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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Summary of Tax Reform Adjustments

In accordance with SAB 118, the Company completed its analysis of the impacts of the Tax Act in 2018. The adjustments to deferred income taxes resulting from completion of the Company’s analysis, which resulted primarily from differences between the estimated amounts recorded as of December 31, 2017 and the actual amounts reflected in the Company’s 2017 tax return filing, including adjustments resulting from additional guidance and interpretations to the Tax Act issued in 2018 related to bonus depreciation, certain incentive compensation, and other items are presented below:

		PNM				TNMP				Corporate and Other				Consolidated
		(In thousands)
Net increase (decrease) in regulatory liabilities		$	11,244			$	(4,069	)		$	—			$	7,175
Net decrease in deferred income tax liabilities (deferred income tax assets)		(2,175		)		(9,784		)		13,869				$	1,910
Net increase in affiliate receivables (affiliate payables)		12,300				4,042				(16,342		)		—
Net deferred income tax expense		$	1,119			$	1,673			$	2,473			$	5,265

The adjustments to deferred income taxes recorded as increases in regulatory liabilities and income tax expense as a result of the enactment of the Tax Act at December 31, 2017 are presented below:

		PNM				TNMP				Corporate and Other				Consolidated
		(In thousands)
Net increase in regulatory liabilities		$	402,501			$	146,451			$	—			$	548,952
Net decrease in deferred income tax liabilities (deferred income tax assets)		372,895				138,586				(19,990		)		491,491
Net deferred income tax expense		$	29,606			$	7,865			$	19,990			$	57,461

Schedule of Components of Income Tax Expense (Benefit)

PNM’s income taxes (benefit) consist of the following components:

	Year Ended December 31,
	2018				2017				2016
	(In thousands)
Current federal income tax	$	(6,644	)		$	118			$	(10,290	)
Current state income tax	(2,661		)		(1,112		)		(1,907		)
Deferred federal income tax	5,661				73,308				49,123
Deferred state income tax	(2,080		)		9,527				4,969
Amortization of accumulated investment tax credits	(247		)		(286		)		(973		)
Total income taxes (benefit)	$	(5,971	)		$	81,555			$	40,922

PNMR’s income taxes consist of the following components:

	Year Ended December 31,
	2018				2017				2016
	(In thousands)
Current federal income tax	$	—			$	—			$	—
Current state income tax	(244		)		(188		)		(527		)
Deferred federal income tax	7,716				119,182				60,892
Deferred state income tax	648				11,632				3,886
Amortization of accumulated investment tax credits	(345		)		(286		)		(973		)
Total income taxes	$	7,775			$	130,340			$	63,278

TNMP’s income taxes consist of the following components:

	Year Ended December 31,
	2018				2017				2016
	(In thousands)
Current federal income tax	$	13,347			$	2,472			$	9,445
Current state income tax	1,753				1,765				1,729
Deferred federal income tax	(540		)		27,304				12,690
Deferred state income tax	2,320				(29		)		(28		)
Total income taxes	$	16,880			$	31,512			$	23,836

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,
	2018				2017				2016
	(In thousands)
Federal income tax at statutory rates	$	22,902			$	79,016			$	68,311
Amortization of accumulated investment tax credits	(345		)		(286		)		(973		)
Amortization of excess deferred income tax	(19,779		)		—				—
Flow-through of depreciation items	712				1,147				1,227
Earnings attributable to non-controlling interest in Valencia	(3,173		)		(5,256		)		(5,082		)
State income tax, net of federal benefit	1,358				5,398				4,537
Impairment of state net operating loss carryforwards	—				819				(311		)
Allowance for equity funds used during construction	(2,185		)		(3,331		)		(1,732		)
Impairment of charitable contribution carryforward	—				909				—
Regulatory recovery of prior year impairments of state net operating loss carryforward, including amortization	1,367				(2,225		)		(1,877		)
Federal income tax rate change	2,914				57,461				—
Tax expense (benefit) related to stock compensation awards	4,647				(2,324		)		—
Other	(643		)		(988		)		(822		)
Total income taxes	$	7,775			$	130,340			$	63,278
Effective tax rate	7.13		%		57.73		%		32.42		%

The differences are attributable to the following factors:

