INCOME TAXES:

12 Months Ended

Dec. 31, 2019

INCOME TAXES

A reconciliation between the statutory federal income tax rate and the effective tax rate is as follows:



	IDACORP									Idaho Power
	2019			2018			2017			2019			2018			2017
	(thousands of dollars)
Federal income tax expense at statutory rate	$	54,046		$	51,279		$	91,378		$	53,099		$	50,536		$	90,163
Change in taxes resulting from:
AFUDC	(7,941		)	(7,246		)	(10,318		)	(7,941		)	(7,246		)	(10,318		)
Capitalized interest	976			928			1,513			976			928			1,513
Investment tax credits	(6,252		)	(2,929		)	(3,081		)	(6,252		)	(2,929		)	(3,081		)
Removal costs	(3,139		)	(3,471		)	(6,280		)	(3,139		)	(3,471		)	(6,280		)
Capitalized overhead costs	(7,140		)	(6,720		)	(11,200		)	(7,140		)	(6,720		)	(11,200		)
Capitalized repair costs	(18,480		)	(17,850		)	(28,700		)	(18,480		)	(17,850		)	(28,700		)
Bond redemption costs	—			(1,029		)	—			—			(1,029		)	—
Remeasurement of deferred taxes	—			(5,411		)	1,690			—			(5,664		)	1,970
State income taxes, net of federal benefit	8,627			8,512			8,153			8,401			8,532			8,108
Depreciation	14,641			13,110			18,953			14,641			13,110			18,953
Excess deferred income tax reversal	(6,181		)	(7,289		)	—			(6,181		)	(7,289		)	—
Income tax return adjustments	745			(5,076		)	(3,710		)	993			(4,968		)	(3,601		)
Affordable housing tax credits	(2,874		)	(2,560		)	(2,559		)	—			—			—
Affordable housing investment distributions	(3,232		)	(267		)	(1,124		)	—			—			—
Affordable housing investment amortization	1,825			1,519			1,271			—			—			—
Other, net	(1,114		)	1,886			(7,326		)	(560		)	2,372			(6,265		)
Total income tax expense	$	24,507		$	17,386		$	48,660		$	28,417		$	18,312		$	51,262
Effective tax rate	9.5%			7.1%			18.6%			11.2%			7.6%			19.9%

The items comprising income tax expense are as follows:



	IDACORP									Idaho Power
	2019			2018			2017			2019			2018			2017
	(thousands of dollars)
Income taxes current:
Federal	$	8,830		$	5,390		$	11,726		$	25,338		$	24,919		$	51,575
State	4,865			3,328			5,418			(4,392		)	(2,049		)	10,562
Total	13,695			8,718			17,144			20,946			22,870			62,137
Income taxes deferred:
Federal	9,486			1,649			24,018			(4,599		)	(15,388		)	(13,002		)
State	1,159			30			(154		)	10,054			5,425			(5,298		)
Total	10,645			1,679			23,864			5,455			(9,963		)	(18,300		)
Investment tax credits:
Deferred	8,268			8,334			10,506			8,268			8,334			10,506
Restored	(6,252		)	(2,929		)	(3,081		)	(6,252		)	(2,929		)	(3,081		)
Total	2,016			5,405			7,425			2,016			5,405			7,425
Affordable housing investments	(1,849		)	1,584			227			—			—			—
Total income tax expense	$	24,507		$	17,386		$	48,660		$	28,417		$	18,312		$	51,262

The components of the net deferred tax liability are as follows:



	IDACORP				Idaho Power
	2019		2018		2019		2018
	(thousands of dollars)
Deferred tax assets:
Regulatory liabilities	$	96,599	$	98,042	$	96,599	$	98,042
Deferred compensation	21,946		21,871		21,946		21,826
Deferred revenue	39,039		35,137		39,039		35,137
Tax credits	76,125		100,041		24,489		44,532
Partnership investments	7,911		4,200		4,912		1,086
Retirement benefits	114,124		91,867		114,124		91,867
Other	11,347		9,299		11,107		9,121
Total	367,091		360,457		312,216		301,611
Deferred tax liabilities:
Property, plant and equipment	286,583		294,471		286,583		294,471
Regulatory assets	646,886		614,144		646,886		614,144
Partnership investments	3,565		3,875		—		—
Retirement benefits	132,764		108,440		132,764		108,440
Other	43,524		39,405		40,385		37,795
Total	1,113,322		1,060,335		1,106,618		1,054,850
Net deferred tax liabilities	$	746,231	$	699,878	$	794,402	$	753,239

