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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes PNMR PNMR’s income taxes consist of the following components:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (In thousands)
Current federal income tax | $ | — |  |  | $ | (1,296 | ) |  | $ | 1,319 |
Current state income tax | (917 | ) |  | (37 | ) |  | (4,208 | )
Deferred federal income tax | 50,044 |  |  | 51,559 |  |  | 119,280 |
Deferred state income tax | 12,578 |  |  | 6,921 |  |  | 7,462 |
Amortization of accumulated investment tax credits | (2,192 | ) |  | (2,237 | ) |  | (2,318 | )
Total income taxes | $ | 59,513 |  |  | $ | 54,910 |  |  | $ | 121,535 |
PNMR’s provision for income taxes differed from the federal income tax computed at the statutory rate for each of the years shown. The differences are attributable to the following factors:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (In thousands)
Federal income tax at statutory rates | $ | 61,274 |  |  | $ | 61,262 |  |  | $ | 109,364 |
First Choice goodwill | — |  |  | — |  |  | 15,055 |
Amortization of accumulated investment tax credits | (2,192 | ) |  | (2,237 | ) |  | (2,318 | )
Flow-through of depreciation items | 1,132 |  |  | 1,284 |  |  | 3,659 |
Earnings attributable to non-controlling interest in Valencia | (5,082 | ) |  | (4,918 | ) |  | (4,917 | )
State income tax, net of federal benefit | 3,818 |  |  | 4,646 |  |  | 3,395 |
Impairment of state production tax credits, net of federal benefit | 3,880 |  |  | 718 |  |  | — |
Other | (3,317 | ) |  | (5,845 | ) |  | (2,703 | )
Total income taxes | $ | 59,513 |  |  | $ | 54,910 |  |  | $ | 121,535 |
Effective tax rate | 33.99 | % |  | 31.37 | % |  | 38.90 | %
The components of PNMR’s net accumulated deferred income tax liability were:
| December 31,
| 2013 |  | 2012
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 134,418 |  |  | $ | 110,989 |
Pension | — |  |  | 26,452 |
Regulatory liabilities related to income taxes | 83,838 |  |  | 53,439 |
Other | 144,126 |  |  | 129,801 |
Total deferred tax assets | 362,382 |  |  | 320,681 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (814,671 | ) |  | (759,587 | )
Investment tax credit | (25,855 | ) |  | (14,242 | )
Regulatory assets related to income taxes | (66,352 | ) |  | (59,471 | )
CTC | (22,262 | ) |  | (24,934 | )
Pension | (58,780 | ) |  | — |
Other | (143,044 | ) |  | (178,492 | )
Total deferred tax liabilities | (1,130,964 | ) |  | (1,036,726 | )
Net accumulated deferred income tax liabilities | (768,582 | ) |  | (716,045 | )
Current accumulated deferred income tax (asset) liability | (58,681 | ) |  | 258 |
Non-current accumulated deferred income tax liability | $ | (827,263 | ) |  | $ | (715,787 | )
The following table reconciles the change in PNMR’s net accumulated deferred income tax liability to the deferred income tax benefit included in the Consolidated Statement of Earnings:
| Year Ended
| December 31, 2013
| (In thousands)
Net change in deferred income tax liability per above table | $ | 52,537 |
Change in tax effects of income tax related regulatory assets and liabilities | 23,592 |
Tax effect of mark-to-market adjustments | (6,096 | )
Tax effect of excess pension liability | (9,305 | )
Adjustment for uncertain income tax positions | 691 |
Other | (989 | )
Deferred income taxes | $ | 60,430 |
PNM PNM’s income taxes consist of the following components:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (In thousands)
Current federal income tax | $ | (479 | ) |  | $ | (12,951 | ) |  | $ | (46,364 | )
Current state income tax | (760 | ) |  | (1,815 | ) |  | (6,776 | )
Deferred federal income tax | 42,806 |  |  | 56,194 |  |  | 78,673 |
Deferred state income tax | 9,429 |  |  | 11,522 |  |  | 14,212 |
Amortization of accumulated investment tax credits | (2,192 | ) |  | (2,237 | ) |  | (2,318 | )
Total income taxes | $ | 48,804 |  |  | $ | 50,713 |  |  | $ | 37,427 |
PNM’s provision for income taxes differed from the federal income tax computed at the statutory rate for each of the years shown. The differences are attributable to the following factors:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (In thousands)
Federal income tax at statutory rates | $ | 53,018 |  |  | $ | 54,710 |  |  | $ | 37,088 |
Amortization of accumulated investment tax credits | (2,192 | ) |  | (2,237 | ) |  | (2,318 | )
