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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes | 14:INCOME TAXES CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return and a unitary Michigan income tax return. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement. Presented in the following table is the difference between actual income tax expense on continuing operations, excluding noncontrolling interests, and income tax expense computed by applying the statutory U.S. federal income tax rate:
In Millions, Except Tax Rate |  |
Years Ended December 31 | 2014 |  | 2013 |  | 2012 |  |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  | $ | 727 |  |  | $ | 754 |  |  | $ | 620 |  |
Income tax expense at statutory rate |  |  | 254 |  |  |  | 264 |  |  |  | 217 |  |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect |  |  | 36 |  |  |  | 37 |  |  |  | 27 |  |
Accelerated flow-through of regulatory tax benefits |  |  | (39) |  |  |  | - |  |  |  | - |  |
Other, net |  |  | (1) |  |  |  | 1 |  |  |  | 1 |  |
Income tax expense |  | $ | 250 |  |  | $ | 302 |  |  | $ | 245 |  |
Effective tax rate |  |  | 34.4 | % |  |  | 40.1 | % |  |  | 39.5 | % |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  | $ | 873 |  |  | $ | 880 |  |  | $ | 736 |  |
Income tax expense at statutory rate |  |  | 306 |  |  |  | 308 |  |  |  | 258 |  |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect |  |  | 42 |  |  |  | 43 |  |  |  | 36 |  |
Accelerated flow-through of regulatory tax benefits |  |  | (39) |  |  |  | - |  |  |  | - |  |
Other, net |  |  | (3) |  |  |  | (5) |  |  |  | 3 |  |
Income tax expense |  | $ | 306 |  |  | $ | 346 |  |  | $ | 297 |  |
Effective tax rate |  |  | 35.1 | % |  |  | 39.3 | % |  |  | 40.4 | % |
Prior to 2014, Consumers recognized the income tax benefits associated with the removal costs of plant placed in service before 1993 as payments were made and the tax benefits were flowed through to customers. In September 2013, the MPSC issued an order authorizing Consumers to flow through to customers the income tax benefits on a straight-line basis over an accelerated period. This new regulatory treatment, which Consumers implemented in January 2014, will accelerate the return of $209 million of income tax benefits over five years to electric customers and $260 million of income tax benefits over 12 years to gas customers. For the year ended December 31, 2014, this new treatment reduced Consumers’ income tax expense by $39 million. Presented in the following table are the significant components of income tax expense on continuing operations:
In Millions
Years Ended December 31 | 2014 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
Current income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | - |  | $ | - |  | $ | 1 |
State and local |  |  | 24 |  |  | 34 |  |  | 21 |
|  | $ | 24 |  | $ | 34 |  | $ | 22 |
Deferred income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 198 |  | $ | 248 |  | $ | 205 |
State and local |  |  | 31 |  |  | 23 |  |  | 21 |
|  | $ | 229 |  | $ | 271 |  | $ | 226 |
Deferred income tax credit |  |  | (3) |  |  | (3) |  |  | (3) |
Tax expense |  | $ | 250 |  | $ | 302 |  | $ | 245 |
Consumers |  |  |  |  |  |  |  |  |  |
Current income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8 |  | $ | 137 |  | $ | 110 |
State and local |  |  | 36 |  |  | 45 |  |  | 37 |
|  | $ | 44 |  | $ | 182 |  | $ | 147 |
Deferred income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 236 |  | $ | 147 |  | $ | 134 |
State and local |  |  | 29 |  |  | 20 |  |  | 19 |
|  | $ | 265 |  | $ | 167 |  | $ | 153 |
Deferred income tax credit |  |  | (3) |  |  | (3) |  |  | (3) |
Tax expense |  | $ | 306 |  | $ | 346 |  | $ | 297 |
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
In Millions
December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Employee benefits |  | $ | (72) |  | $ | (99) |
Gas inventory |  |  | (117) |  |  | (130) |
Plant, property, and equipment |  |  | (2,217) |  |  | (1,856) |
Net regulatory tax liability |  |  | 65 |  |  | 86 |
Reserves and accruals |  |  | 63 |  |  | 57 |
Securitized costs |  |  | (144) |  |  | (190) |
Tax loss and credit carryforwards |  |  | 676 |  |  | 629 |
Other |  |  | - |  |  | 15 |
|  | $ | (1,746) |  | $ | (1,488) |
Less valuation allowance |  |  | (2) |  |  | (2) |
Total net deferred income tax liabilities |  | $ | (1,748) |  | $ | (1,490) |
