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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes PNMR PNMR’s income taxes consist of the following components:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Current federal income tax | $ | — |  |  | $ | — |  |  | $ | (2,015 | )
Current state income tax | (527 | ) |  | (1,376 | ) |  | (728 | )
Deferred federal income tax | 60,892 |  |  | 5,488 |  |  | 59,814 |
Deferred state income tax | 3,886 |  |  | 12,305 |  |  | 14,831 |
Amortization of accumulated investment tax credits | (973 | ) |  | (1,342 | ) |  | (2,164 | )
Total income taxes | $ | 63,278 |  |  | $ | 15,075 |  |  | $ | 69,738 |
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,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Federal income tax at statutory rates | $ | 68,311 |  |  | $ | 16,154 |  |  | $ | 70,226 |
Amortization of accumulated investment tax credits | (973 | ) |  | (1,342 | ) |  | (2,164 | )
Flow-through of depreciation items | 1,227 |  |  | 1,485 |  |  | 1,344 |
Earnings attributable to non-controlling interest in Valencia | (5,082 | ) |  | (5,218 | ) |  | (4,945 | )
State income tax, net of federal benefit | 4,537 |  |  | (1,781 | ) |  | 5,723 |
Impairment of state net operating loss carryforwards | (311 | ) |  | 5,278 |  |  | 3,129 |
Impairment of state production tax credits | — |  |  | 3,092 |  |  | 894 |
Allowance for equity funds used during construction | (1,732 | ) |  | (3,650 | ) |  | (1,947 | )
Reversal of deferred items related to BART at SJGS | — |  |  | 1,826 |  |  | — |
Impairment of charitable contribution carryforward | — |  |  | 2,042 |  |  | — |
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization | (1,877 | ) |  | — |  |  | — |
Other | (822 | ) |  | (2,811 | ) |  | (2,522 | )
Total income taxes | $ | 63,278 |  |  | $ | 15,075 |  |  | $ | 69,738 |
Effective tax rate | 32.42 | % |  | 32.66 | % |  | 34.76 | %
The components of PNMR’s net accumulated deferred income tax liability were:
| December 31,
| 2016 |  | 2015
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 160,901 |  |  | $ | 161,691 |
Regulatory liabilities related to income taxes | 64,657 |  |  | 80,031 |
Federal tax credit carryforwards | 78,675 |  |  | 77,417 |
Shutdown of SJGS Units 2 and 3 | 53,434 |  |  | 53,823 |
Other | 75,805 |  |  | 70,749 |
Total deferred tax assets | 433,472 |  |  | 443,711 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (1,102,458 | ) |  | (1,027,047 | )
Investment tax credit | (56,017 | ) |  | (56,589 | )
Regulatory assets related to income taxes | (66,378 | ) |  | (71,054 | )
CTC | (12,715 | ) |  | (16,151 | )
Pension | (57,287 | ) |  | (65,226 | )
Other | (79,267 | ) |  | (85,037 | )
Total deferred tax liabilities | (1,374,122 | ) |  | (1,321,104 | )
Net accumulated deferred income tax liabilities | $ | (940,650 | ) |  | $ | (877,393 | )
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, 2016
| (In thousands)
Net change in deferred income tax liability per above table | $ | 63,257 |
Change in tax effects of income tax related regulatory assets and liabilities | (10,621 | )
Tax effect of mark-to-market adjustments | 8,379 |
Tax effect of excess pension liability | 5,071 |
Adjustment for uncertain income tax positions | 297 |
Reclassification of unrecognized tax benefits | (297 | )
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization | (1,877 | )
Other | (404 | )
Deferred income taxes | $ | 63,805 |
PNM PNM’s income taxes (benefit) consist of the following components:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Current federal income tax | $ | (10,290 | ) |  | $ | (7,934 | ) |  | $ | (2,175 | )
Current state income tax | (1,907 | ) |  | (1,988 | ) |  | (979 | )
Deferred federal income tax | 49,123 |  |  | (6,827 | ) |  | 45,890 |
Deferred state income tax | 4,969 |  |  | 5,333 |  |  | 12,061 |
Amortization of accumulated investment tax credits | (973 | ) |  | (1,342 | ) |  | (2,164 | )
Total income taxes (benefit) | $ | 40,922 |  |  | $ | (12,758 | ) |  | $ | 52,633 |
