

	2019		2018			2017
	(In thousands)
Current
Federal	$	—	$	(10,099	)	$	—
State	8,412		11,075			9,022
Deferred
Federal	113,331		150,556			197,013
State	17,160		15,330			15,348
TCJA Impact	—		(158,782		)	—
	$	138,903	$	8,080		$	221,383

Reconciliations of the provision for income taxes computed at the statutory rate to the reported provisions for income taxes from continuing operations for 2019, 2018 and 2017 are set forth below:



	2019			2018			2017
	(In thousands)
Tax at statutory rate⁽¹⁾	$	136,565		$	149,730		$	211,433
Common stock dividends deductible for tax reporting	(1,460		)	(1,745		)	(2,584		)
State taxes (net of federal benefit)	20,202			19,826			16,100
Amortization of excess deferred taxes	(14,085		)	(1,219		)	—
Remeasurement due to TCJA	—			(158,782		)	—
Other, net	(2,319		)	270			(3,566		)
Income tax expense	$	138,903		$	8,080		$	221,383

Deferred income taxes reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that gave rise to significant components of the deferred tax liabilities and deferred tax assets at September 30, 2019 and 2018 are presented below:



	2019			2018
	(In thousands)
Deferred tax assets:
Employee benefit plans	$	70,929		$	72,745
Interest rate swaps	33,918			27,135
Net operating loss carryforwards	485,133			461,481
Charitable and other credit carryforwards	8,241			6,818
Regulatory excess deferred tax	165,701			169,947
Other	13,186			13,804
Total deferred tax assets	777,108			751,930
Valuation allowance	(1,894		)	(1,465		)
Net deferred tax assets	775,214			750,465
Deferred tax liabilities:
Difference in net book value and net tax value of assets	(2,004,516		)	(1,859,787		)
Pension funding	(4,384		)	(6,986		)
Gas cost adjustments	(18,072		)	1,005
Other	(48,257		)	(38,764		)
Total deferred tax liabilities	(2,075,229		)	(1,904,532		)
Net deferred tax liabilities	$	(1,300,015	)	$	(1,154,067	)
Deferred credits for rate regulated entities	$	2,582		$	762

At September 30, 2019, we had $451.8 million of federal net operating loss carryforwards. The federal net operating loss carryforwards are available to offset taxable income and will begin to expire in 2029. The Company also has $10.1 million of federal alternative minimum tax credit carryforwards, which do not expire and are expected to be fully refunded to us between 2020 and 2022 as a result of changes introduced by the TCJA. These credit carryforwards are now reflected as taxes receivable within the deferred charges and other assets line item on our consolidated balance sheet. In addition, the Company has $5.5 million in remeasured charitable contribution carryforwards to offset future taxable income. The Company’s charitable contribution carryforwards expiration period begins in 2020.

The Company also has $33.3 million of state net operating loss carryforwards (net of $8.8 million of federal effects) and $1.8 million of state tax credits carryforwards (net of $0.5 million of federal effects). Depending on the jurisdiction in which the state net operating loss was generated, the carryforwards expiration period begins in 2020.

We believe it is more likely than not that the benefit from certain state net operating loss carryforwards and state credit carryforwards will not be realized. Due to the uncertainty of realizing a benefit from the deferred tax asset recorded for the carryforwards, a valuation allowance of $1.8 million was established for the year ended September 30, 2019.

At September 30, 2019, we had recorded liabilities associated with unrecognized tax benefits totaling $27.7 million. The following table reconciles the beginning and ending balance of our unrecognized tax benefits:



	2019			2018			2017
	(In thousands)
Unrecognized tax benefits - beginning balance	$	26,203		$	23,719		$	20,298
Increase (decrease) resulting from prior period tax positions	(923		)	22			(366		)
Increase resulting from current period tax positions	2,436			2,462			3,787
Unrecognized tax benefits - ending balance	27,716			26,203			23,719
Less: deferred federal and state income tax benefits	(5,820		)	(5,503		)	(8,302		)
Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year	$	21,896		$	20,700		$	15,417

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties included within interest charges in our consolidated statements of comprehensive income. During the years ended September 30, 2019, 2018 and 2017, the Company recognized approximately $2.2 million, $1.6 million and $1.1 million in interest and penalties. The Company had approximately $7.9 million, $6.1 million and $4.5 million for the payment of interest and penalties accrued at September 30, 2019, 2018 and 2017.

We file income tax returns in the U.S. federal jurisdiction as well as in various states where we have operations. We have concluded substantially all U.S. federal income tax matters through fiscal year 2009 and concluded substantially all Texas income tax matters through fiscal year 2010.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "TCJA") was signed into law. As a result of the implementation of the TCJA, we recognized a $158.8 million income tax benefit in our consolidated statement of comprehensive income for the year ended September 30, 2018 related to a change in deferred taxes that were not related to our cost of service ratemaking. The change in deferred taxes related to our cost of service ratemaking (referred to as excess deferred taxes) was reclassified into a regulatory liability and will be returned to ratepayers in accordance with regulatory requirements. As of September 30, 2019 and 2018, this liability totaled $726.3 million and $744.9 million.

We have worked and continue to work with our regulators in each jurisdiction to fully incorporate the effects of the TCJA into customer bills. As of September 30, 2019, we have received approval from regulators to update our cost of service rates to reflect the decrease in the statutory income tax rate in all of our service areas.

Regulators in all of our service areas issued accounting orders that required us to establish, effective January 1, 2018, a separate regulatory liability for the difference in taxes included in our rates that were calculated based on a 35% statutory income tax rate and rates based on the new 21% statutory income tax rate until the new rates could be established. As of September 30, 2019, we received approval from most of our regulators to return these liabilities to customers. This regulatory liability totaled $5.2 million and $22.5 million as of September 30, 2019 and 2018.

As of September 30, 2019, we received approval from regulators to return excess deferred taxes in most of our jurisdictions in accordance with regulatory proceedings on a provisional basis over periods ranging from 13 to 51 years. In our remaining jurisdictions, the treatment of the effects of the TCJA in rates is being addressed in ongoing or will be addressed in future regulatory proceedings.

The SEC issued guidance in Staff Accounting Bulletin 118 (SAB 118), which allowed us to record provisional amounts during a one-year measurement period, similar to the measurement period in accounting for business combinations. The Company recorded provisional amounts for the income tax effects of the TCJA for the fiscal year ended September 30, 2018. Although the Company no longer considers the accounting effects of the TCJA to be provisional under SAB 118, many aspects of the TCJA remain unclear and its impact on the Company's income tax balances may change following further interpretation of TCJA provisions by issuance of U.S. Treasury regulations or guidance from the Internal Revenue Service. We continue to monitor and assess the accounting implications of the TCJA developments on the consolidated financial statements.