Deferred tax assets, net of valuation reserves |  | $ | 802 |  | $ | 785 |
Deferred tax liabilities |  |  | (2,550) |  |  | (2,275) |
Total net deferred income tax liabilities |  | $ | (1,748) |  | $ | (1,490) |
Consumers |  |  |  |  |  |  |
Employee benefits |  | $ | (103) |  | $ | (119) |
Gas inventory |  |  | (117) |  |  | (130) |
Plant, property, and equipment |  |  | (2,263) |  |  | (1,911) |
Net regulatory tax liability |  |  | 65 |  |  | 86 |
Reserves and accruals |  |  | 34 |  |  | 31 |
Securitized costs |  |  | (144) |  |  | (190) |
Tax loss and credit carryforwards |  |  | 45 |  |  | 48 |
Other |  |  | (2) |  |  | 16 |
|  | $ | (2,485) |  | $ | (2,169) |
Less valuation allowance |  |  | (1) |  |  | (1) |
Total net deferred income tax liabilities |  | $ | (2,486) |  | $ | (2,170) |
Deferred tax assets, net of valuation reserves |  | $ | 143 |  | $ | 180 |
Deferred tax liabilities |  |  | (2,629) |  |  | (2,350) |
Total net deferred income tax liabilities |  | $ | (2,486) |  | $ | (2,170) |
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements. Deferred tax assets and liabilities are classified as current or non‑current according to the classification of the related assets or liabilities. Deferred tax assets and liabilities not related to assets or liabilities are classified according to the expected reversal date of the temporary differences. Presented in the following table are the tax loss and credit carryforwards at December 31, 2014:
In Millions
| Gross Amount | Tax Attribute | Expiration |
CMS Energy, including Consumers |  |  |  |  |  |  |  |
Federal net operating loss carryforward |  | $ | 1,032 |  | $ | 362 | 2025 – 2034 |
Local net operating loss carryforwards |  |  | 406 |  |  | 4 | 2023 – 2034 |
State capital loss carryforward |  |  | 18 |  |  | 1 | 2014 |
Alternative minimum tax credits |  |  | 270 |  |  | 270 | No expiration |
Charitable contribution carryover |  |  | 1 |  |  | 1 | 2016 – 2019 |
General business credits |  |  | 38 |  |  | 38 | 2018 – 2034 |
Total tax attributes |  |  |  |  | $ | 676 |  |
Consumers |  |  |  |  |  |  |  |
Federal net operating loss carryforward |  | $ | 125 |  | $ | 44 | 2025 – 2034 |
State capital loss carryforward |  |  | 10 |  |  | 1 | 2014 |
Charitable contribution carryover |  |  | 1 |  |  | - | 2016 – 2019 |
Total tax attributes |  |  |  |  | $ | 45 |  |
CMS Energy has provided a valuation allowance of $1 million for the local tax loss carryforward, and a valuation allowance of $1 million for the state capital loss carryforward. Consumers has provided a valuation allowance of $1 million for the state capital loss carryforward. CMS Energy and Consumers expect to utilize fully tax loss and credit carryforwards for which no valuation has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year. Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:
In Millions
Years Ended December 31 | 2014 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4 |  | $ | 1 |  | $ | 4 |
Additions for current-year tax positions |  |  | 2 |  |  | - |  |  | - |
Additions for prior-year tax positions |  |  | 1 |  |  | 3 |  |  | 1 |
Reductions for prior-year tax positions |  |  | (2) |  |  | - |  |  | (4) |
Balance at end of period |  | $ | 5 |  | $ | 4 |  | $ | 1 |
Consumers |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4 |  | $ | 1 |  | $ | 4 |
Additions for current-year tax positions |  |  | 2 |  |  | - |  |  | - |
Additions for prior-year tax positions |  |  | 1 |  |  | 3 |  |  | 1 |
Reductions for prior-year tax positions |  |  | (2) |  |  | - |  |  | (4) |
Balance at end of period |  | $ | 5 |  | $ | 4 |  | $ | 1 |
I f recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rate s in fu ture years. CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2014, 2013, or 2012. In April 2014, the IRS completed its audit of the federal income tax returns of CMS Energy and its subsidiaries for 2010 and 2011. The audit resulted in no significant adjustments to CMS Energy’s or Consumers’ taxable income or income tax expense. CMS Energy’s federal income tax returns for 201 2 and subsequent years remain subject to examination by the IRS. CMS Energy’s MCIT and MBT returns for 2008 and subsequent years remain subject to examination by the State of Michigan. The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2014 were adequate for all years.
