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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes PNMR PNMR’s income taxes consist of the following components:
| Year Ended December 31,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Current federal income tax | $ | (2,015 | ) |  | $ | — |  |  | $ | (1,296 | )
Current state income tax | (728 | ) |  | (917 | ) |  | (37 | )
Deferred federal income tax | 59,814 |  |  | 50,044 |  |  | 51,559 |
Deferred state income tax | 14,831 |  |  | 12,578 |  |  | 6,921 |
Amortization of accumulated investment tax credits | (2,164 | ) |  | (2,192 | ) |  | (2,237 | )
Total income taxes | $ | 69,738 |  |  | $ | 59,513 |  |  | $ | 54,910 |
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,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Federal income tax at statutory rates | $ | 70,226 |  |  | $ | 61,274 |  |  | $ | 61,262 |
Amortization of accumulated investment tax credits | (2,164 | ) |  | (2,192 | ) |  | (2,237 | )
Flow-through of depreciation items | 1,344 |  |  | 1,132 |  |  | 1,284 |
Earnings attributable to non-controlling interest in Valencia | (4,945 | ) |  | (5,082 | ) |  | (4,918 | )
State income tax, net of federal benefit | 5,723 |  |  | 3,818 |  |  | 4,646 |
Impairment of state net operating loss carryforwards | 3,129 |  |  | — |  |  | — |
Impairment of state production tax credits, net of federal benefit | 894 |  |  | 3,880 |  |  | 718 |
Other | (4,469 | ) |  | (3,317 | ) |  | (5,845 | )
Total income taxes | $ | 69,738 |  |  | $ | 59,513 |  |  | $ | 54,910 |
Effective tax rate | 34.76 | % |  | 33.99 | % |  | 31.37 | %
The components of PNMR’s net accumulated deferred income tax liability were:
| December 31,
| 2014 |  | 2013
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 153,858 |  |  | $ | 134,418 |
Regulatory liabilities related to income taxes | 78,858 |  |  | 83,838 |
Federal tax credit carryforwards | 54,748 |  |  | 40,708 |
Other | 68,566 |  |  | 75,832 |
Total deferred tax assets | 356,030 |  |  | 334,796 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (914,926 | ) |  | (814,671 | )
Investment tax credit | (36,790 | ) |  | (25,855 | )
Regulatory assets related to income taxes | (67,910 | ) |  | (66,352 | )
CTC | (19,352 | ) |  | (22,262 | )
Pension | (66,498 | ) |  | (58,780 | )
Other | (115,282 | ) |  | (115,458 | )
Total deferred tax liabilities | (1,220,758 | ) |  | (1,103,378 | )
Net accumulated deferred income tax liabilities | (864,728 | ) |  | (768,582 | )
Current accumulated deferred income tax (asset) liability | (26,383 | ) |  | (58,681 | )
Non-current accumulated deferred income tax liability | $ | (891,111 | ) |  | $ | (827,263 | )
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, 2014
| (In thousands)
Net change in deferred income tax liability per above table | $ | 96,146 |
Change in tax effects of income tax related regulatory assets and liabilities | (6,538 | )
Tax effect of mark-to-market adjustments | (1,612 | )
Tax effect of excess pension liability | 3,993 |
Adjustment for uncertain income tax positions | (4,858 | )
Reclassification of unrecognized tax benefits | (15,031 | )
Other | 381 |
Deferred income taxes | $ | 72,481 |
PNM PNM’s income taxes consist of the following components:
| Year Ended December 31,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Current federal income tax | $ | (2,175 | ) |  | $ | (479 | ) |  | $ | (12,951 | )
Current state income tax | (979 | ) |  | (760 | ) |  | (1,815 | )
Deferred federal income tax | 45,890 |  |  | 42,806 |  |  | 56,194 |
Deferred state income tax | 12,061 |  |  | 9,429 |  |  | 11,522 |
Amortization of accumulated investment tax credits | (2,164 | ) |  | (2,192 | ) |  | (2,237 | )
Total income taxes | $ | 52,633 |  |  | $ | 48,804 |  |  | $ | 50,713 |
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,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Federal income tax at statutory rates | $ | 53,930 |  |  | $ | 53,018 |  |  | $ | 54,710 |
Amortization of accumulated investment tax credits | (2,164 | ) |  | (2,192 | ) |  | (2,237 | )
Flow-through of depreciation items | 1,325 |  |  | 1,115 |  |  | 1,268 |
Earnings attributable to non-controlling interest in Valencia | (4,945 | ) |  | (5,082 | ) |  | (4,918 | )
State income tax, net of federal benefit | 5,522 |  |  | 6,202 |  |  | 6,500 |
Impairment of state net operating loss carryforwards | 2,145 |  |  | — |  |  | — |
Other | (3,180 | ) |  | (4,257 | ) |  | (4,610 | )
Total income taxes | $ | 52,633 |  |  | $ | 48,804 |  |  | $ | 50,713 |
Effective tax rate | 34.16 | % |  | 32.22 | % |  | 32.44 | %
The components of PNM’s net accumulated deferred income tax liability were:
| December 31,
| 2014 |  | 2013
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 108,505 |  |  | $ | 99,247 |
Regulatory liabilities related to income taxes | 74,293 |  |  | 78,849 |
Federal tax credit carryforwards | 35,259 |  |  | 22,509 |
Other | 35,681 |  |  | 37,008 |
Total deferred tax assets | 253,738 |  |  | 237,613 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (733,519 | ) |  | (661,239 | )
