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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Summary of income tax expense | The following table is a summary of income tax expense for the years ended December 31:
(in millions) |  | 2018 |  | 2017 |  | 2016
Current tax (benefit) expense |  | $ | (127.5 | ) |  | $ | 111.8 |  |  | $ | 72.7 |
Deferred income taxes, net |  | 300.1 |  |  | 274.4 |  |  | 498.7 |
Investment tax credit, net |  | (2.8 | ) |  | (2.7 | ) |  | (4.9 | )
Total income tax expense |  | $ | 169.8 |  |  | $ | 383.5 |  |  | $ | 566.5 |
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:
|  | 2018 |  | 2017 (2) |  | 2016
|  |  |  | Effective |  |  |  | Effective |  |  |  | Effective
(in millions) |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate
Expected tax at statutory federal tax rates |  | $ | 258.1 |  |  | 21.0 | % |  | $ | 555.5 |  |  | 35.0 | % |  | $ | 526.4 |  |  | 35.0 | %
State income taxes net of federal tax benefit |  | 71.8 |  |  | 5.8 | % |  | 100.8 |  |  | 6.4 | % |  | 72.8 |  |  | 4.8 | %
Tax repairs (1) |  | (120.7 | ) |  | (9.8 | )% |  | — |  |  | — | % |  | — |  |  | — | %
Federal excess amortization |  | (16.8 | ) |  | (1.4 | )% |  | — |  |  | — | % |  | — |  |  | — | %
Production tax credits |  | (12.1 | ) |  | (1.0 | )% |  | (16.8 | ) |  | (1.1 | )% |  | (15.7 | ) |  | (1.1 | )%
AFUDC – Equity |  | (3.2 | ) |  | (0.3 | )% |  | (4.0 | ) |  | (0.3 | )% |  | (8.8 | ) |  | (0.6 | )%
Investment tax credit restored |  | (2.8 | ) |  | (0.2 | )% |  | (2.7 | ) |  | (0.2 | )% |  | (4.9 | ) |  | (0.3 | )%
Federal tax reform |  | — |  |  | — | % |  | (226.9 | ) |  | (14.3 | )% |  | — |  |  | — | %
Other, net |  | (4.5 | ) |  | (0.3 | )% |  | (22.4 | ) |  | (1.4 | )% |  | (3.3 | ) |  | (0.2 | )%
Total income tax expense |  | $ | 169.8 |  |  | 13.8 | % |  | $ | 383.5 |  |  | 24.1 | % |  | $ | 566.5 |  |  | 37.6 | %
(1) | In accordance with a settlement agreement with the PSCW, WE will flow through the tax benefit of its repair related deferred tax liabilities in 2018 and 2019, to maintain certain regulatory asset balances at their December 31, 2017 levels. The flow through treatment of the repair related deferred tax liabilities offsets the negative income statement impact of holding the regulatory assets level, resulting in no change to net income. See Note 24, Regulatory Environment, for more information about the impact of the Tax Legislation and the Wisconsin rate settlement
(2) | In 2017, the net impact of tax reform in the amount of $206.7 million is represented in both the Federal tax reform and State income taxes net of federal tax benefit lines above.
Components of deferred income taxes classified as net current assets and net long-term liabilities | The components of deferred income taxes as of December 31 were as follows:
(in millions) |  | 2018 |  | 2017
Deferred tax assets |  |  |  |
Tax gross up – regulatory items |  | $ | 579.2 |  |  | $ | 585.8 |
Deferred revenues |  | 129.3 |  |  | 128.8 |
Future tax benefits |  | 70.6 |  |  | 303.9 |
Employee benefits and compensation |  | — |  |  | 164.2 |
Property-related |  | — |  |  | 24.4 |
Other |  | 194.4 |  |  | 185.0 |
Total deferred tax assets |  | 973.5 |  |  | 1,392.1 |
Valuation allowance |  | (11.4 | ) |  | (15.7 | )
Net deferred tax assets |  | $ | 962.1 |  |  | $ | 1,376.4 |
Deferred tax liabilities |  |  |  |
Property-related |  | $ | 3,436.9 |  |  | $ | 3,464.6 |
Investment in transmission affiliate |  | 420.6 |  |  | 321.2 |
Deferred costs – Pleasant Prairie |  | 176.0 |  |  | — |
Employee benefits and compensation |  | 121.2 |  |  | 285.8 |
Deferred transmission costs |  | 55.4 |  |  | 60.1 |
Other |  | 140.1 |  |  | 244.5 |
Total deferred tax liabilities |  | 4,350.2 |  |  | 4,376.2 |
Deferred tax liability, net |  | $ | 3,388.1 |  |  | $ | 2,999.8 |
Components of deferred tax assets associated with federal and state tax benefit carryforwards | The components of net deferred tax assets associated with federal and state tax benefit carryforwards as of December 31, 2018 and 2017 are summarized in the tables below:
2018 (in millions) |  | Gross Value |  | Deferred Tax Effect |  | Valuation Allowance |  | Earliest Year of Expiration
Future tax benefits as of December 31, 2018 |  |  |  |  |  |  |  |
Federal foreign tax credit |  | $ | — |  |  | $ | 9.7 |  |  | $ | (9.7 | ) |  | 2018
Other federal tax credit |  | — |  |  | 39.3 |  |  | (1.7 | ) |  | 2038
State net operating loss |  | 275.9 |  |  | 17.0 |  |  | — |  |  | 2023
State tax credit |  | — |  |  | 4.6 |  |  | — |  |  | 2018
Balance as of December 31, 2018 |  | $ | 275.9 |  |  | $ | 70.6 |  |  | $ | (11.4 | ) |  |
2017 (in millions) |  | Gross Value |  | Deferred Tax Effect |  | Valuation Allowance |  | Earliest Year of Expiration
Future tax benefits as of December 31, 2017 |  |  |  |  |  |  |  |
Federal foreign tax credit |  | $ | — |  |  | $ | 13.5 |  |  | $ | (13.5 | ) |  | 2018
Other federal tax credit |  | — |  |  | 259.6 |  |  | (0.1 | ) |  | 2025
Charitable contribution and capital loss |  | 21.7 |  |  | 8.6 |  |  | (2.1 | ) |  | 2017
State net operating loss |  | 282.7 |  |  | 17.2 |  |  | — |  |  | 2025
State tax credit |  | — |  |  | 5.0 |  |  | — |  |  | 2017
Balance as of December 31, 2017 |  | $ | 304.4 |  |  | $ | 303.9 |  |  | $ | (15.7 | ) |  |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) |  | 2018 |  | 2017
Balance as of January 1 |  | $ | 17.3 |  |  | $ | 14.5 |
Additions for tax positions of prior years |  | 2.8 |  |  | 7.9 |
Additions based on tax positions related to the current year |  | 0.1 |  |  | 0.5 |
Reductions for tax positions of prior years |  | (0.2 | ) |  | (5.6 | )
Balance as of December 31 |  | $ | 20.0 |  |  | $ | 17.3 |
Summary of income tax examinations | As of December 31, 2018, with a few exceptions, we were subject to examination by federal and state or local tax authorities for the 2013 through 2018 tax years in our major operating jurisdictions as follows:
Jurisdiction |  | Years
Federal |  | 2015–2018
Illinois |  | 2013–2018
Michigan |  | 2014–2018
Minnesota |  | 2014–2018
Wisconsin |  | 2014–2018

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