Consumers Energy Company [Member] |
Income Taxes | 14:INCOME TAXES CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return and a unitary Michigan income tax return. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement. Presented in the following table is the difference between actual income tax expense on continuing operations, excluding noncontrolling interests, and income tax expense computed by applying the statutory U.S. federal income tax rate:
In Millions, Except Tax Rate |  |
Years Ended December 31 | 2014 |  | 2013 |  | 2012 |  |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  | $ | 727 |  |  | $ | 754 |  |  | $ | 620 |  |
Income tax expense at statutory rate |  |  | 254 |  |  |  | 264 |  |  |  | 217 |  |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect |  |  | 36 |  |  |  | 37 |  |  |  | 27 |  |
Accelerated flow-through of regulatory tax benefits |  |  | (39) |  |  |  | - |  |  |  | - |  |
Other, net |  |  | (1) |  |  |  | 1 |  |  |  | 1 |  |
Income tax expense |  | $ | 250 |  |  | $ | 302 |  |  | $ | 245 |  |
Effective tax rate |  |  | 34.4 | % |  |  | 40.1 | % |  |  | 39.5 | % |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  | $ | 873 |  |  | $ | 880 |  |  | $ | 736 |  |
Income tax expense at statutory rate |  |  | 306 |  |  |  | 308 |  |  |  | 258 |  |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect |  |  | 42 |  |  |  | 43 |  |  |  | 36 |  |
Accelerated flow-through of regulatory tax benefits |  |  | (39) |  |  |  | - |  |  |  | - |  |
Other, net |  |  | (3) |  |  |  | (5) |  |  |  | 3 |  |
Income tax expense |  | $ | 306 |  |  | $ | 346 |  |  | $ | 297 |  |
Effective tax rate |  |  | 35.1 | % |  |  | 39.3 | % |  |  | 40.4 | % |
Prior to 2014, Consumers recognized the income tax benefits associated with the removal costs of plant placed in service before 1993 as payments were made and the tax benefits were flowed through to customers. In September 2013, the MPSC issued an order authorizing Consumers to flow through to customers the income tax benefits on a straight-line basis over an accelerated period. This new regulatory treatment, which Consumers implemented in January 2014, will accelerate the return of $209 million of income tax benefits over five years to electric customers and $260 million of income tax benefits over 12 years to gas customers. For the year ended December 31, 2014, this new treatment reduced Consumers’ income tax expense by $39 million. Presented in the following table are the significant components of income tax expense on continuing operations:
In Millions
Years Ended December 31 | 2014 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
Current income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | - |  | $ | - |  | $ | 1 |
State and local |  |  | 24 |  |  | 34 |  |  | 21 |
|  | $ | 24 |  | $ | 34 |  | $ | 22 |
Deferred income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 198 |  | $ | 248 |  | $ | 205 |
State and local |  |  | 31 |  |  | 23 |  |  | 21 |
|  | $ | 229 |  | $ | 271 |  | $ | 226 |
Deferred income tax credit |  |  | (3) |  |  | (3) |  |  | (3) |
Tax expense |  | $ | 250 |  | $ | 302 |  | $ | 245 |
Consumers |  |  |  |  |  |  |  |  |  |
Current income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8 |  | $ | 137 |  | $ | 110 |
State and local |  |  | 36 |  |  | 45 |  |  | 37 |
|  | $ | 44 |  | $ | 182 |  | $ | 147 |
Deferred income taxes |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 236 |  | $ | 147 |  | $ | 134 |
State and local |  |  | 29 |  |  | 20 |  |  | 19 |
|  | $ | 265 |  | $ | 167 |  | $ | 153 |
Deferred income tax credit |  |  | (3) |  |  | (3) |  |  | (3) |
Tax expense |  | $ | 306 |  | $ | 346 |  | $ | 297 |
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
In Millions
December 31 | 2014 | 2013 |
CMS Energy, including Consumers |  |  |  |  |  |  |
Employee benefits |  | $ | (72) |  | $ | (99) |
Gas inventory |  |  | (117) |  |  | (130) |
Plant, property, and equipment |  |  | (2,217) |  |  | (1,856) |
Net regulatory tax liability |  |  | 65 |  |  | 86 |
Reserves and accruals |  |  | 63 |  |  | 57 |
Securitized costs |  |  | (144) |  |  | (190) |
Tax loss and credit carryforwards |  |  | 676 |  |  | 629 |
Other |  |  | - |  |  | 15 |
|  | $ | (1,746) |  | $ | (1,488) |
Less valuation allowance |  |  | (2) |  |  | (2) |
Total net deferred income tax liabilities |  | $ | (1,748) |  | $ | (1,490) |
Deferred tax assets, net of valuation reserves |  | $ | 802 |  | $ | 785 |
