XML 27 R15.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Entity Information [Line Items]  
Income Taxes INCOME TAXES
IPALCO follows a policy of comprehensive interperiod income tax allocation. Investment tax credits related to utility property have been deferred and are being amortized over the estimated useful lives of the related property.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries. Under a tax sharing agreement with AES, IPALCO is responsible for the income taxes associated with its own taxable income and records the provision for income taxes as if IPALCO and its subsidiaries each filed separate income tax returns. IPALCO is no longer subject to U.S. or state income tax examinations for tax years through March 27, 2001, but is open for all subsequent periods. IPALCO made tax sharing payments to AES of $27.5 million, $27.0 million and $29.6 million in 2021, 2020 and 2019, respectively.

On March 25, 2014, the state of Indiana amended Indiana Code 6-3-2-1 through Senate Bill 001, which phases in an additional 1.6% reduction to the state corporate income tax rate that was initially being reduced by 2%. While the statutory state income tax rate decreased to 5.075% for the calendar year 2021, the deferred tax balances were adjusted according to the anticipated reversal of temporary differences. The statutory state corporate income tax rate will be 4.9% for 2022 and beyond.
Income Tax Provision

Federal and state income taxes charged to income are as follows: 
 202120202019
 (In Thousands)
Components of income tax expense:   
Current income taxes:   
Federal$28,100 $19,489 $17,229 
State8,218 6,249 3,022 
Total current income taxes36,318 25,738 20,251 
Deferred income taxes:   
Federal(7,286)323 7,547 
State(91)2,531 7,745 
Total deferred income taxes(7,377)2,854 15,292 
Net amortization of investment credit— — (15)
Total income tax expense$28,941 $28,592 $35,528 

Effective and Statutory Rate Reconciliation

The provision for income taxes (including net investment tax credit adjustments) is different than the amount computed by applying the statutory tax rate to pretax income. The reasons for the difference, stated as a percentage of pretax income, are as follows: 
 202120202019
Federal statutory tax rate21.0 %21.0 %21.0 %
State income tax, net of federal tax benefit4.0 %4.2 %4.4 %
Depreciation flow through and amortization(6.3)%(6.8)%(5.7)%
Additional funds used during construction - equity0.4 %1.0 %0.2 %
Other – net0.4 %1.2 %1.3 %
Effective tax rate19.5 %20.6 %21.2 %

Deferred Income Taxes

The significant items comprising IPALCO’s net accumulated deferred tax liability recognized on the audited Consolidated Balance Sheets as of December 31, 2021 and 2020 are as follows:
 20212020
 (In Thousands)
Deferred tax liabilities:  
Relating to utility property, net$369,783 $408,291 
Regulatory assets recoverable through future rates126,531 82,783 
Other14,326 5,485 
Total deferred tax liabilities510,640 496,559 
Deferred tax assets:  
Investment tax credit7 6 
Regulatory liabilities including ARO200,948 197,657 
Employee benefit plans— 3,866 
Other18,958 19,316 
Total deferred tax assets219,913 220,845 
Deferred income tax liability – net$290,727 $275,714 
Uncertain Tax Positions

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019: 
 202120202019
 (In Thousands)
Unrecognized tax benefits at January 1$7,368 $7,056 $7,056 
Gross increases – current period tax positions— 312 — 
Gross decreases – prior period tax positions(7,368)— — 
Unrecognized tax benefits at December 31$— $7,368 $7,056 

The prior period unrecognized tax benefits represent tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. As a result of the resolution of federal and state audits in 2021, IPALCO reviewed its uncertain positions and determined that they are more likely than not to be sustained upon examination by taxing authorities. Consequently, the uncertain tax positions were reversed; because of the impact of deferred tax accounting the reversal did not affect the annual effective tax rate but were reclassified to plant related deferred tax balances.

Tax years subsequent to March 27, 2001 remain open to examination by taxing authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe unrecognized tax benefits of $0 at December 31, 2021 is the appropriate accrual for our uncertain tax positions.
However, audit outcomes and the timing of audit settlements and future events that would impact our previously recorded unrecognized tax benefits are subject to significant uncertainty. It is possible that the ultimate outcome of future examinations may exceed our provision for current unrecognized tax benefits.

Tax-related interest expense and income is reported as part of the provision for federal and state income taxes. Penalties, if incurred, would also be recognized as a component of tax expense. There are no interest or penalties applicable to the periods contained in this report.
Indianapolis Power And Light Company  
Entity Information [Line Items]  
Income Taxes INCOME TAXES
AES Indiana follows a policy of comprehensive interperiod income tax allocation. Investment tax credits related to utility property have been deferred and are being amortized over the estimated useful lives of the related property.