PNM’s provision for income taxes (benefit) 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,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Federal income tax (benefit) at statutory rates | $ | 46,501 |  |  | $ | (4,579 | ) |  | $ | 53,930 |
Amortization of accumulated investment tax credits | (973 | ) |  | (1,342 | ) |  | (2,164 | )
Flow-through of depreciation items | 1,185 |  |  | 1,465 |  |  | 1,325 |
Earnings attributable to non-controlling interest in Valencia | (5,082 | ) |  | (5,218 | ) |  | (4,945 | )
State income tax, net of federal benefit | 3,921 |  |  | (2,162 | ) |  | 5,522 |
Impairment of state net operating loss carryforwards | (213 | ) |  | 3,619 |  |  | 2,145 |
Allowance for equity funds used during construction | (1,457 | ) |  | (3,650 | ) |  | (1,947 | )
Reversal of deferred items related to BART at SJGS | — |  |  | 1,826 |  |  | — |
Reversal of deferred income taxes accrued at prior tax rates | (301 | ) |  | (737 | ) |  | (737 | )
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization | (1,877 | ) |  | — |  |  | — |
Other | (782 | ) |  | (1,980 | ) |  | (496 | )
Total income taxes (benefit) | $ | 40,922 |  |  | $ | (12,758 | ) |  | $ | 52,633 |
Effective tax rate | 30.80 | % |  | 97.52 | % |  | 34.16 | %
The components of PNM’s net accumulated deferred income tax liability were:
| December 31,
| 2016 |  | 2015
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 117,922 |  |  | $ | 116,693 |
Regulatory liabilities related to income taxes | 60,940 |  |  | 75,889 |
Federal tax credit carryforwards | 59,156 |  |  | 57,928 |
Shutdown of SJGS Units 2 and 3 | 53,434 |  |  | 53,823 |
Other | 41,700 |  |  | 41,210 |
Total deferred tax assets | 333,152 |  |  | 345,543 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (891,578 | ) |  | (828,926 | )
Investment tax credit | (56,017 | ) |  | (56,589 | )
Regulatory assets related to income taxes | (56,577 | ) |  | (61,018 | )
Pension | (50,134 | ) |  | (58,070 | )
Other | (27,512 | ) |  | (37,324 | )
Total deferred tax liabilities | (1,081,818 | ) |  | (1,041,927 | )
Net accumulated deferred income tax liabilities | $ | (748,666 | ) |  | $ | (696,384 | )
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, 2016
| (In thousands)
Net change in deferred income tax liability per above table | $ | 52,282 |
Change in tax effects of income tax related regulatory assets and liabilities | (10,510 | )
Tax effect of mark-to-market adjustments | 8,336 |
Tax effect of excess pension liability | 5,071 |
Adjustment for uncertain income tax positions | 297 |
Reclassification of unrecognized tax benefits | (297 | )
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization | (1,877 | )
Other | (183 | )
Deferred income taxes | $ | 53,119 |
TNMP TNMP’s income taxes consist of the following components:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Current federal income tax | $ | 9,445 |  |  | $ | 1,603 |  |  | $ | 35 |
Current state income tax | 1,729 |  |  | 1,639 |  |  | 1,939 |
Deferred federal income tax | 12,690 |  |  | 20,904 |  |  | 20,577 |
Deferred state income tax | (28 | ) |  | (21 | ) |  | (28 | )
Total income taxes | $ | 23,836 |  |  | $ | 24,125 |  |  | $ | 22,523 |
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,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Federal income tax at statutory rates | $ | 22,928 |  |  | $ | 23,131 |  |  | $ | 21,115 |
State income tax, net of federal benefit | 1,132 |  |  | 1,065 |  |  | 1,257 |
Other | (224 | ) |  | (71 | ) |  | 151 |
Total income taxes | $ | 23,836 |  |  | $ | 24,125 |  |  | $ | 22,523 |
Effective tax rate | 36.39 | % |  | 36.50 | % |  | 37.33 | %
The components of TNMP’s net accumulated deferred income tax liability at December 31, were:
| December 31,
| 2016 |  | 2015
| (In thousands)
Deferred tax assets: |  |  |
Regulatory liabilities related to income taxes | $ | 3,718 |  |  | $ | 4,141 |
Other | 6,016 |  |  | 6,702 |
Total deferred tax assets | 9,734 |  |  | 10,843 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (201,017 | ) |  | (189,322 | )
CTC | (12,715 | ) |  | (16,151 | )
Regulatory assets related to income taxes | (9,800 | ) |  | (10,036 | )