	Year Ended December 31,
	2018				2017				2016
	(In thousands)
Federal income tax at statutory rates	$	14,379			$	23,475			$	22,928
State income tax, net of federal benefit	1,454				1,198				1,132
Federal income tax rate change	—				7,865				—
Allocation of tax expense (benefit) related to stock compensation awards	735				(616		)		—
Other	312				(410		)		(224		)
Total income taxes	$	16,880			$	31,512			$	23,836
Effective tax rate	24.65		%		46.98		%		36.39		%

The differences are attributable to the following factors:

	Year Ended December 31,
	2018				2017				2016
	(In thousands)
Federal income tax at statutory rates	$	13,514			$	59,139			$	46,501
Amortization of accumulated investment tax credits	(247		)		(286		)		(973		)
Amortization of excess deferred income tax	(19,779		)		—				—
Flow-through of depreciation items	674				1,103				1,185
Earnings attributable to non-controlling interest in Valencia	(3,173		)		(5,256		)		(5,082		)
State income tax, net of federal benefit	1,323				4,926				3,921
Impairment of state net operating loss carryforwards	—				627				(213		)
Allowance for equity funds used during construction	(1,716		)		(3,032		)		(1,457		)
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization	1,367				(2,225		)		(1,877		)
Federal income tax rate change	(683		)		29,606				—
Allocation of tax expense (benefit) related to stock compensation awards	3,967				(1,708		)		—
Other	(1,218		)		(1,339		)		(1,083		)
Total income taxes (benefit)	$	(5,971	)		$	81,555			$	40,922
Effective tax rate	(9.28		)%		48.27		%		30.80		%

Components of Deferred Tax Assets and Liabilities

The components of PNM’s net accumulated deferred income tax liability were:

	December 31,
	2018				2017
	(In thousands)
Deferred tax assets:
Net operating loss	$	50,762			$	67,719
Regulatory liabilities related to income taxes	125,395				152,059
Federal tax credit carryforwards	62,230				60,085
Shutdown of SJGS Units 2 and 3	1,638				2,204
Other	36,916				23,801
Total deferred tax assets	276,941				305,868
Deferred tax liabilities:
Depreciation and plant related	(606,673		)		(544,270		)
Investment tax credit	(55,484		)		(55,731		)
Regulatory assets related to income taxes	(53,561		)		(52,392		)
Pension	(31,046		)		(51,774		)
Regulatory asset for shutdown of SJGS Units 2 and 3	(30,425		)		(31,887		)
Other	(2,519		)		(18,826		)
Total deferred tax liabilities	(779,708		)		(754,880		)
Net accumulated deferred income tax liabilities	$	(502,767	)		$	(449,012	)

The components of PNMR’s net accumulated deferred income tax liability were:

	December 31,
	2018				2017
	(In thousands)
Deferred tax assets:
Net operating loss	$	82,386			$	98,301
Regulatory liabilities related to income taxes	158,416				189,501
Federal tax credit carryforwards	76,481				71,849
Shutdown of SJGS Units 2 and 3	1,638				2,204
Other	97,515				45,656
Total deferred tax assets	416,436				407,511
Deferred tax liabilities:
Depreciation and plant related	(767,482		)		(690,909		)
Investment tax credit	(57,853		)		(55,731		)
Regulatory assets related to income taxes	(62,889		)		(61,956		)
CTC	(3,613		)		(5,670		)
Pension	(35,407		)		(56,070		)
Regulatory asset for shutdown of SJGS Units 2 and 3	(30,425		)		(31,887		)
Other	(59,486		)		(52,498		)
Total deferred tax liabilities	(1,017,155		)		(954,721		)
Net accumulated deferred income tax liabilities	$	(600,719	)		$	(547,210	)

The components of TNMP’s net accumulated deferred income tax liability at December 31, were:

	December 31,
	2018				2017
	(In thousands)
Deferred tax assets:
Regulatory liabilities related to income taxes	$	33,021			$	43,103
Other	4,517				3,762
Total deferred tax assets	37,538				46,865
Deferred tax liabilities:
Depreciation and plant related	(136,117		)		(135,647		)
CTC	(3,613		)		(5,670		)
Regulatory assets related to income taxes	(9,328		)		(9,564		)
Loss on reacquired debt	(6,617		)		(6,890		)
Pension	(4,361		)		(4,296		)
AMS	(10,030		)		(7,707		)
Other	(3,710		)		(3,506		)
Total deferred tax liabilities	(173,776		)		(173,280		)
Net accumulated deferred income tax liabilities	$	(136,238	)		$	(126,415	)

