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Income Tax
 6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Tax INCOME TAX

An estimate of annual income tax expense is made each interim period using estimates for annual pre-tax income, regulatory flow-through adjustments, tax credits, and other items. The estimated annual effective tax rate is applied to year-to-date, pre-tax income to determine income tax expense for the interim period consistent with the annual estimate. Discrete events are recorded in the interim period in which they occur or become known.

The effective income tax rate varied from the federal statutory rate due to the following:
 
 
Three Months Ended June 30,
 
 
NW Holdings
 
NW Natural
In thousands
 
2020
 
2019
 
2020
 
2019
Income tax at statutory rate (federal)
 
$
(1,429
)
 
$
480

 
$
(1,287
)
 
$
765

State
 
(333
)
 
214

 
(281
)
 
290

Increase (decrease):
 
 
 
 
 
 
 
 

Differences required to be flowed-through by regulatory commissions
 
173

 
(37
)
 
173

 
(37
)
Other, net
 
(83
)
 
(32
)
 
(24
)
 
(33
)
Total provision for income taxes on continuing operations
 
$
(1,672
)
 
$
625

 
$
(1,419
)
 
$
985

Effective income tax rate for continuing operations
 
24.6
%
 
23.4
%
 
23.1
%
 
24.4
%

 
 
Six Months Ended June 30,
 
 
NW Holdings
 
NW Natural
In thousands
 
2020
 
2019
 
2020
 
2019
Income tax at statutory rate (federal)
 
$
11,676

 
$
11,502

 
$
12,068

 
$
11,924

State
 
3,344

 
3,505

 
3,456

 
3,616

Increase (decrease):
 
 
 
 
 
 
 
 

Differences required to be flowed-through by regulatory commissions
 
(2,352
)
 
(5,297
)
 
(2,352
)
 
(5,297
)
Other, net
 
(213
)
 
(410
)
 
(173
)
 
(410
)
Total provision for income taxes on continuing operations
 
$
12,455

 
$
9,300

 
$
12,999

 
$
9,833

Effective income tax rate for continuing operations
 
22.4
%
 
17.0
%
 
22.6
%
 
17.3
%



The NW Holdings and NW Natural effective income tax rates for the six months ended June 30, 2020 compared to the same periods in 2019 changed primarily as a result of changes in pre-tax income and regulatory amortization of deferred TCJA benefits as approved in the March 2019 OPUC order. See "U.S. Federal TCJA Matters" below and Note 11 in the 2019 Form 10-K for more detail on income taxes and effective tax rates.

The IRS Compliance Assurance Process (CAP) examination of the 2018 tax year was completed during the second quarter of 2020. There were no material changes to the return as filed. The 2019 tax year is subject to examination under CAP and the 2020 tax year CAP application has been accepted by the IRS.

U.S. Federal TCJA Matters
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted and permanently lowered the U.S. federal corporate income tax rate to 21% from the previous maximum rate of 35%, effective for the tax year beginning January 1, 2018. The TCJA included specific provisions related to regulated public utilities that provide for the continued deductibility of interest expense and the elimination of bonus tax depreciation for property both acquired and placed into service on or after January 1, 2018. See Note 11 in the 2019 Form 10-K.