Investment tax credit | (36,790 | ) |  | (25,855 | )
Regulatory assets related to income taxes | (57,637 | ) |  | (55,844 | )
Pension | (58,474 | ) |  | (52,104 | )
Other | (70,714 | ) |  | (75,838 | )
Total deferred tax liabilities | (957,134 | ) |  | (870,880 | )
Net accumulated deferred income tax liabilities | (703,396 | ) |  | (633,267 | )
Current accumulated deferred income tax (asset) liability | (12,418 | ) |  | (43,827 | )
Non-current accumulated deferred income tax liability | $ | (715,814 | ) |  | $ | (677,094 | )
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, 2014
| (In thousands)
Net change in deferred income tax liability per above table | $ | 70,129 |
Change in tax effects of income tax related regulatory assets and liabilities | (6,349 | )
Tax effect of mark-to-market adjustments | (1,470 | )
Tax effect of excess pension liability | 3,993 |
Adjustment for uncertain income tax positions | 1,155 |
Reclassification of unrecognized tax benefits | (12,228 | )
Other | 557 |
Deferred income taxes | $ | 55,787 |
TNMP TNMP’s income taxes consist of the following components:
| Year Ended December 31,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Current federal income tax | $ | 35 |  |  | $ | (4,957 | ) |  | $ | 9,152 |
Current state income tax | 1,939 |  |  | 1,916 |  |  | 1,822 |
Deferred federal income tax | 20,577 |  |  | 20,688 |  |  | 4,406 |
Deferred state income tax | (28 | ) |  | (26 | ) |  | (28 | )
Total income taxes | $ | 22,523 |  |  | $ | 17,621 |  |  | $ | 15,352 |
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,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Federal income tax at statutory rates | $ | 21,115 |  |  | $ | 16,349 |  |  | $ | 14,735 |
State income tax, net of federal benefit | 1,257 |  |  | 1,247 |  |  | 1,185 |
Other | 151 |  |  | 25 |  |  | (568 | )
Total income taxes | $ | 22,523 |  |  | $ | 17,621 |  |  | $ | 15,352 |
Effective tax rate | 37.33 | % |  | 37.72 | % |  | 36.47 | %
The components of TNMP’s net accumulated deferred income tax liability at December 31, were:
| December 31,
| 2014 |  | 2013
| (In thousands)
Deferred tax assets: |  |  |
Regulatory liabilities related to income taxes | $ | 4,565 |  |  | $ | 4,988 |
Other | 13,429 |  |  | 23,479 |
Total deferred tax assets | 17,994 |  |  | 28,467 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (174,510 | ) |  | (151,581 | )
CTC | (19,352 | ) |  | (22,262 | )
Regulatory assets related to income taxes | (10,197 | ) |  | (10,509 | )
Loss on reacquired debt | (12,846 | ) |  | (13,516 | )
Other | (12,636 | ) |  | (14,295 | )
Total deferred tax liabilities | (229,541 | ) |  | (212,163 | )
Net accumulated deferred income tax liabilities | (211,547 | ) |  | (183,696 | )
Current accumulated deferred income tax (asset) | (6,398 | ) |  | (6,501 | )
Non-current accumulated deferred income tax liability | $ | (217,945 | ) |  | $ | (190,197 | )
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, 2014
| (In thousands)
Net change in deferred income tax liability per above table | $ | 27,851 |
Change in tax effects of income tax related regulatory assets and liabilities | (111 | )
Adjustment for uncertain tax positions | (6,796 | )
Other | (395 | )
Deferred income taxes | $ | 20,549 |
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, 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 | )
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2012 | 19,198 |  |  | 10,382 |  |  | 6,796 |
Additions based on tax positions related to 2013 | (54 | ) |  | (54 | ) |  | — |
Additions for tax positions of prior years | 745 |  |  | 745 |  |  | — |
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2013 | 19,889 |  |  | 11,073 |  |  | 6,796 |
Additions based on tax positions related to 2014 | 623 |  |  | 623 |  |  | — |
Additions (reductions) for tax positions of prior years | (5,481 | ) |  | 532 |  |  | (6,796 | )
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2014 | $ | 15,031 |  |  | $ | 12,228 |  |  | $ | — |
Included in the balance at December 31, 2014 are $4.7 million and $1.9 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate for PNMR and PNM. The Company does not anticipate that any unrecognized tax expenses or unrecognized tax benefits will be reduced or settled in 2015. 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)
2014 | $ | 146 |  |  | $ | 148 |  |  | $ | (2 | )
2013 | $ | 242 |  |  | $ | 251 |  |  | $ | (2 | )
2012 | $ | 243 |  |  | $ | 244 |  |  | $ | (3 | )
Accumulated accrued interest receivable (payable) related to income taxes is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2014: |  |  |  |  |
Accumulated accrued interest receivable | $ | 3,569 |  |  | $ | 3,569 |  |  | $ | — |
Accumulated accrued interest payable | $ | (1,120 | ) |  | $ | (24 | ) |  | $ | (120 | )
December 31, 2013: |  |  |  |  |
Accumulated accrued interest receivable | $ | 4,048 |  |  | $ | 4,048 |  |  | $ | — |
Accumulated accrued interest payable | $ | (1,118 | ) |  | $ | (24 | ) |  | $ | (118 | )