Loss on reacquired debt | (11,937 | ) |  | (12,392 | )
Other | (20,050 | ) |  | (15,733 | )
Total deferred tax liabilities | (255,519 | ) |  | (243,634 | )
Net accumulated deferred income tax liabilities | $ | (245,785 | ) |  | $ | (232,791 | )
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, 2016
| (In thousands)
Net change in deferred income tax liability per above table | $ | 12,994 |
Change in tax effects of income tax related regulatory assets and liabilities | (111 | )
Other | (221 | )
Deferred income taxes | $ | 12,662 |
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, 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 |  |  | — |
Additions based on tax positions related to 2015 | 1,214 |  |  | 1,214 |  |  | — |
Additions (reductions) for tax positions of prior years | (9,790 | ) |  | (9,790 | ) |  | — |
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2015 | 6,455 |  |  | 3,652 |  |  | — |
Additions based on tax positions related to 2016 | 242 |  |  | 242 |  |  | — |
Additions (reductions) for tax positions of prior years | 55 |  |  | 55 |  |  | — |
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2016 | $ | 6,752 |  |  | $ | 3,949 |  |  | $ | — |
Included in the balance of unrecognized tax benefits at December 31, 2016 are $6.2 million and $3.4 million 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 2017. In 2016, the Company undertook an analysis of interest income and interest expense applicable to federal income tax matters. The analysis encompassed the impacts of IRS examinations, amended income tax returns, and filings for carrybacks of tax matters to previous taxable years applicable to all years not closed under the IRS rules. As a result of this effort, PNMR received net refunds from the IRS of $6.5 million. Of the refunds, $2.1 million was recorded as a reduction of the net interest receivable and $5.1 million was recorded as interest income, which was partially offset by $0.7 million of interest expense. In addition, PNMR incurred $0.9 million in professional fees related to the analysis. Of the net pre-tax impacts aggregating $3.5 million, $2.6 million is reflected in the PNM segment, $0.3 million in the TNMP segment, and $0.6 million in the Corporate and Other segment. 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 Charges in the Consolidated Statements of Earnings. Interest income (expense) related to income taxes is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
2016 | $ | 4,398 |  |  | $ | 3,625 |  |  | $ | 345 |
2015 | $ | — |  |  | $ | — |  |  | $ | — |
2014 | $ | 146 |  |  | $ | 148 |  |  | $ | (2 | )
Accumulated accrued interest receivable (payable) related to income taxes is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2016: |  |  |  |  |
Accumulated accrued interest receivable | $ | — |  |  | $ | — |  |  | $ | — |
Accumulated accrued interest payable | $ | — |  |  | $ | — |  |  | $ | — |
December 31, 2015: |  |  |  |  |
Accumulated accrued interest receivable | $ | 3,236 |  |  | $ | 3,236 |  |  | $ | — |
Accumulated accrued interest payable | $ | (1,120 | ) |  | $ | (24 | ) |  | $ | (120 | )
The Company files a federal consolidated and several consolidated and separate state income tax returns. The tax years prior to 2013 are closed to examination by either federal or state taxing authorities other than Arizona. The tax years prior to 2012 are closed to examination by Arizona taxing authorities. Other tax years are open to examination by federal and state taxing authorities. At December 31, 2016, the Company has $420.1 million of federal net operating loss carryforwards that expire beginning in 2030 and $78.7 million of federal tax credit carryforwards that expire beginning in 2023. State net operating losses expire beginning in 2017 and vary from federal due to differences between state and federal tax law. In 2013, New Mexico House Bill 641 reduced 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. PNM’s NM 2016 Rate Case (Note 17) reflects that assumption. 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. 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. Adjustments to deferred income taxes recorded as increases (decreases) in the regulatory liability and income tax expense are as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2016: |  |  |  |  |