Flow-through of depreciation items | 1,115 |  |  | 1,268 |  |  | 3,656 |
Earnings attributable to non-controlling interest in Valencia | (5,082 | ) |  | (4,918 | ) |  | (4,917 | )
State income tax, net of federal benefit | 6,202 |  |  | 6,500 |  |  | 4,797 |
Other | (4,257 | ) |  | (4,610 | ) |  | (879 | )
Total income taxes | $ | 48,804 |  |  | $ | 50,713 |  |  | $ | 37,427 |
Effective tax rate | 32.22 | % |  | 32.44 | % |  | 35.32 | %
The components of PNM’s net accumulated deferred income tax liability were:
| December 31,
| 2013 |  | 2012
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 99,247 |  |  | $ | 93,980 |
Pension | — |  |  | 32,532 |
Regulatory liabilities related to income taxes | 78,849 |  |  | 48,027 |
Other | 67,179 |  |  | 55,629 |
Total deferred tax assets | 245,275 |  |  | 230,168 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (661,239 | ) |  | (624,724 | )
Investment tax credit | (25,855 | ) |  | (14,242 | )
Regulatory assets related to income taxes | (55,844 | ) |  | (48,726 | )
Pension | (52,104 | ) |  | — |
Other | (83,500 | ) |  | (134,046 | )
Total deferred tax liabilities | (878,542 | ) |  | (821,738 | )
Net accumulated deferred income tax liabilities | (633,267 | ) |  | (591,570 | )
Current accumulated deferred income tax (asset) liability | (43,827 | ) |  | 3,447 |
Non-current accumulated deferred income tax liability | $ | (677,094 | ) |  | $ | (588,123 | )
The following table reconciles the change in PNM’s net accumulated deferred income tax liability to the deferred income tax benefit included in the Consolidated Statement of Earnings:
| Year Ended
| December 31, 2013
| (In thousands)
Net change in deferred income tax liability per above table | $ | 41,697 |
Change in tax effects of income tax related regulatory assets and liabilities | 23,704 |
Tax effect of mark-to-market adjustments | (6,121 | )
Tax effect of excess pension liability | (9,305 | )
Adjustment for uncertain income tax positions | 691 |
Other | (623 | )
Deferred income taxes | $ | 50,043 |
TNMP TNMP’s income taxes consist of the following components:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (In thousands)
Current federal income tax | $ | (4,957 | ) |  | $ | 9,152 |  |  | $ | (3,578 | )
Current state income tax | 1,916 |  |  | 1,822 |  |  | 1,981 |
Deferred federal income tax | 20,688 |  |  | 4,406 |  |  | 15,507 |
Deferred state income tax | (26 | ) |  | (28 | ) |  | (29 | )
Total income taxes | $ | 17,621 |  |  | $ | 15,352 |  |  | $ | 13,881 |
TNMP’s provision for income taxes differed from the federal income tax computed at the statutory rate for each of the periods shown. The differences are attributable to the following factors:
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
| (In thousands)
Federal income tax at statutory rates | $ | 16,349 |  |  | $ | 14,735 |  |  | $ | 12,648 |
State income tax, net of federal benefit | 1,247 |  |  | 1,185 |  |  | 1,288 |
Other | 25 |  |  | (568 | ) |  | (55 | )
Total income taxes | $ | 17,621 |  |  | $ | 15,352 |  |  | $ | 13,881 |
Effective tax rate | 37.72 | % |  | 36.47 | % |  | 38.41 | %
The components of TNMP’s net accumulated deferred income tax liability at December 31, were:
| December 31,
| 2013 |  | 2012
| (In thousands)
Deferred tax assets: |  |  |
Regulatory liabilities related to income taxes | $ | 4,988 |  |  | $ | 5,412 |
Other | 23,479 |  |  | 16,702 |
Total deferred tax assets | 28,467 |  |  | 22,114 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (151,581 | ) |  | (133,686 | )
CTC | (22,262 | ) |  | (24,934 | )
Regulatory assets related to income taxes | (10,509 | ) |  | (10,745 | )
Loss on reacquired debt | (13,516 | ) |  | (599 | )
Other | (14,295 | ) |  | (14,729 | )
Total deferred tax liabilities | (212,163 | ) |  | (184,693 | )
Net accumulated deferred income tax liabilities | (183,696 | ) |  | (162,579 | )
Current accumulated deferred income tax (asset) | (6,501 | ) |  | (1,131 | )
Non-current accumulated deferred income tax liability | $ | (190,197 | ) |  | $ | (163,710 | )
The following table reconciles the change in TNMP’s net accumulated deferred income tax liability to the deferred income tax benefit included in the Consolidated Statement of Earnings:
| Year Ended
| December 31, 2013
| (In thousands)
