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Income Taxes
 9 Months Ended
Sep. 30, 2016
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes
 
The following table summarizes the significant differences in income tax expense based on the differences between our effective tax rate and the federal statutory rate (in thousands):

 
Three Months Ended
September 30,
 
2016
 
2015
Income Before Income Taxes
$
34,946

 
 
 
$
30,187

 
 
 
 
 
 
 
 
 
 
Income tax calculated at 35% federal statutory rate
12,231

 
35.0
 %
 
10,565

 
35.0
 %
 
 
 
 
 
 
 
 
Permanent or flow through adjustments:
 
 
 
 
 
 
 
State income, net of federal provisions
(615
)
 
(1.8
)
 
(857
)
 
(2.8
)
Flow-through repairs deductions
(18,995
)
 
(54.4
)
 
(2,779
)
 
(9.2
)
Production tax credits
(2,218
)
 
(6.3
)
 
(733
)
 
(2.4
)
Plant and depreciation of flow through items
(243
)
 
(0.7
)
 
(374
)
 
(1.2
)
Prior year permanent return to accrual adjustments
—

 
—

 
1,025

 
3.4

Other, net
181

 
0.6

 
(458
)
 
(1.6
)
 
(21,890
)
 
(62.6
)
 
(4,176
)
 
(13.8
)
 
 
 
 
 
 
 
 
 
$
(9,659
)
 
(27.6
)%
 
$
6,389

 
21.2
 %



 
Nine Months Ended
September 30,
 
2016
 
2015
Income Before Income Taxes
$
113,988

 
 
 
$
130,812

 
 
 
 
 
 
 
 
 
 
Income tax calculated at 35% federal statutory rate
39,896

 
35.0
 %
 
45,784

 
35.0
 %
 
 
 
 
 
 
 
 
Permanent or flow through adjustments:
 
 
 
 
 
 
 
State income, net of federal provisions
(2,740
)
 
(2.4
)
 
(329
)
 
(0.3
)
Flow-through repairs deductions
(32,640
)
 
(28.6
)
 
(17,240
)
 
(13.2
)
Production tax credits
(7,317
)
 
(6.4
)
 
(2,645
)
 
(2.0
)
Plant and depreciation of flow through items
(1,427
)
 
(1.3
)
 
(1,000
)
 
(0.8
)
Prior year permanent return to accrual adjustments
(128
)
 
(0.1
)
 
1,025

 
0.8

Other, net
116

 
0.1

 
(979
)
 
(0.7
)
 
(44,136
)
 
(38.7
)
 
(21,168
)
 
(16.2
)
 
 
 
 
 
 
 
 
 
$
(4,240
)
 
(3.7
)%
 
$
24,616

 
18.8
 %

We compute income tax expense for each quarter based on the estimated annual effective tax rate for the year, adjusted for certain discrete items. Our effective tax rate typically differs from the federal statutory tax rate of 35% primarily due to the regulatory impact of flowing through the federal and state tax benefit of repairs deductions, state tax benefit of accelerated tax depreciation deductions (including bonus depreciation when applicable) and production tax credits. The regulatory accounting treatment of these deductions requires immediate income recognition for temporary tax differences of this type, which is referred to as the flow-through method. When the flow-through method of accounting for temporary differences is reflected in regulated revenues, we record deferred income taxes and establish related regulatory assets and liabilities.

In 2009, we received approval from the Internal Revenue Service (IRS) to change our tax accounting method related to the repair and maintenance of transmission and distribution utility assets and have recorded a current tax deduction in our Financial Statements for each period since. In 2013, the IRS issued guidance related to the repair and maintenance of utility generation assets. During the third quarter of 2016, we filed a tax accounting method change with the IRS consistent with the guidance for generation property. This enabled us to take a current tax deduction for a significant amount of repair costs that were previously capitalized for tax purposes. As discussed above, we flow this current tax deduction through to our customers in rate cases. Consistent with this regulatory treatment, we recorded an income tax benefit of approximately $15.5 million during the three months ended September 30, 2016, of which approximately $12.5 million related to 2015 and prior tax years and is reflected in the flow-through repairs deductions line above.

Uncertain Tax Positions

We recognize tax positions that meet the more-likely-than-not threshold as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We have unrecognized tax benefits of approximately $90.0 million as of September 30, 2016, including approximately $66.6 million that, if recognized, would impact our effective tax rate. We do not anticipate that total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within the next twelve months.

Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the nine months ended September 30, 2016 we recognized $0.5 million of expense for interest and penalties in the Condensed Consolidated Statements of Income. As of September 30, 2016, we had $0.5 million of interest accrued in the Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2015, we did not recognize any expense for interest or penalties, and did not have any amounts accrued as of December 31, 2015, for the payment of interest and penalties.

Our federal tax returns from 2000 forward remain subject to examination by the Internal Revenue Service.