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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Summary of Tax Reform Adjustments

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

Schedule of Components of Income Tax Expense (Benefit)

PNMR’s income taxes (benefits) consist of the following components:

			Year Ended December 31,
			2020						2019						2018
			(In thousands)
Current federal income tax			$	—					$	60					$	—
Current state income tax			231						43						(244)
Deferred federal income tax			17,574						(20,372)						7,716
Deferred state income tax			3,721						(4,491)						648
Amortization of accumulated investment tax credits			(890)						(522)						(345)
Total income taxes (benefits)			$	20,636					$	(25,282)					$	7,775

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

			Year Ended December 31,
			2020						2019						2018
			(In thousands)
Current federal income tax			$	—					$	(6,266)					$	(6,644)
Current state income tax			(585)						449						(2,661)
Deferred federal income tax			20,125						(12,308)						5,661
Deferred state income tax			2,560						(7,590)						(2,080)
Amortization of accumulated investment tax credits			(243)						(247)						(247)
Total income taxes (benefit)			$	21,857					$	(25,962)					$	(5,971)

TNMP’s income taxes consist of the following components:

			Year Ended December 31,
			2020						2019						2018
			(In thousands)
Current federal income tax			$	12,048					$	10,792					$	13,347
Current state income tax			2,033						1,904						1,753
Deferred federal income tax			(7,744)						(7,621)						(540)
Deferred state income tax			(29)						(29)						2,320
Total income taxes			$	6,308					$	5,046					$	16,880

Schedule of Effective Income Tax Rate Reconciliation

PNMR’s provision for income taxes (benefits) 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,
			2020						2019						2018
			(In thousands)
Federal income tax at statutory rates			$	43,670					$	14,038					$	22,902
Amortization of accumulated investment tax credits			(890)						(522)						(345)
Amortization of excess deferred income tax (Note 17)			(30,723)						(37,799)						(19,779)
Flow-through of depreciation items			1,368						1,136						712
Earnings attributable to non-controlling interest in Valencia			(2,943)						(2,991)						(3,173)
State income tax, net of federal benefit			6,961						298						1,358
Impairment of state net operating loss carryforwards			—						—						—
Allowance for equity funds used during construction			(2,363)						(1,990)						(2,185)
Impairment of charitable contribution carryforward			—						—						—
Regulatory recovery of prior year impairments of state net operating loss carryforward, including amortization			1,367						1,367						1,367
Federal income tax rate change			—						—						2,914
Tax expense (benefit) related to stock compensation awards			(392)						(795)						4,647
Non-deductible compensation			2,630						1,156						891
Other			1,951						820						(1,534)
Total income taxes (benefits)			$	20,636					$	(25,282)					$	7,775

Effective tax rate 9.92  % (37.82) % 7.13  %

The differences are attributable to the following factors:

			Year Ended December 31,
			2020						2019						2018
			(In thousands)
Federal income tax at statutory rates			$	38,193					$	6,187					$	13,514
Amortization of accumulated investment tax credits			(243)						(247)						(247)
Amortization of excess deferred income tax (Note 17)			(21,609)						(28,923)						(19,779)
Flow-through of depreciation items			1,279						1,077						674
Earnings attributable to non-controlling interest in Valencia			(2,943)						(2,991)						(3,173)
State income tax, net of federal benefit			7,111						92						1,323
Impairment of state net operating loss carryforwards			—						—						—
Allowance for equity funds used during construction			(1,461)						(1,398)						(1,716)
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization			1,367						1,367						1,367
Federal income tax rate change			—						—						(683)
Allocation of tax expense (benefit) related to stock compensation awards			(279)						(559)						3,967
Non-deductible compensation			1,554						683						612
Other			(1,112)						(1,250)						(1,830)
Total income taxes (benefit)			$	21,857					$	(25,962)					$	(5,971)

Effective tax rate 12.02  % (88.13) % (9.28) %

The differences are attributable to the following factors:

			Year Ended December 31,
			2020						2019						2018
			(In thousands)
Federal income tax at statutory rates			$	13,628					$	12,778					$	14,379
Amortization of excess deferred income tax			(9,113)						(8,876)						—
State income tax, net of federal benefit			1,625						1,532						1,454
Allocation of tax expense (benefit) related to stock compensation awards			(112)						(236)						735
Officer compensation			1,071						471						277
Other			(791)						(623)						35
Total income taxes			$	6,308					$	5,046					$	16,880

Effective tax rate 9.71  % 8.29  % 24.65  %

Components of Deferred Tax Assets and Liabilities

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

			December 31,
			2020						2019
			(In thousands)
Deferred tax assets:
Net operating loss			$	41,419					$	59,488
Regulatory liabilities related to income taxes			148,961						145,087
Federal tax credit carryforwards			121,354						101,231
Regulatory disallowances			38,531						34,639
Other			42,885						54,199
Total deferred tax assets			393,150						394,644
Deferred tax liabilities:
Depreciation and plant related			(738,342)						(787,928)
Investment tax credit			(98,669)						(81,186)
Regulatory assets related to income taxes			(61,330)						(58,495)
CTC			—						(1,466)
Pension			(37,099)						(35,029)
Regulatory asset for shutdown of SJGS Units 2 and 3			(27,237)						(28,831)
Other			(124,985)						(27,767)
Total deferred tax liabilities			(1,087,662)						(1,020,702)
Net accumulated deferred income tax liabilities			$	(694,512)					$	(626,058)