Net change in deferred income tax liability per above table | $ | 21,117 |
Change in tax effects of income tax related regulatory assets and liabilities | (112 | )
Other | (343 | )
Deferred income taxes | $ | 20,662 |
Other Disclosures GAAP requires that the Company recognize only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority. A reconciliation of unrecognized tax benefits (expenses) is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
Balance at December 31, 2010 | $ | 36,105 |  |  | $ | 11,918 |  |  | $ | 7,788 |
Additions based on tax positions related to 2011 | (790 | ) |  | (717 | ) |  | (74 | )
Reductions for tax positions of prior years | (15,735 | ) |  | (449 | ) |  | (13 | )
Settlements | — |  |  | — |  |  | — |
Balance at December 31, 2011 | 19,580 |  |  | 10,752 |  |  | 7,701 |
Additions based on tax positions related to 2012 | 2,046 |  |  | 1,152 |  |  | — |
Reductions for tax positions of prior years | (2,428 | ) |  | (1,522 | ) |  | (905 | )
Settlements | — |  |  | — |  |  | — |
Balance at December 31, 2012 | 19,198 |  |  | 10,382 |  |  | 6,796 |
Reductions based on tax positions related to 2013 | (54 | ) |  | (54 | ) |  | — |
Additions for tax positions of prior years | 745 |  |  | 745 |  |  | — |
Settlements | — |  |  | — |  |  | — |
Balance at December 31, 2013 | $ | 19,889 |  |  | $ | 11,073 |  |  | $ | 6,796 |
Included in the balance at December 31, 2013 are $5.6 million and $1.4 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate for PNMR and PNM. None of TNMP’s unrecognized tax benefits at December 31, 2013 would affect the effective tax rate if recognized. The Company believes that it is reasonably possible that approximately $5.5 million of PNMR’s unrecognized tax expenses, $0.4 million of PNM’s unrecognized tax benefits, and $6.8 million of TNMP’s unrecognized tax expenses will be reduced or settled in 2014 as a result of the conclusion of income tax examinations. As discussed in Note 1, the Company has elected not to early adopt Accounting Standards Update 2013-11. Estimated interest income related to refunds the Company expects to receive is included in Other Income and estimated interest expense and penalties related to potential cash settlements are included in interest expense in the Consolidated Statements of Earnings (Loss). Interest income (expense) related to income taxes is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
2013 | $ | 242 |  |  | $ | 251 |  |  | $ | (2 | )
2012 | $ | 243 |  |  | $ | 244 |  |  | $ | (3 | )
2011 | $ | 467 |  |  | $ | 401 |  |  | $ | 2 |
Accumulated accrued interest receivable (payable) related to income taxes is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2013: |  |  |  |  |
Accumulated accrued interest receivable | $ | 4,048 |  |  | $ | 4,048 |  |  | $ | — |
Accumulated accrued interest payable | $ | (1,118 | ) |  | $ | (24 | ) |  | $ | (118 | )
December 31, 2012: |  |  |  |  |
Accumulated accrued interest receivable | $ | 3,796 |  |  | $ | 3,796 |  |  | $ | — |
Accumulated accrued interest payable | $ | (1,108 | ) |  | $ | (23 | ) |  | $ | (116 | )
The Company files a federal consolidated and several consolidated and separate state income tax returns. The tax years prior to 2003 are closed to examination by either federal or state taxing authorities. Tax year 2003 is open for examination only for certain items. Tax year 2004 is closed to examination by federal and state taxing authorities. Other tax years are open to examination by federal and state taxing authorities. At December 31, 2013, the Company has $301.2 million of federal net operating loss carryforwards that expire beginning in 2030 and $40.6 million of federal tax credit carryforwards that expire beginning in 2023. State net operating losses expire beginning in 2015 and vary from federal due to differences between state and federal tax law. PNMR has New Mexico wind energy production tax credit carry forwards with statutory expiration dates beginning in 2013. In 2012, PNMR impaired $0.7 million, after federal tax benefit, of the New Mexico wind energy production tax credit carry forwards that were not expected to be utilized prior to their expiration due to the Company’s net operating loss position. The impairment is reflected in PNMR’s Corporate and Other segment. On January 3, 2013, the American Taxpayer