Regulatory liability | $ | (7,132 | ) |  | $ | (7,132 | ) |  | $ | — |
Income tax expense | $ | 712 |  |  | $ | 804 |  |  | $ | — |
December 31, 2015: |  |  |  |  |
Regulatory liability | $ | (1,903 | ) |  | $ | (1,903 | ) |  | $ | — |
Income tax expense | $ | (674 | ) |  | $ | (470 | ) |  | $ | — |
December 31, 2014: |  |  |  |  |
Regulatory liability | $ | (5,106 | ) |  | $ | (5,106 | ) |  | $ | — |
Income tax expense | $ | (71 | ) |  | $ | (312 | ) |  | $ | — |
In 2008, fifty percent bonus tax depreciation was enacted as a temporary two-year stimulus measure as part of the Economic Stimulus Act of 2008. Bonus tax depreciation in various forms has been continuously extended since that time, most recently by the Protecting Americans from Tax Hikes Act of 2015. The 2015 act extends and phases-out bonus tax depreciation through 2019. As a result of the net operating loss carryforwards for income tax purposes created by bonus depreciation, and reduced future income taxes payable resulting from New Mexico House Bill 641, certain tax carryforwards are not expected to be utilized before their expiration. In accordance with GAAP, PNMR and PNM have impaired the tax carryforwards which were not expected to be utilized prior to their expiration. The impairments, net of federal tax benefit, for 2014 through 2016 are as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2016: |  |  |  |  |
State tax credit carryforwards | $ | — |  |  | $ | — |  |  | $ | — |
State net operating loss carryforwards | $ | (311 | ) |  | $ | (213 | ) |  | $ | — |
Charitable contribution carryforwards | $ | — |  |  | $ | — |  |  | $ | — |
December 31, 2015: |  |  |  |  |
State tax credit carryforwards | $ | 3,092 |  |  | $ | — |  |  | $ | — |
State net operating loss carryforwards | $ | 5,278 |  |  | $ | 3,619 |  |  | $ | — |
Charitable contribution carryforwards | $ | 2,042 |  |  | $ | — |  |  | $ | — |
December 31, 2014: |  |  |  |  |
State tax credit carryforwards | $ | 894 |  |  | $ | — |  |  | $ | — |
State net operating loss carryforwards | $ | 3,129 |  |  | $ | 2,145 |  |  | $ | — |
The impairments of unexpired state tax credits, state net operating loss, and charitable contribution carryforwards are reflected as a valuation allowance against deferred tax assets. The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2016 and 2015 are as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2016: |  |  |  |  |
State tax credit carryforwards | $ | 3,986 |  |  | $ | — |  |  | $ | — |
State net operating loss carryforwards | $ | 361 |  |  | $ | 248 |  |  | $ | — |
Charitable contribution carryforwards | $ | 659 |  |  | $ | — |  |  | $ | — |
December 31, 2015: |  |  |  |  |
State tax credit carryforwards | $ | 6,378 |  |  | $ | — |  |  | $ | — |
State net operating loss carryforwards | $ | 361 |  |  | $ | 248 |  |  | $ | — |
Charitable contribution carryforwards | $ | 659 |  |  | $ | — |  |  | $ | — |
The NMPRC’s order in the NM 2015 Rate Case (Note 17) approved PNM’s request to record a regulatory asset, which net of federal income taxes, amounts to $2.1 million, to recover a 2014 impairment of PNM’s New Mexico net operating loss carryforward resulting from an extension of the income tax provision for fifty percent bonus depreciation. The regulatory asset is being recovered through rates over two years. The impact, net of amortization, is reflected as a reduction of income tax expense on the Consolidated Statement of Earnings. In 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 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 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 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=65882285&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=65882285&loc=d3e32537-109319 + Details
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