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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income Tax Expense The following table is a summary of income tax expense for the years ended December 31:
(in millions) |  | 2019 |  | 2018 |  | 2017
Current tax expense (benefit) |  | $ | (37.9 | ) |  | $ | (127.5 | ) |  | $ | 111.8 |
Deferred income taxes, net |  | 167.7 |  |  | 300.1 |  |  | 274.4 |
Investment tax credit, net |  | (4.8 | ) |  | (2.8 | ) |  | (2.7 | )
Total income tax expense |  | $ | 125.0 |  |  | $ | 169.8 |  |  | $ | 383.5 |
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:
|  | 2019 |  | 2018 |  | 2017 (2)
|  |  |  | Effective |  |  |  | Effective |  |  |  | Effective
(in millions) |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate
Statutory federal income tax |  | $ | 264.4 |  |  | 21.0 | % |  | $ | 258.1 |  |  | 21.0 | % |  | $ | 555.5 |  |  | 35.0 | %
State income taxes net of federal tax benefit |  | 80.4 |  |  | 6.4 | % |  | 71.8 |  |  | 5.8 | % |  | 100.8 |  |  | 6.4 | %
Tax repairs (1) |  | (122.8 | ) |  | (9.8 | )% |  | (120.7 | ) |  | (9.8 | )% |  | — |  |  | — | %
Federal excess deferred tax amortization |  | (34.9 | ) |  | (2.8 | )% |  | (16.8 | ) |  | (1.4 | )% |  | — |  |  | — | %
Wind production tax credits |  | (34.1 | ) |  | (2.7 | )% |  | (12.1 | ) |  | (1.0 | )% |  | (16.8 | ) |  | (1.1 | )%
Excess tax benefits – stock options |  | (15.8 | ) |  | (1.3 | )% |  | (5.9 | ) |  | (0.5 | )% |  | (10.0 | ) |  | (0.6 | )%
Investment tax credit restored |  | (4.8 | ) |  | (0.4 | )% |  | (2.8 | ) |  | (0.2 | )% |  | (2.7 | ) |  | (0.2 | )%
AFUDC – Equity |  | (3.0 | ) |  | (0.2 | )% |  | (3.2 | ) |  | (0.3 | )% |  | (4.0 | ) |  | (0.3 | )%
Federal tax reform |  | — |  |  | — | % |  | — |  |  | — | % |  | (226.9 | ) |  | (14.3 | )%
Other, net |  | (4.4 | ) |  | (0.3 | )% |  | 1.4 |  |  | 0.2 | % |  | (12.4 | ) |  | (0.8 | )%
Total income tax expense |  | $ | 125.0 |  |  | 9.9 | % |  | $ | 169.8 |  |  | 13.8 | % |  | $ | 383.5 |  |  | 24.1 | %
(1) | In accordance with a settlement agreement with the PSCW, WE flowed 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 25, Regulatory Environment, for more information about the impact of the Tax Legislation and the Wisconsin rate order.
(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.
Deferred Income Tax Assets and Liabilities On December 22, 2017, the Tax Legislation was signed into law. For businesses, the Tax Legislation reduced the corporate federal tax rate from a maximum of 35% to a 21% rate effective January 1, 2018. In December 2017, we recorded a tax benefit related to the re-measurement of our deferred taxes in the amount of $2,657 million. Accordingly, the tax benefit related to our regulated utilities was recorded as both an increase to regulatory liabilities as well as a decrease to certain existing regulatory assets as of December 31, 2017. The effects of the Tax Legislation primarily at our non-utility energy infrastructure and corporate and other segments resulted in the recording of an income tax benefit of approximately $206.7 million for the year ended December 31, 2017. This tax benefit was primarily due to a re-measurement of deferred tax assets and liabilities. On December 22, 2017, the SEC staff issued guidance in SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which provided for a measurement period of up to one year from the enactment date to complete accounting under GAAP for the tax effects of the legislation. Due to the complex and comprehensive nature of the enacted tax law changes, and their application under GAAP, certain amounts related to bonus depreciation and future tax benefit utilization recorded in the financial statements as a result of the Tax Legislation were considered "provisional" and subject to revision at December 31, 2017, and through 2018, as discussed in SAB 118. In 2018, we considered all available guidance from industry and income tax authorities related to these tax items, and revised our Alternative Minimum Tax Credit valuation allowance, and revised our estimates for re-measurement of deferred income taxes related to guidance on bonus depreciation. See Note 25, Regulatory Environment, for more information on the re-measurement of deferred income taxes. At December 31, 2018, we no longer considered any amounts related to bonus depreciation and future tax benefit utilization "provisional," subject to any additional amendments or technical corrections to the Tax Legislation. In 2019, we considered all available guidance from industry and income tax authorities related to these tax items, and reversed the valuation allowance we had related to Alternative Minimum Tax Credits due to an IRS Announcement issued January 14, 2019. Any further amendments or technical corrections to the Tax Legislation could subject these tax items to revision. The components of deferred income taxes as of December 31 were as follows:
(in millions) |  | 2019 |  | 2018
Deferred tax assets |  |  |  |
Tax gross up – regulatory items |  | $ | 519.8 |  |  | $ | 579.2 |
Deferred revenues |  | 106.3 |  |  | 129.3 |
Future tax benefits |  | 101.0 |  |  | 70.6 |
Other |  | 159.8 |  |  | 194.4 |
Total deferred tax assets |  | 886.9 |  |  | 973.5 |
Valuation allowance |  | (2.3 | ) |  | (11.4 | )
Net deferred tax assets |  | $ | 884.6 |  |  | $ | 962.1 |
Deferred tax liabilities |  |  |  |
Property-related |  | $ | 3,609.0 |  |  | $ | 3,436.9 |
Investment in affiliates |  | 531.7 |  |  | 420.6 |
Deferred costs – Plant retirements |  | 232.0 |  |  | 176.0 |
Employee benefits and compensation |  | 131.4 |  |  | 121.2 |
Other |  | 149.8 |  |  | 195.5 |
Total deferred tax liabilities |  | 4,653.9 |  |  | 4,350.2 |
Deferred tax liability, net |  | $ | 3,769.3 |  |  | $ | 3,388.1 |
Consistent with rate-making 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, 2019 and 2018 are summarized in the tables below:
2019 (in millions) |  | Gross Value |  | Deferred Tax Effect |  | Valuation Allowance |  | Earliest Year of Expiration
Future tax benefits as of December 31, 2019 |  |  |  |  |  |  |  |
Federal tax credit |  | $ | — |  |  | $ | 75.4 |  |  | $ | — |  |  | 2037
State net operating loss |  | 287.1 |  |  | 17.6 |  |  | (2.3 | ) |  | 2023
Other state benefits |  | — |  |  | 8.0 |  |  | — |  |  | 2019
Balance as of December 31, 2019 |  | $ | 287.1 |  |  | $ | 101.0 |  |  | $ | (2.3 | ) |  |
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
Other state benefits |  | — |  |  | 4.6 |  |  | — |  |  | 2018
Balance as of December 31, 2018 |  | $ | 275.9 |  |  | $ | 70.6 |  |  | $ | (11.4 | ) |  |
Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) |  | 2019 |  | 2018
Balance as of January 1 |  | $ | 20.0 |  |  | $ | 17.3 |
Additions for tax positions of prior years |  | 1.9 |  |  | 2.8 |
Additions based on tax positions related to the current year |  | 0.2 |  |  | 0.1 |
Reductions for tax positions of prior years |  | (4.2 | ) |  | (0.2 | )
Balance as of December 31 |  | $ | 17.9 |  |  | $ | 20.0 |
The amount of unrecognized tax benefits as of both December 31, 2019 and 2018, excludes deferred tax assets related to uncertainty in income taxes of $2.0 million. As of December 31, 2019 and 2018, the net amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations was $15.9 million and $18.0 million, respectively. For the years ended December 31, 2019, 2018, and 2017, we recognized $0.1 million of interest expense, $0.5 million of interest expense, and $0.6 million of interest income, respectively, related to unrecognized tax benefits in our income statements. For the years ended December 31, 2019, 2018, and 2017, we recognized no penalties related to unrecognized tax benefits in our income statements. For the year ended December 31, 2019, we had $0.8 million of interest accrued and no penalties accrued related to unrecognized tax benefits on our balance sheets. For the year ended December 31, 2018, we had $0.7 million of interest accrued and no penalties accrued related to unrecognized tax benefits on our balance sheets. 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 $11.4 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, 2019, with a few exceptions, we were subject to examination by federal and state or local tax authorities for the 2015 through 2019 tax years in our major operating jurisdictions as follows:
Jurisdiction |  | Years
Federal |  | 2015–2019
Illinois |  | 2015–2019
Michigan |  | 2015–2019
Minnesota |  | 2015–2019
Wisconsin |  | 2015–2019

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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