AES files federal and state income tax returns which consolidate IPALCO and AES Indiana. Under a tax sharing agreement with IPALCO, AES Indiana is responsible for the income taxes associated with its own taxable income and records the provision for income taxes as if AES Indiana filed separate income tax returns. AES Indiana is no longer subject to U.S. or state income tax examinations for tax years through March 27, 2001, but is open for all subsequent periods. AES Indiana made tax sharing payments to IPALCO of $40.8 million, $27.0 million and $37.4 million in 2021, 2020 and 2019, respectively.

On March 25, 2014, the state of Indiana amended Indiana Code 6-3-2-1 through Senate Bill 001, which phases in an additional 1.6% reduction to the state corporate income tax rate that was initially being reduced by 2%. While the statutory state income tax rate decreased to 5.075% for the calendar year 2021, the deferred tax balances were adjusted according to the anticipated reversal of temporary differences. The statutory state corporate income tax rate will be 4.9% for 2022 and beyond.
Income Tax Provision

Federal and state income taxes charged to income are as follows:
 202120202019
 (In Thousands)
Components of income tax expense:   
Current income taxes:   
Federal$36,353 $28,395 $23,941 
State10,325 8,661 4,370 
Total current income taxes46,678 37,056 28,311 
Deferred income taxes:   
Federal(7,283)503 7,578 
State(90)2,576 7,556 
Total deferred income taxes(7,373)3,079 15,134 
Net amortization of investment credit— — (15)
Total income tax expense$39,305 $40,135 $43,430 
 
Effective and Statutory Rate Reconciliation

The provision for income taxes (including net investment tax credit adjustments) is different than the amount computed by applying the statutory tax rate to pretax income. The reasons for the difference, stated as a percentage of pretax income, are as follows:
 202120202019
Federal statutory tax rate21.0 %21.0 %21.0 %
State income tax, net of federal tax benefit4.0 %4.2 %4.4 %
Depreciation flow through and amortization(4.9)%(5.1)%(4.7)%
Additional funds used during construction - equity0.3 %0.7 %0.2 %
Other – net0.3 %1.0 %0.8 %
Effective tax rate20.7 %21.8 %21.7 %

Deferred Income Taxes

The significant items comprising AES Indiana’s net accumulated deferred tax liability recognized on the audited Consolidated Balance Sheets as of December 31, 2021 and 2020 are as follows: 
 20212020
 (In Thousands)
Deferred tax liabilities:  
Relating to utility property, net$369,783 $408,291 
Regulatory assets recoverable through future rates126,531 82,783 
Other18,283 5,323 
Total deferred tax liabilities514,597 496,397 
Deferred tax assets:  
Investment tax credit7 6 
Regulatory liabilities including ARO205,099 197,657 
Employee benefit plans— 3,866 
Other9,313 5,069 
Total deferred tax assets214,419 206,598 
Deferred income tax liability – net$300,178 $289,799 
 
Uncertain Tax Positions

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019:
 202120202019
 (In Thousands)
Unrecognized tax benefits at January 1$7,368 $7,056 $7,056 
Gross increases – current period tax positions— 312 — 
Gross decreases – prior period tax positions(7,368)— — 
Unrecognized tax benefits at December 31$— $7,368 $7,056 

The prior period unrecognized tax benefits represent tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. As a result of the resolution of federal and state audits in 2021, AES Indiana reviewed its uncertain positions and determined that they are more likely than not to be sustained upon examination by taxing authorities. Consequently, the uncertain tax positions were reversed; because of the impact of deferred tax accounting the reversal did not affect the annual effective tax rate but were reclassified to plant related deferred tax balances.

Tax years subsequent to March 27, 2001 remain open to examination by taxing authorities. While it is often difficult
to predict the final outcome or the timing of resolution of any particular uncertain tax position, AES Indiana believes
unrecognized tax benefits of $0 at December 31, 2021 is the appropriate accrual for our uncertain tax positions. However, audit outcomes and the timing of audit settlements and future events that would impact AES Indiana's previously recorded unrecognized tax benefits are subject to significant uncertainty. It is possible that the ultimate outcome of future examinations may exceed AES Indiana's provision for current unrecognized tax benefits.

Tax-related interest expense and income is reported as part of the provision for federal and state income taxes. Penalties, if incurred, would also be recognized as a component of tax expense. There are no interest or penalties applicable to the periods contained in this report.