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Income Taxes | 12 Months Ended
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Dec. 31, 2020
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) |  | 2020 |  | 2019 |  | 2018
Current tax expense (benefit) |  | $ | 49.2 |  |  | $ | (37.9) |  |  | $ | (127.5) |
Deferred income taxes, net |  | 182.2 |  |  | 167.7 |  |  | 300.1 |
ITC, net |  | (3.5) |  |  | (4.8) |  |  | (2.8) |
Total income tax expense |  | $ | 227.9 |  |  | $ | 125.0 |  |  | $ | 169.8 |
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:
|  | 2020 |  | 2019 |  | 2018
|  |  |  | Effective |  |  |  | Effective |  |  |  | Effective
(in millions) |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate
Statutory federal income tax |  | $ | 299.9 |  |  | 21.0 | % |  | $ | 264.4 |  |  | 21.0 | % |  | $ | 258.1 |  |  | 21.0 | %
State income taxes net of federal tax benefit |  | 90.5 |  |  | 6.3 | % |  | 80.4 |  |  | 6.4 | % |  | 71.8 |  |  | 5.8 | %
Federal excess deferred tax amortization – Wisconsin unprotected (1) |  | (57.6) |  |  | (4.0) | % |  | — |  |  | — | % |  | — |  |  | — | %
Wind PTCs |  | (51.5) |  |  | (3.6) | % |  | (34.1) |  |  | (2.7) | % |  | (12.1) |  |  | (1.0) | %
Federal excess deferred tax amortization (2) |  | (36.7) |  |  | (2.6) | % |  | (34.9) |  |  | (2.8) | % |  | (16.8) |  |  | (1.4) | %
Excess tax benefits – stock options |  | (12.3) |  |  | (0.9) | % |  | (15.8) |  |  | (1.3) | % |  | (5.9) |  |  | (0.5) | %
AFUDC – Equity |  | (4.4) |  |  | (0.3) | % |  | (3.0) |  |  | (0.2) | % |  | (3.2) |  |  | (0.3) | %
ITC restored |  | (3.5) |  |  | (0.2) | % |  | (4.8) |  |  | (0.4) | % |  | (2.8) |  |  | (0.2) | %
Tax repairs (3) |  | 3.3 |  |  | 0.2 | % |  | (122.8) |  |  | (9.8) | % |  | (120.7) |  |  | (9.8) | %
Other, net |  | 0.2 |  |  | — | % |  | (4.4) |  |  | (0.3) | % |  | 1.4 |  |  | 0.2 | %
Total income tax expense |  | $ | 227.9 |  |  | 15.9 | % |  | $ | 125.0 |  |  | 9.9 | % |  | $ | 169.8 |  |  | 13.8 | %
(1) In accordance with the rate order received from the PSCW in December 2019, our Wisconsin utilities are amortizing 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. (2) 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. (3) 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 offset the negative income statement impact of holding the regulatory assets level, resulting in no impact to net income. In 2020, in accordance with the settlement agreement, WE started collecting the payback of the tax repairs benefit that was flowed through to customers. Customers will pay back all of the benefits over the next fifty years. 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) |  | 2020 |  | 2019
Deferred tax assets |  |  |  |
Tax gross up – regulatory items |  | $ | 497.6 |  |  | $ | 519.8 |
Deferred revenues |  | 104.2 |  |  | 106.3 |
Future tax benefits |  | 102.5 |  |  | 101.0 |
Other |  | 197.2 |  |  | 159.8 |
Total deferred tax assets |  | 901.5 |  |  | 886.9 |
Valuation allowance |  | (2.3) |  |  | (2.3) |
Net deferred tax assets |  | $ | 899.2 |  |  | $ | 884.6 |
Deferred tax liabilities |  |  |  |
Property-related |  | $ | 3,721.0 |  |  | $ | 3,609.0 |
Investment in affiliates |  | 647.2 |  |  | 531.7 |
Deferred costs – Plant retirements |  | 255.4 |  |  | 232.0 |
Employee benefits and compensation |  | 148.2 |  |  | 131.4 |
Other |  | 187.2 |  |  | 149.8 |
Total deferred tax liabilities |  | 4,959.0 |  |  | 4,653.9 |
Deferred tax liability, net |  | $ | 4,059.8 |  |  | $ | 3,769.3 |
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, 2020 and 2019 are summarized in the tables below:
2020 (in millions) |  | Gross Value |  | Deferred Tax Effect |  | Valuation Allowance |  | Earliest Year of Expiration
Future tax benefits as of December 31, 2020 |  |  |  |  |  |  |  |
Federal tax credit |  | $ | — |  |  | $ | 89.1 |  |  | $ | — |  |  | 2040
State net operating loss |  | 88.8 |  |  | 5.5 |  |  | (2.3) |  |  | 2030
Other state benefits |  | — |  |  | 7.9 |  |  | — |  |  | 2023
Balance as of December 31, 2020 |  | $ | 88.8 |  |  | $ | 102.5 |  |  | $ | (2.3) |  |  |
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) |  |  |
Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) |  | 2020 |  | 2019
Balance as of January 1 |  | $ | 17.9 |  |  | $ | 20.0 |
Additions for tax positions of prior years |  | 1.6 |  |  | 1.9 |
Additions based on tax positions related to the current year |  | 0.1 |  |  | 0.2 |
Reductions for tax positions of prior years |  | (7.7) |  |  | (4.2) |
Balance as of December 31 |  | $ | 11.9 |  |  | $ | 17.9 |
The amount of unrecognized tax benefits as of both December 31, 2020 and 2019, excludes deferred tax assets related to uncertainty in income taxes of $1.9 million and $2.0 million, respectively. As of December 31, 2020 and 2019, the net amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations was $10.1 million and $15.9 million, respectively. For the years ended December 31, 2020, 2019, and 2018, we recognized $0.3 million of interest income, $0.1 million of interest expense, and $0.5 million of interest expense, respectively, related to unrecognized tax benefits in our income statements. For the years ended December 31, 2020, 2019, and 2018, we recognized no penalties related to unrecognized tax benefits in our income statements. For the year ended December 31, 2020, we had $0.5 million of interest accrued and no penalties accrued related to unrecognized tax benefits on our balance sheets. 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. 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 $7.5 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, 2020, with a few exceptions, we were subject to examination by federal and state or local tax authorities for the 2015 through 2020 tax years in our major operating jurisdictions as follows:
Jurisdiction |  | Years
Federal |  | 2017–2020
Illinois |  | 2015–2020
Michigan |  | 2015–2020
Minnesota |  | 2016–2020
Wisconsin |  | 2016–2020

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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