IDACORP's tax allocation agreement provides that each member of its consolidated group compute its income taxes on a separate company basis. Amounts payable or refundable are settled through IDACORP and are reported as taxes accrued or income taxes receivable, respectively, on the consolidated balance sheets of Idaho Power. See Note 1 - "Summary of Significant Accounting Policies" for further discussion of accounting policies related to income taxes.

Tax Credit Carryforwards

As of December 31, 2019, IDACORP had $36.7 million of general business credit carryforwards for federal income tax purposes and $39.4 million of Idaho investment tax credit carryforward. The general business credit carryforward period expires from 2032 to 2039, and the Idaho investment tax credit expires from 2024 to 2033.

Uncertain Tax Positions

IDACORP and Idaho Power believe that they have no material income tax uncertainties for 2019 and prior tax years. Both companies recognize interest accrued related to unrecognized tax benefits as interest expense and penalties as other expense.

IDACORP and Idaho Power are subject to examination by their major tax jurisdictions - U.S. federal and the State of Idaho. The open tax years for examination are 2019 for federal and 2016-2019 for Idaho. In May 2009, IDACORP formally entered the U.S. Internal Revenue Service (IRS) Compliance Assurance Process (CAP) program for its 2009 tax year and has remained in the CAP program for all subsequent years. The CAP program provides for IRS examination and issue resolution throughout the current year with the objective of return filings containing no contested items. In 2019, the IRS completed its examination of IDACORP's 2018 tax year with no unresolved income tax issues.

Income Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law, which significantly reformed the Internal Revenue Code of 1986, as amended. Effective January 1, 2018, the Tax Cuts and Jobs Act permanently lowers the corporate tax rate to 21 percent from the existing maximum rate of 35 percent, provides for expanded bonus depreciation, limits the deductibility of interest expense, eliminates the alternative minimum tax, repeals the manufacturing deduction, and imposes additional limitations on the deductibility of executive compensation. Public utility companies, such as Idaho Power, retain the full deductibility of interest expense and are excluded from the bonus depreciation provisions; however, traditional accelerated tax depreciation methods are still available.

Due to the enactment of the Tax Cuts and Jobs Act and following generally accepted accounting principles, at December 31, 2017, IDACORP and Idaho Power remeasured all deferred income tax assets and liabilities. The effects of these adjustments resulted in a net tax expense for 2017, as shown in the rate reconciliation table above. Also, as shown above, in 2018, a net tax benefit was recognized for the remeasurement of deferred taxes for the adjustment of temporary differences as a result of IDACORP's 2017 consolidated income tax return filings.

Additionally, in 2017, the net deferred tax liabilities at both companies decreased by approximately $672 million. Idaho Power's regulatory asset deferred income tax liability item decreased as the related regulatory asset was reduced in two primary ways: (1) the decrease in the federal income tax rate decreased the future cost to customers for funding the net deferred income tax liabilities resulting from the cumulative impacts of using the flow-through income tax accounting method for regulatory purposes and (2) the decrease in the federal income tax rate also reduced the net-to-gross multiplier that increases the regulatory asset to a revenue requirement carrying value. The change in income tax law also reduced the deferred income tax liability for depreciation-related timing differences under the normalized tax accounting method. As this reduction will flow back to customers in the future under the statutorily prescribed average rate assumption method, it was recorded as a regulatory liability on the consolidated balance sheets of the companies. See Note 3 - "Regulatory Matters" for more information.

On March 12, 2018, Idaho House Bill 463 was enacted which lowered the Idaho state corporate income tax rate from 7.4 percent to 6.925 percent effective January 1, 2018. The Idaho tax rate reduction did not have a material impact on IDACORP's and Idaho Power's 2018 income tax expense or deferred tax asset and liability balances.