The Company files a federal consolidated and several consolidated and separate state income tax returns. The tax years prior to 2011 are closed to examination by either federal or state taxing authorities other than Arizona. The tax years prior to 2009 are closed to examination by Arizona taxing authorities. Other tax years are open to examination by federal and state taxing authorities. At December 31, 2014, the Company has $405.7 million of federal net operating loss carryforwards that expire beginning in 2030 and $54.7 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 2014. 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 for 2013, 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 was required to record 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 is being 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 during the period that includes the date of enactment, which was in the year ended December 31, 2013. At that time, 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. In addition, the portion of the adjustment that is not related to PNM's regulated activities was recorded in PNMR’s Corporate and Other segment 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. Changes in the estimated timing of reversals of deferred tax assets and liabilities will result in refinements of the impacts of this change in tax rates being recorded periodically until 2018, when the rate reduction is fully phased in. In the year ended December 31, 2014, PNM’s deferred tax liabilities were increased by $4.6 million, which reduced regulatory liabilities. Additionally, deferred tax assets not related to PNM’s regulatory activities were increased by $0.1 million, of which $0.2 million increased income tax expense in PNMR's Corporate and Other segment and $0.3 million decreased income tax expense in PNM. 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. On December 19, 2014, the Tax Increase Prevention Act of 2014, which retroactively extended fifty percent bonus tax depreciation for 2014, was signed into law. Due to provisions in the act, taxes payable to the State of New Mexico for 2014 were reduced, which resulted in an impairment of New Mexico wind energy production tax credits, which after federal income tax benefit, amounted to $0.9 million. The impairment is reflected in PNMR’s Corporate and Other segment. Additionally, the act resulted in an impairment of New Mexico net operating loss carryforwards, which after federal income tax benefit, amounted to $3.1 million. Of this amount, $2.1 million is reflected in PNM and $1.0 million is reflected in PNMR’s Corporate and Other segment. In accordance with GAAP, these impairments were recorded as additional income tax expense during the year ended December 31, 2014. The impairment of the New Mexico net operating loss carryforward is reflected as a valuation allowance against deferred tax assets. No such impairments occurred in prior years. TNMP had no such impairment. 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, 2014, PNMR had a total valuation allowance for these credits of $5.5 million. During the years ended December 31, 2014, 2013, and 2012, the valuation allowance for these credits increased by $0.9 million, $3.9 million, and $0.7 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 due to PNMR’s net operating loss carryforward position. 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. In 2013, the FASB issued Accounting Standards Update 2013-11, which requires entities to present liabilities for uncertain tax positions as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such carryforward could be used to offset those liabilities upon settlement. The Company adopted the change for 2014. Had the Company applied the update at December 31, 2013, the effect would have been decreases in net operating loss deferred tax assets of $19.9 million for PNMR, $11.2 million for PNM, and $6.8 million for TNMP, along with the elimination of the corresponding assets and liabilities associated with uncertain tax positions. There was no impact to earnings from adopting the update. In June 2014, the Company settled the IRS examination of income tax years 2003 and 2005 through 2008. As a result of the settlement, the Company received net federal tax refunds of $2.0 million. The IRS examination resulted in the settlement of certain issues for which the Company had previously reflected liabilities related to uncertain tax positions. The settlement of the IRS examination, including the uncertain tax position matters, resulted in PNMR recording an income tax benefit of $0.2 million on a consolidated basis in the year ended December 31, 2014. PNM recorded an income tax expense of $1.1 million, TNMP reflected no impact, and an income tax benefit of $1.3 million was recorded in PNMR’s Corporate and Other segment.

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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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