Relief Act of 2012, which extended fifty percent bonus depreciation, was signed into law. Due to provisions in the act, taxes payable to the state of New Mexico for 2013 were reduced, which resulted in an impairment of New Mexico wind energy production tax credits. In accordance with GAAP, PNMR recorded this impairment, which after federal income tax benefit, amounted to $1.5 million as additional income tax expense during the year ended December 31, 2013. The impairment is reflected in PNMR’s Corporate and Other segment. On April 4, 2013, New Mexico House Bill 641 was signed into law. One of the provisions of the bill was to reduce the New Mexico corporate income tax rate from 7.6% to 5.9%. The rate reduction will be phased in from 2014 to 2018. In accordance with GAAP, PNMR and PNM adjusted accumulated deferred income taxes to reflect the tax rate at which the balances are expected to reverse. The portion of the adjustment related to PNM's regulated activities was recorded as a reduction in deferred tax liabilities, which was offset by an increase in a regulatory liability, on the assumption that PNM will be required to return the benefit to customers over time. The increase in the regulatory liability was $23.9 million. The portion of the adjustment that is not related to PNM's regulated activities was recorded as a reduction in deferred tax assets and an increase in income tax expense of $1.2 million during the year ended December 31, 2013. This additional income tax expense is reflected in PNMR's Corporate and Other segment. The future reduction in taxes payable to the State of New Mexico resulting from the rate reduction in House Bill 641 and revisions in estimates of future taxable income resulted in a further impairment of New Mexico wind energy production tax credits. In accordance with GAAP, PNMR was required to record this impairment, which after federal income tax benefit, amounted to $2.4 million as additional income tax expense during the year ended December 31, 2013. This impairment is reflected in PNMR's Corporate and Other segment. The impairments of the New Mexico wind energy production tax credits discussed above are reflected as a valuation allowance against deferred tax assets. At December 31, 2013, PNMR had a total allowance of $7.2 million, all of which is attributable to these credits. During the year ended December 31, 2013, the valuation allowance increased by $3.9 million. PNM and TNMP have no such valuation allowances. In April 2013, the IRS issued Revenue Procedure 2013-24, which provides a safe harbor method of accounting that taxpayers may use to determine repair costs for electric generation property. Adoption of the safe harbor method is elective for years ending on or after December 31, 2012. On July 11, 2013, the IRS issued a directive that suspends most current examination activity related to generation repairs methodology for any company that is eligible for the safe harbor. PNM is evaluating the possible effects of adopting the safe harbor method and the ultimate outcome cannot be determined at this time although the effects are not expected to be material. In September 2013, the IRS issued final regulations addressing the recovery of amounts paid to acquire, produce, or improve tangible personal property and the accounting for and retirement of depreciable property. Also issued were proposed regulations addressing dispositions of property. Repairs of electric transmission and distribution property and repairs of electric generation property are specifically addressed in other Revenue Procedures issued by the IRS. The effects of the remainder of regulations are being evaluated by the Company and cannot be determined at this time. However, due to PNMR's net operating loss carryforward position for income tax purposes, the effects are not expected to be material. In May 2013, PNMR received a refund of federal income taxes paid in prior years, which primarily was due to bonus tax depreciation and changes in the Company's method of accounting for repairs expense for income tax purposes. The total refund was $96.2 million of which $77.4 million was attributable to PNM.

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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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