Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure

INCOME TAXES

Income Tax Expense

The following table is a summary of income tax expense for the years ended December 31:

(in millions)	2023		2022		2021
Current tax expense (benefit)	$	(14.8)	$	50.2	$	93.9
Deferred income taxes, net	229.9		278.5		111.0
ITCs	(10.5)		(5.8)		(4.6)
Total income tax expense	$	204.6	$	322.9	$	200.3

Statutory Rate Reconciliation

The provision for income taxes for each of the years ended December 31 differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to income before income taxes as a result of the following:

	2023				2022				2021
			Effective				Effective				Effective
(in millions)	Amount		Tax Rate		Amount		Tax Rate		Amount		Tax Rate
Statutory federal income tax	$	322.6	21.0	%	$	363.5	21.0	%	$	315.1	21.0	%
State income taxes net of federal tax benefit	94.3		6.1	%	109.7		6.3	%	96.1		6.4	%
PTCs, net	(168.2)		(10.9)	%	(107.6)		(6.2)	%	(81.3)		(5.4)	%
Federal excess deferred tax amortization (1)	(37.6)		(2.4)	%	(36.9)		(2.1)	%	(37.3)		(2.5)	%
AFUDC-Equity	(12.4)		(0.8)	%	(6.2)		(0.4)	%	(3.8)		(0.3)	%
Federal excess deferred tax amortization – Wisconsin unprotected (2)	(0.8)		(0.1)	%	(0.8)		—	%	(77.9)		(5.2)	%
Other, net	6.7		0.4	%	1.2		—	%	(10.6)		(0.6)	%
Total income tax expense	$	204.6	13.3	%	$	322.9	18.6	%	$	200.3	13.4	%

(1)    The Tax Legislation required our regulated utilities to remeasure their deferred income taxes and we began to amortize the resulting excess protected deferred income taxes beginning in 2018 in accordance with normalization requirements. The decrease in income tax expense related to the amortization of the deferred tax benefits is offset by a decrease in revenue as the benefits are returned to customers, resulting in no impact on net income.

(2)    In accordance with the rate order received from the PSCW in December 2019, our Wisconsin utilities amortized these unprotected deferred tax benefits over periods ranging from two years to four years, to reduce near-term rate impacts to their customers. The decrease in income tax expense related to the amortization of the deferred tax benefits is offset by a decrease in revenue as the benefits are returned to customers, resulting in no impact on net income.

See Note 26, Regulatory Environment, for more information about the impact of the Tax Legislation and the Wisconsin rate orders.

Deferred Income Tax Assets and Liabilities

The components of deferred income taxes as of December 31 were as follows:

(in millions)	2023		2022
Deferred tax assets
Tax gross up – regulatory items	$	438.6	$	459.0
Future tax benefits	160.7		187.7
Deferred revenues	84.7		86.8
Other	168.3		190.2
Total deferred tax assets	852.3		923.7
Valuation allowance	(5.0)		(1.2)
Net deferred tax assets	$	847.3	$	922.5
Deferred tax liabilities
Property-related	$	4,198.0	$	4,072.5
Investment in affiliates	915.1		839.7
Employee benefits and compensation	227.2		219.5
Deferred costs – plant retirements	199.6		212.8
Other	225.9		203.6
Total deferred tax liabilities	5,765.8		5,548.1
Deferred tax liability, net	$	4,918.5	$	4,625.6

Consistent with ratemaking treatment, deferred taxes related to our regulated utilities in the table above are offset for temporary differences that have related regulatory assets and liabilities.

The components of net deferred tax assets associated with federal and state tax benefit carryforwards as of December 31, 2023 and 2022 are summarized in the tables below:

2023 (in millions)	Gross Value		Deferred Tax Effect		Valuation Allowance		Earliest Year of Expiration
Future tax benefits as of December 31, 2023
Federal tax credit	$	—	$	153.0	$	—	2042
State net operating loss	62.6		3.8		(1.1)		2032
Other state benefits	—		3.9		(3.9)		2024
Balance as of December 31, 2023	$	62.6	$	160.7	$	(5.0)

2022 (in millions)	Gross Value		Deferred Tax Effect		Valuation Allowance		Earliest Year of Expiration
Future tax benefits as of December 31, 2022
Federal tax credit	$	—	$	176.4	$	—	2041
State net operating loss	72.6		4.5		(1.2)		2032
Other state benefits	—		6.8		—		2023
Balance as of December 31, 2022	$	72.6	$	187.7	$	(1.2)

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in millions)	2023		2022		2021
Balance as of January 1	$	6.3	$	6.8	$	11.9
Additions for tax positions of prior years	0.2		0.3		—
Additions based on tax positions related to the current year	—		0.4		1.6
Reductions for tax positions of prior years	(1.9)		(1.2)		(6.7)
Balance as of December 31	$	4.6	$	6.3	$	6.8

The amount of unrecognized tax benefits as of December 31, 2023 and 2022, excludes deferred tax assets related to uncertainty in income taxes of $1.1 million and $1.3 million, respectively. As of December 31, 2023 and 2022, the net amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations was $3.6 million and $5.1 million, respectively.

Interest accrued related to unrecognized tax benefits is as follows:

(in millions)	2023		2022		2021
Balance as of January 1	$	0.5	$	0.1	$	0.5
Interest expense (income) related to unrecognized tax benefits	0.1		0.4		(0.4)
Balance as of December 31	$	0.6	$	0.5	$	0.1

For the years ended December 31, 2023, 2022, and 2021, we recognized no penalties related to unrecognized tax benefits in our consolidated income statements. At December 31, 2023 and 2022, we had no amounts accrued for penalties related to unrecognized tax benefits.

Although analysis of our unrecognized tax benefits is ongoing, the potential estimated decrease in the total amounts of unrecognized tax benefits within the next 12 months is approximately $0.6 million associated with statutes of limitations on certain tax years. We do not anticipate any significant increases in the total amounts of unrecognized tax benefits within the next 12 months.

We file income tax returns in the United States federal jurisdiction and state tax returns based on income in our major state operating jurisdictions of Wisconsin, Illinois, Michigan, and Minnesota. We also file tax returns in other state and local jurisdictions with varying statutes of limitations. As of December 31, 2023, with a few exceptions, we were subject to examination by federal and state or local tax authorities for the 2019 through 2023 tax years in our major operating jurisdictions as follows:

Jurisdiction	Years
Federal	2020–2023
Illinois	2019–2023
Michigan	2019–2023
Minnesota	2019–2023
Wisconsin	2019–2023