INCOME TAXES (Notes)

12 Months Ended

Dec. 31, 2021

Income tax [Line Items]

INCOME TAXES

INCOME TAXES

The following table sets forth our provision for income taxes for the periods indicated:

	Years Ended December 31,
	2021		2020		2019
	(Thousands of dollars)
Current income tax provision (benefit)
Federal	$	(1,568)	$	20,129	$	24,537
State	(1,565)		2,965		5,008
Total current income tax provision (benefit)	(3,133)		23,094		29,545
Deferred income tax provision
Federal	37,810		10,757		8,375
State	5,639		7,728		4,932
Total deferred income tax provision	43,449		18,485		13,307
Total provision for income taxes	$	40,316	$	41,579	$	42,852

The following table is a reconciliation of our income tax provision for the periods indicated:

	Years Ended December 31,
	2021			2020			2019
	(Thousands of dollars)
Income before income taxes	$	246,750		$	237,991		$	229,601
Federal statutory income tax rate	21		%	21		%	21		%
Provision for federal income taxes	51,817			49,978			48,215
State income taxes, net of federal tax benefit	4,074			10,693			9,758
Amortization of EDIT regulatory liability	(17,289)			(17,031)			(12,828)
Tax benefit of employee share-based compensation	(469)			(1,489)			(2,116)
Other, net	2,183			(572)			(177)
Total provision for income taxes	$	40,316		$	41,579		$	42,852

As of December 31, 2021, we have no uncertain tax positions. Changes in tax laws or tax rates are recognized in the financial reporting period that includes the enactment date. As a regulated entity, the change in ADIT resulting from a change in tax laws or tax rates is recorded as a regulatory liability and is subject to refund to our customers.

In May 2021, a bill amending the Oklahoma state income tax code was signed into law that reduced the state income tax rate to four percent from six percent beginning January 1, 2022. As a result of the enactment of this legislation, we remeasured our ADIT. As a regulated entity, the reduction in ADIT of $29.3 million was recorded as a regulatory liability. The impact of the change in the state income tax rate on Oklahoma Natural Gas’ rates, as well as the timing and amount of the impact on the annual crediting mechanism for the EDIT regulatory liability, will be addressed during the processing of the March 15, 2022 PBRC filing.

In May 2020, a bill amending the Kansas state income tax code was signed into law that exempts public utilities regulated by the KCC from paying Kansas state income taxes beginning January 1, 2021. As a result of the enactment of this legislation, we remeasured our ADIT. As a regulated entity, the reduction in ADIT of $84.2 million was recorded as an EDIT regulatory liability and will be refunded to our customers. This adjustment had no material impact on our income tax expense and no impact on our cash flows for the years ended December 31, 2021 and 2020. The bill stipulates that, if requested by the utility, this EDIT will be returned to Kansas customers over a period of no less than 30 years, with the exact timing to be determined in our next general rate proceeding. In August 2020, Kansas Gas Service submitted an application to the KCC to reduce its base rates to reflect the elimination of Kansas state income taxes by approximately $4.9 million. In December 2020, the KCC approved the reduction, effective January 1, 2021.

The following table sets forth the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities for the periods indicated:

	December 31,
	2021		2020
	(Thousands of dollars)
Deferred tax assets
Employee benefits and other accrued liabilities	$	11,126	$	28,127
Regulatory adjustments for enacted tax rate changes	120,051		121,738
Net operating loss	424,861		—
Lease obligation basis	6,906		9,319
Other	12,597		4,790
Total deferred tax assets	575,541		163,974
Deferred tax liabilities
Excess of tax over book depreciation	734,051		717,492
Winter weather event costs	421,070		—
Purchased-gas cost adjustment - other	37,433		5,240
Other regulatory assets and liabilities, net	71,541		88,260
Right-of-use asset basis	6,730		9,788
Total deferred tax liabilities	1,270,825		820,780
Net deferred tax liabilities	$	695,284	$	656,806

We deduct our purchased gas costs for federal income tax purposes in the period they are paid. As a result of the impacts from Winter Storm Uri, we recorded a $421.1 million (tax effected) increase in our deferred tax liability and an increase in our net operating loss carryforward as of December 31, 2021. At December 31, 2021, we had $386.0 million (tax effected) of federal net operating loss carryforwards and $38.9 million (tax effected) of state net operating loss carryforwards available to offset future taxable income.

We have filed our consolidated federal and state income tax returns for years 2018, 2019 and 2020. We are no longer subject to income tax examination for years prior to 2018.