Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

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 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.

The following table summarizes the differences between our effective tax rate and the federal statutory rate (in thousands):

	Three Months Ended March 31,
	2022				2021
Income before income taxes	$	60,221			$	63,049
Income tax calculated at federal statutory rate	12,646		21.0	%	13,240		21.0	%
Permanent or flow-through adjustments:
State income tax, net of federal provisions	400		0.7		55		0.1
Flow-through repairs deductions	(6,801)		(11.3)		(7,853)		(12.5)
Production tax credits	(3,824)		(6.4)		(4,307)		(6.8)
Amortization of excess deferred income tax	(411)		(0.7)		(265)		(0.4)
Plant and depreciation of flow-through items	(255)		(0.4)		(340)		(0.5)
Share-based compensation	(253)		(0.4)		(261)		(0.4)
Other, net	(391)		(0.7)		(291)		(0.5)
	(11,535)		(19.2)		(13,262)		(21.0)
Income tax expense (benefit)	$	1,111	1.8	%	$	(22)	0.0	%

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 had unrecognized tax benefits of approximately $31.6 million as of March 31, 2022, including approximately $28.1 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. As of March 31, 2022, we have accrued $0.7 million for the payment of interest and penalties on the Condensed Consolidated Balance Sheets. As of December 31, 2021, we had accrued $0.5 million for the payment of interest and penalties on the Condensed Consolidated Balance Sheets.

Tax years 2018 and forward remain subject to examination by the Internal Revenue Service and state taxing authorities.