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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

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

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

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

Schedule of Effective Income Tax Rate Reconciliation

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 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 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		%

Components of Deferred Tax Assets and Liabilities

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 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 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	)

Reconciliation of Accumulated Deferred Income Tax Liability to Deferred Income Tax Benefit

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

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

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

Reconciliation of Unrecognized Tax Benefits (Expenses)

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			$	—

Interest Income (Expense) Related to Income Taxes

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

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	)

Deferred Income Taxes, Increase (Decrease) In Regulatory Liability and Income Tax Expense

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	)		$	—

Tax Carryforward, Impairments, net of Federal Tax Benefit

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			$	—

Summary of Tax Credit Carryforwards

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			$	—			$	—

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