Deferred tax liabilities |  |  | (2,550) |  |  | (2,275) |
Total net deferred income tax liabilities |  | $ | (1,748) |  | $ | (1,490) |
Consumers |  |  |  |  |  |  |
Employee benefits |  | $ | (103) |  | $ | (119) |
Gas inventory |  |  | (117) |  |  | (130) |
Plant, property, and equipment |  |  | (2,263) |  |  | (1,911) |
Net regulatory tax liability |  |  | 65 |  |  | 86 |
Reserves and accruals |  |  | 34 |  |  | 31 |
Securitized costs |  |  | (144) |  |  | (190) |
Tax loss and credit carryforwards |  |  | 45 |  |  | 48 |
Other |  |  | (2) |  |  | 16 |
|  | $ | (2,485) |  | $ | (2,169) |
Less valuation allowance |  |  | (1) |  |  | (1) |
Total net deferred income tax liabilities |  | $ | (2,486) |  | $ | (2,170) |
Deferred tax assets, net of valuation reserves |  | $ | 143 |  | $ | 180 |
Deferred tax liabilities |  |  | (2,629) |  |  | (2,350) |
Total net deferred income tax liabilities |  | $ | (2,486) |  | $ | (2,170) |
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements. Deferred tax assets and liabilities are classified as current or non‑current according to the classification of the related assets or liabilities. Deferred tax assets and liabilities not related to assets or liabilities are classified according to the expected reversal date of the temporary differences. Presented in the following table are the tax loss and credit carryforwards at December 31, 2014:
In Millions
| Gross Amount | Tax Attribute | Expiration |
CMS Energy, including Consumers |  |  |  |  |  |  |  |
Federal net operating loss carryforward |  | $ | 1,032 |  | $ | 362 | 2025 – 2034 |
Local net operating loss carryforwards |  |  | 406 |  |  | 4 | 2023 – 2034 |
State capital loss carryforward |  |  | 18 |  |  | 1 | 2014 |
Alternative minimum tax credits |  |  | 270 |  |  | 270 | No expiration |
Charitable contribution carryover |  |  | 1 |  |  | 1 | 2016 – 2019 |
General business credits |  |  | 38 |  |  | 38 | 2018 – 2034 |
Total tax attributes |  |  |  |  | $ | 676 |  |
Consumers |  |  |  |  |  |  |  |
Federal net operating loss carryforward |  | $ | 125 |  | $ | 44 | 2025 – 2034 |
State capital loss carryforward |  |  | 10 |  |  | 1 | 2014 |
Charitable contribution carryover |  |  | 1 |  |  | - | 2016 – 2019 |
Total tax attributes |  |  |  |  | $ | 45 |  |
CMS Energy has provided a valuation allowance of $1 million for the local tax loss carryforward, and a valuation allowance of $1 million for the state capital loss carryforward. Consumers has provided a valuation allowance of $1 million for the state capital loss carryforward. CMS Energy and Consumers expect to utilize fully tax loss and credit carryforwards for which no valuation has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year. Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:
In Millions
Years Ended December 31 | 2014 | 2013 | 2012 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4 |  | $ | 1 |  | $ | 4 |
Additions for current-year tax positions |  |  | 2 |  |  | - |  |  | - |
Additions for prior-year tax positions |  |  | 1 |  |  | 3 |  |  | 1 |
Reductions for prior-year tax positions |  |  | (2) |  |  | - |  |  | (4) |
Balance at end of period |  | $ | 5 |  | $ | 4 |  | $ | 1 |
Consumers |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4 |  | $ | 1 |  | $ | 4 |
Additions for current-year tax positions |  |  | 2 |  |  | - |  |  | - |
Additions for prior-year tax positions |  |  | 1 |  |  | 3 |  |  | 1 |
Reductions for prior-year tax positions |  |  | (2) |  |  | - |  |  | (4) |
Balance at end of period |  | $ | 5 |  | $ | 4 |  | $ | 1 |
I f recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rate s in fu ture years. CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2014, 2013, or 2012. In April 2014, the IRS completed its audit of the federal income tax returns of CMS Energy and its subsidiaries for 2010 and 2011. The audit resulted in no significant adjustments to CMS Energy’s or Consumers’ taxable income or income tax expense. CMS Energy’s federal income tax returns for 201 2 and subsequent years remain subject to examination by the IRS. CMS Energy’s MCIT and MBT returns for 2008 and subsequent years remain subject to examination by the State of Michigan. The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2014 were adequate for all years.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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