Income taxes (Tables)

12 Months Ended

Dec. 31, 2019

Components of income taxes attributable to net income for common stock

The components of income taxes attributable to net income for common stock were as follows:



	HEI consolidated									Hawaiian Electric consolidated
Years ended December 31	2019			2018			2017			2019			2018			2017
(in thousands)
Federal
Current	$	28,736		$	42,903		$	61,534		$	21,751		$	29,649		$	36,267
Deferred*	(4,353		)	(6,099		)	33,967			(7,793		)	(5,245		)	35,229
Deferred tax credits, net**	13,410			(12		)	(20		)	13,155			(12		)	(20		)
	37,793			36,792			95,481			27,113			24,392			71,476
State
Current	10,472			17,361			10,076			5,579			13,210			8,947
Deferred	(10,732		)	(3,269		)	3,868			(8,491		)	(2,737		)	2,808
Deferred tax credits, net**	14,104			(87		)	(32		)	14,104			(87		)	(32		)
	13,844			14,005			13,912			11,192			10,386			11,723
Total	$	51,637		$	50,797		$	109,393		$	38,305		$	34,778		$	83,199


*	The 2018 deferred income tax expense includes the final adjustment to reduce the provisional amount recorded in 2017 pursuant to Staff Accounting Bulletin No. 118 (SAB No. 118). See “Major tax developments” disclosure below for details of the accounting for the enactment of the Tax Act.

Represents 2019 federal and state tax credits, primarily related to the West Loch PV project, deferred and amortized starting in 2020. See West Loch PV Project discussion in Note 3.

Schedule of reconciliation of amount of income taxes computed at federal statutory rate

A reconciliation of the amount of income taxes computed at the federal statutory rate to the amount provided in the consolidated statements of income was as follows:



	HEI consolidated									Hawaiian Electric consolidated
Years ended December 31	2019			2018			2017			2019			2018			2017
(in thousands)
Amount at the federal statutory income tax rate	$	56,996		$	53,437		$	96,796		$	41,399		$	37,889		$	71,801
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit	11,658			11,832			9,789			8,703			8,080			7,584
Net deferred tax asset (liability) adjustment related to the Tax Act	(9,255		)	(9,540		)	13,420			(9,255		)	(9,285		)	9,168
Other, net	(7,762		)	(4,932		)	(10,612		)	(2,542		)	(1,906		)	(5,354		)
Total	$	51,637		$	50,797		$	109,393		$	38,305		$	34,778		$	83,199
Effective income tax rate	19.0		%	20.0		%	39.6		%	19.4		%	19.3		%	40.6		%

Schedule of deferred tax assets and liabilities

The tax effects of book and tax basis differences that give rise to deferred tax assets and liabilities were as follows:



	HEI consolidated				Hawaiian Electric consolidated
December 31	2019		2018		2019		2018
(in thousands)
Deferred tax assets
Regulatory liabilities, excluding amounts attributable to property, plant and equipment	$	100,427	$	104,868	$	100,427	$	104,868
Operating lease liabilities	51,573		—		45,608		—
Allowance for bad debts	14,858		14,647		560		659
Other¹	54,028		46,036		41,181		26,522
Total deferred tax assets	220,886		165,551		187,776		132,049
Deferred tax liabilities
Property, plant and equipment related	464,312		437,644		458,349		434,831
Operating lease right-of-use assets	51,542		—		45,608		—
Regulatory assets, excluding amounts attributable to property, plant and equipment	33,897		37,345		33,897		37,345
Deferred RAM and RBA revenues	—		11,278		—		11,278
Retirement benefits	9,684		20,173		13,072		25,430
Other	40,776		31,629		14,001		6,362
Total deferred tax liabilities	600,211		538,069		564,927		515,246
Net deferred income tax liability	$	379,325	$	372,518	$	377,151	$	383,197

As of December 31, 2019, HEI consolidated and Hawaiian Electric consolidated have deferred tax assets of $8.7 million and $6.7 million respectively, relating to the benefit of state tax credit carryforwards of $11.7 million and $9 million respectively. These state tax credit carryforwards primarily relate to the West Loch PV project and do not expire. The Company concluded that as of December 31, 2019, a valuation allowance is not required.

Schedule of changes in total unrecognized tax benefits

The following is a reconciliation of the Company’s liability for unrecognized tax benefits for 2019, 2018 and 2017.



	HEI consolidated									Hawaiian Electric consolidated
(in millions)	2019			2018			2017			2019			2018			2017
Unrecognized tax benefits, January 1	$	2.1		$	4.0		$	3.8		$	1.6		$	3.5		3.8
Additions based on tax positions taken during the year	0.5			0.3			0.9			0.5			0.3			0.4
Reductions based on tax positions taken during the year	—			—			(0.2		)	—			—			(0.2		)
Additions for tax positions of prior years	0.1			0.1			—			0.1			0.1			—
Reductions for tax positions of prior years	(0.2		)	(0.1		)	(0.5		)	(0.2		)	(0.1		)	(0.5		)
Lapses of statute of limitations	(0.3		)	(2.2		)	—			(0.3		)	(2.2		)	—
Unrecognized tax benefits, December 31	$	2.2		$	2.1		$	4.0		$	1.7		$	1.6		$	3.5