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

			December 31,
			2020						2019
			(In thousands)
Deferred tax assets:
Net operating loss			$	—					$	25,889
Regulatory liabilities related to income taxes			121,569						114,849
Federal tax credit carryforwards			84,719						82,983
Shutdown of SJGS Units 2 and 3			—						—
Regulatory disallowance			38,531						34,639
Other			46,444						38,735
Total deferred tax assets			291,263						297,095
Deferred tax liabilities:
Depreciation and plant related			(576,079)						(630,293)
Investment tax credit			(74,424)						(74,667)
Regulatory assets related to income taxes			(51,493)						(49,479)
Pension			(32,413)						(30,609)
Regulatory asset for shutdown of SJGS Units 2 and 3			(27,237)						(28,831)
Other			(108,767)						(5,206)
Total deferred tax liabilities			(870,413)						(819,085)
Net accumulated deferred income tax liabilities			$	(579,150)					$	(521,990)

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

			December 31,
			2020						2019
			(In thousands)
Deferred tax assets:
Regulatory liabilities related to income taxes			$	27,392					$	30,238
Other			4,548						3,788
Total deferred tax assets			31,940						34,026
Deferred tax liabilities:
Depreciation and plant related			(148,279)						(142,791)
CTC			—						(1,466)
Regulatory assets related to income taxes			(9,836)						(9,016)
Loss on reacquired debt			(6,072)						(6,345)
Pension			(4,685)						(4,420)
AMS			(6,915)						(8,473)
Other			(1,522)						(1,666)
Total deferred tax liabilities			(177,309)						(174,177)
Net accumulated deferred income tax liabilities			$	(145,369)					$	(140,151)

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, 2020
			(In thousands)
Net change in deferred income tax liability per above table			$	68,454
Change in tax effects of income tax related regulatory assets and liabilities			(11,602)
Amortization of excess deferred income tax			(30,723)
Tax effect of mark-to-market adjustments			(3,206)
Tax effect of excess pension liability			(3,670)
Adjustment for uncertain income tax positions			2,459
Reclassification of unrecognized tax benefits			(2,459)
Amortization of state net operating loss recovered in prior years			1,367
Refundable alternative minimum tax credit carryforward reclassified to receivable			—
Other			(215)
Deferred income taxes (benefits)			$	20,405

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, 2020
			(In thousands)
Net change in deferred income tax liability per above table			$	57,160
Change in tax effects of income tax related regulatory assets and liabilities			(7,936)
Amortization of excess deferred income tax			(21,609)
Tax effect of mark-to-market adjustments			(3,325)
Tax effect of excess pension liability			(3,670)
Adjustment for uncertain income tax positions			2,454
Reclassification of unrecognized tax benefits			(1,999)
Amortization of state net operating loss recovered in prior years			1,367
Other			—
Deferred income taxes (benefits)			$	22,442

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, 2020
			(In thousands)
Net change in deferred income tax liability per above table			$	5,218
Change in tax effects of income tax related regulatory assets and liabilities			(3,666)
Amortization of excess deferred income tax			(9,113)
Other			(212)
Deferred income taxes (benefits)			$	(7,773)

Reconciliation of Unrecognized Tax Benefits (Expenses)

A reconciliation of unrecognized tax benefits is as follows:

			PNMR						PNM						TNMP
			(In thousands)
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
Additions based on tax positions related to 2019			329						329						—
Additions (reductions) for tax positions of prior years			170						159						11
Settlement payments			—						—						—
Balance at December 31, 2019			10,693						7,776						114
Additions based on tax positions related to 2020			2,286						2,286						—
Additions (reductions) for tax positions of prior years			173						168						5
Settlement payments			—						—						—
Balance at December 31, 2020			$	13,152					$	10,230					$	119

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 2018 through 2020 are as follows:

			PNMR						PNM						TNMP
			(In thousands)
December 31, 2020:
State tax credit carryforwards			$	(425)					$	—					$	—
State net operating loss carryforwards			$	—					$	—					$	—
Charitable contribution carryforwards			$	—					$	—					$	—
Compensation expense			$	96					$	61					$	35
December 31, 2019:
State tax credit carryforwards			$	425					$	—					$	—
State net operating loss carryforwards			$	—					$	—					$	—
Charitable contribution carryforwards			$	—					$	—					$	—
Compensation expense			$	(99)					$	(100)					$	2
December 31, 2018:
State tax credit carryforwards			$	—					$	—					$	—
State net operating loss carryforwards			$	—					$	—					$	—
Charitable contribution carryforwards			$	—					$	—					$	—
Compensation expense			$	410					$	298					$	111

Summary of Tax Credit Carryforwards

The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2020 and 2019 are as follows:

			PNMR						PNM						TNMP
			(In thousands)
December 31, 2020:
State tax credit carryforwards			$	—					$	—					$	—
State net operating loss carryforwards			$	—					$	—					$	—
Charitable contribution carryforwards			$	—					$	—					$	—
Compensation expense			$	407					$	259					$	148
December 31, 2019:
State tax credit carryforwards			$	425					$	—					$	—
State net operating loss carryforwards			$	—					$	—					$	—
Charitable contribution carryforwards			$	—					$	—					$	—
Compensation expense			$	311					$	198					$	113

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