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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2024

On a consolidated and separate company basis, the income tax provision consists of the following provision (benefit) components for the years ended December 31:


	MGE Energy									MGE
(In thousands)	2024			2023			2022			2024			2023			2022
Current payable:
Federal	$	4,811		$	1,864		$	2,102		$	3,206		$	1,329		$	934
State		6,875			4,637			2,385			6,309			4,560			2,060
Net-deferred:
Federal		(2,695	)		16,317			14,770			(3,342	)		15,345			14,397
State		3,303			6,683			8,665			2,909			6,191			8,370
Amortized investment tax credits		(1,698	)		(1,698	)		(1,698	)		(1,698	)		(1,698	)		(1,698	)
Total income tax provision	$	10,596		$	27,803		$	26,224		$	7,384		$	25,727		$	24,063

Effective Tax Rate Reconciliation

The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:


	MGE Energy												MGE
	2024				2023				2022				2024				2023				2022
Statutory federal income tax rate		21.0		%		21.0		%		21.0		%		21.0		%		21.0		%		21.0		%
State income taxes, net of federal benefit		6.3				6.2				6.2				6.2				6.2				6.2
Amortized investment tax credits		(2.1	)			(0.7	)			(0.7	)			(2.3	)			(0.7	)			(0.7	)
Credit for electricity from wind energy		(10.5	)			(5.3	)			(5.4	)			(11.5	)			(5.6	)			(5.7	)
AFUDC equity, net		(0.7	)			(0.6	)			(0.3	)			(0.8	)			(0.6	)			(0.3	)
Amortization of utility excess deferred tax(a)		(5.9	)			(1.5	)			(2.0	)			(6.5	)			(1.6	)			(2.1	)
Other, net, individually insignificant		—				—				0.3				0.1				(0.1	)			0.2
Effective income tax rate		8.1		%		19.1		%		19.1		%		6.2		%		18.6		%		18.6		%

(a)

Included are impacts of the 2017 Tax Act for the regulated utility for excess deferred taxes recognized using a normalization method of accounting in recognition of IRS rules that restrict the rate at which the excess deferred taxes may be returned to utility customers. For the years ended December 31, 2024, 2023, and 2022, MGE recognized $3.5 million, $3.5 million, and $4.1 million, respectively. For the year ended December 31, 2024, MGE recognized $4.1 million of deferred taxes not restricted by IRS normalization rules, compared to a net collection from customers of $1.3 million for both the years ended December 31, 2023 and 2022.

Deferred Tax Liabilities (Assets)

The significant components of deferred tax assets and liabilities that appear on the consolidated balance sheets as of December 31 are as follows:


	MGE Energy				MGE
(In thousands)	2024		2023		2024		2023
Deferred tax assets
Investment in ATC	$	18,467	$	19,287	$	—	$	—
Federal tax credits		21,252		43,281		21,252		43,281
Accrued expenses		11,614		10,408		11,566		10,406
Pension and other postretirement benefits		6,878		15,793		6,878		15,793
Deferred tax regulatory account		37,892		41,893		37,892		41,893
Derivatives		13		1,472		13		1,472
Leases		7,521		7,389		7,521		7,389
Other		29,290		23,075		29,048		22,934
Gross deferred income tax assets		132,927		162,598		114,170		143,168
Less valuation allowance		—		—		—		—
Net deferred income tax assets	$	132,927	$	162,598	$	114,170	$	143,168


	MGE Energy				MGE
(In thousands)	2024		2023		2024		2023
Deferred tax liabilities
Property-related	$	334,728	$	316,305	$	334,728	$	316,305
Investment in ATC		54,262		53,137		—		—
Bond transactions		349		411		349		411
Pension and other postretirement benefits		26,801		34,824		26,801		34,824
Derivatives		13		1,472		13		1,472
Tax deductible prepayments		9,677		9,996		9,666		9,986
Leases		7,521		7,389		7,521		7,389
Other		15,973		18,093		16,053		17,415
Gross deferred income tax liabilities		449,324		441,627		395,131		387,802
Deferred income taxes, net	$	316,397	$	279,029	$	280,961	$	244,634

Summary of Tax Credit Carryforwards

The components of federal and state tax benefit carryovers as of December 31, are as follows:


	MGE Energy				MGE
(In thousands)	2024		2023		2024		2023
Federal tax credits	$	21,252	$	43,281	$	21,252	$	43,281

Unrecognized Tax Benefits and Interest

A tabular reconciliation of unrecognized tax benefits and interest is as follows:


(In thousands)
Unrecognized Tax Benefits:	2024			2023			2022
Unrecognized tax benefits, January 1,	$	1,615		$	2,485		$	2,353
Additions based on tax positions related to the current year		415			455			731
Additions based on tax positions related to the prior years		—			—			—
Reductions based on tax positions related to the prior years		(484	)		(1,325	)		(599	)
Unrecognized tax benefits, December 31,	$	1,546		$	1,615		$	2,485


(In thousands)
Interest on Unrecognized Tax Benefits:	2024			2023			2022
Accrued interest on unrecognized tax benefits, January 1,	$	130		$	189		$	150
Reduction in interest expense on uncertain tax positions		(77	)		(149	)		(95	)
Interest expense on uncertain tax positions		64			90			134
Accrued interest on unrecognized tax benefits, December 31,	$	117		$	130		$	189

Tax Years that Remain Subject to Examination

The following table shows tax years that remain subject to examination by major jurisdiction:


	Taxpayer	Open Years
	MGE Energy and consolidated subsidiaries in federal return	2021 through 2024
	MGE Energy Wisconsin combined reporting corporation return	2020 through 2024