Income Tax Expense Continuing Operations

9 Months Ended

Sep. 30, 2016

Income Tax Expense - Continuing Operations

14. Income Tax Expense – Continuing Operations

The following table provides a reconciliation of income tax expense calculated at the net composite federal and state statutory rate on income from continuing operations before income taxes and income tax expense for continuing operations reported on the Company’s consolidated statements of income:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2016			2015			2016			2015
Income Before Income Taxes – Continuing Operations	$	19,757		$	22,230		$	60,378		$	57,749
Tax Computed at Company’s Net Composite Federal and State Statutory Rate (39%)		7,705			8,670			23,547			22,522
Increases (Decreases) in Tax from:
Federal Production Tax Credits		(1,423	)		(1,437	)		(4,994	)		(5,147	)
R&D Tax Credits		(223	)		2			(445	)		(7	)
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes		(212	)		(212	)		(637	)		(637	)
Employee Stock Ownership Plan Dividend Deduction		(157	)		(171	)		(472	)		(514	)
Corporate Owned Life Insurance		(92	)		185			(664	)		(39	)
Investment Tax Credits		(87	)		(143	)		(262	)		(428	)
Adjustment for Uncertain Tax Positions		(57	)		281			(31	)		367
AFUDC Equity		(51	)		(144	)		(238	)		(369	)
Section 199 Domestic Production Activities Deduction		(9	)		(362	)		(207	)		(1,087	)
Other Items – Net		(231	)		(148	)		141			(59	)
Income Tax Expense – Continuing Operations	$	5,163		$	6,521		$	15,738		$	14,602
Effective Income Tax Rate – Continuing Operations		26.1	%		29.3	%		26.1	%		25.3	%

The following table summarizes the activity related to our unrecognized tax benefits:

(in thousands)	2016			2015
Balance on January 1	$	468		$	222
Increases Related to Tax Positions for Prior Years		40			236
Increases Related to Tax Positions for Current Year		26			131
Uncertain Positions Resolved During Year		(97	)		—
Balance on September 30	$	437		$	589

The balance of unrecognized tax benefits as of September 30, 2016 would reduce the Company’s effective tax rate if recognized. The total amount of unrecognized tax benefits as of September 30, 2016 is not expected to change significantly within the next 12 months. The Company classifies interest and penalties on tax uncertainties as components of the provision for income taxes in its consolidated statement of income. There was no amount accrued for interest on tax uncertainties as of September 30, 2016.

The Company and its subsidiaries file a consolidated U.S. federal income tax return and various state income tax returns. As of September 30, 2016, with limited exceptions, the Company is no longer subject to examinations by taxing authorities for tax years prior to 2013 for federal income taxes and Minnesota and North Dakota state income taxes.