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

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, 2018
	(In thousands)
Net change in deferred income tax liability per above table	$	53,755
Change in tax effects of income tax related regulatory assets and liabilities	(27,833		)
Amortization of excess deferred income tax	(19,779		)
Tax effect of mark-to-market adjustments	579
Tax effect of excess pension liability	308
Adjustment for uncertain income tax positions	725
Reclassification of unrecognized tax benefits	(725		)
Amortization of state net operating loss recovered in prior years	1,367
Federal income tax rate change, including impact on regulatory liabilities	(6,250		)
Other	1,187
Deferred income taxes	$	3,334

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, 2018
	(In thousands)
Net change in deferred income tax liability per above table	$	53,509
Change in tax effects of income tax related regulatory assets and liabilities	(27,833		)
Amortization of excess deferred income tax	(19,779		)
Tax effect of mark-to-market adjustments	380
Tax effect of excess pension liability	308
Adjustment for uncertain income tax positions	765
Reclassification of unrecognized tax benefits	(765		)
Amortization of state net operating loss recovered in prior years	1,367
Federal income tax rate change, including impact on regulatory liabilities	2,330
Refundable alternative minimum tax credit carryforward reclassified to receivable	(1,585		)
Other	(678		)
Deferred income taxes	$	8,019

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, 2018
	(In thousands)
Net change in deferred income tax liability per above table	$	9,823
Change in tax effects of income tax related regulatory assets and liabilities	(350		)
Federal income tax rate change, including impact on regulatory liabilities	(7,761		)
Other	68
Deferred income taxes	$	1,780

Reconciliation of Unrecognized Tax Benefits (Expenses)

A reconciliation of unrecognized tax benefits is as follows:

	PNMR				PNM				TNMP
	(In thousands)
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				—
Additions based on tax positions related to 2017	262				262				—
Additions (reductions) for tax positions of prior years	2,415				2,352				63
Settlement payments	—				—				—
Balance at December 31, 2017	9,429				6,563				63
Additions based on tax positions related to 2018	543				543				—
Additions (reductions) for tax positions of prior years	222				182				40
Settlement payments	—				—				—
Balance at December 31, 2018	$	10,194			$	7,288			$	103

Interest Income (Expense) Related to Income Taxes

Interest income (expense) related to income taxes was as follows:

	PNMR				PNM				TNMP
	(In thousands)
2018	$	—			$	—			$	—
2017	$	—			$	—			$	—
2016	$	4,398			$	3,625			$	345

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, 2017:
Regulatory liability	$	(10,109	)		$	(10,109	)		$	—
Income tax expense	$	(1,259	)		$	(1,179	)		$	—
December 31, 2016:
Regulatory liability	$	(7,132	)		$	(7,132	)		$	—
Income tax expense	$	712			$	804			$	—

Tax Carryforward, Impairments, net of Federal Tax Benefit

The impairments after reflecting the expiration of carryforwards under applicable tax laws, net of federal tax benefit, for 2016 through 2018 are as follows:

	PNMR				PNM				TNMP
	(In thousands)
December 31, 2018:
State tax credit carryforwards	$	—			$	—			$	—
State net operating loss carryforwards	$	—			$	—			$	—
Charitable contribution carryforwards	$	—			$	—			$	—
Compensation expense	$	410			$	298			$	111
December 31, 2017:
State tax credit carryforwards	$	—			$	—			$	—
State net operating loss carryforwards	$	819			$	627			$	—
Charitable contribution carryforwards	$	909			$	—			$	—
December 31, 2016:
State tax credit carryforwards	$	—			$	—			$	—
State net operating loss carryforwards	$	(311	)		$	(213	)		$	—
Charitable contribution carryforwards	$	—			$	—			$	—

Summary of Tax Credit Carryforwards

The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2018 and 2017 are as follows:

	PNMR				PNM				TNMP
	(In thousands)
December 31, 2018:
State tax credit carryforwards	$	—			$	—			$	—
State net operating loss carryforwards	$	—			$	—			$	—
Charitable contribution carryforwards	$	—			$	—			$	—
Compensation expense	$	410			$	298			$	111
December 31, 2017:
State tax credit carryforwards	$	2,487			$	—			$	—
State net operating loss carryforwards	$	1,131			$	839			$	—
Charitable contribution carryforwards	$	952			$	—			$	—

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