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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Schedule of Components of Income Tax Expense (Benefit) | PNMR’s income taxes (benefits) consist of the following components:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In thousands)
Current federal income tax | $ | — |  |  | $ | — |  |  | $ | 60 |
Current state income tax | 1,835 |  |  | 231 |  |  | 43 |
Deferred federal income tax (benefit) | 20,679 |  |  | 17,574 |  |  | (20,372) |
Deferred state income tax (benefit) | 11,315 |  |  | 3,721 |  |  | (4,491) |
Amortization of accumulated investment tax credits | (1,247) |  |  | (890) |  |  | (522) |
Total income taxes (benefits) | $ | 32,582 |  |  | $ | 20,636 |  |  | $ | (25,282) |
PNM’s income taxes (benefit) consist of the following components:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In thousands)
Current federal income tax (benefit) | $ | — |  |  | $ | — |  |  | $ | (6,266) |
Current state income tax (benefit) | (128) |  |  | (585) |  |  | 449 |
Deferred federal income tax (benefit) | 18,774 |  |  | 20,125 |  |  | (12,308) |
Deferred state income tax (benefit) | 8,583 |  |  | 2,560 |  |  | (7,590) |
Amortization of accumulated investment tax credits | (237) |  |  | (243) |  |  | (247) |
Total income taxes (benefit) | $ | 26,992 |  |  | $ | 21,857 |  |  | $ | (25,962) |
TNMP’s income taxes consist of the following components:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In thousands)
Current federal income tax | $ | 5,770 |  |  | $ | 12,048 |  |  | $ | 10,792 |
Current state income tax | 2,395 |  |  | 2,033 |  |  | 1,904 |
Deferred federal income tax (benefit) | (224) |  |  | (7,744) |  |  | (7,621) |
Deferred state income tax (benefit) | (29) |  |  | (29) |  |  | (29) |
Total income taxes | $ | 7,912 |  |  | $ | 6,308 |  |  | $ | 5,046 |
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,
| 2021 |  | 2020 |  | 2019
| (In thousands)
Federal income tax at statutory rates | $ | 51,330 |  |  | $ | 43,670 |  |  | $ | 14,038 |
Amortization of accumulated investment tax credits | (1,247) |  |  | (890) |  |  | (522) |
Amortization of excess deferred income tax (Note 17) | (24,484) |  |  | (30,723) |  |  | (37,799) |
Flow-through of depreciation items | 798 |  |  | 1,368 |  |  | 1,136 |
Earnings attributable to non-controlling interest in Valencia | (3,253) |  |  | (2,943) |  |  | (2,991) |
State income tax, net of federal (benefit) | 9,660 |  |  | 6,961 |  |  | 298 |
Allowance for equity funds used during construction | (2,776) |  |  | (2,363) |  |  | (1,990) |
Regulatory recovery of prior year impairments of state net operating loss carryforward, including amortization | — |  |  | 1,367 |  |  | 1,367 |
Tax benefit related to stock compensation awards | (788) |  |  | (392) |  |  | (795) |
Non-deductible compensation | 899 |  |  | 2,630 |  |  | 1,156 |
Transaction costs | 848 |  |  | — |  |  | — |
Other | 1,595 |  |  | 1,951 |  |  | 820 |
Total income taxes (benefits) | $ | 32,582 |  |  | $ | 20,636 |  |  | $ | (25,282) |
Effective tax rate | 13.33 | % |  | 9.92 | % |  | (37.82) | %
The differences are attributable to the following factors:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In thousands)
Federal income tax at statutory rates | $ | 41,696 |  |  | $ | 38,193 |  |  | $ | 6,187 |
Amortization of accumulated investment tax credits | (237) |  |  | (243) |  |  | (247) |
Amortization of excess deferred income tax (Note 17) | (15,158) |  |  | (21,609) |  |  | (28,923) |
Flow-through of depreciation items | 689 |  |  | 1,279 |  |  | 1,077 |
Earnings attributable to non-controlling interest in Valencia | (3,253) |  |  | (2,943) |  |  | (2,991) |
State income tax, net of federal benefit | 7,609 |  |  | 7,111 |  |  | 92 |
Allowance for equity funds used during construction | (2,080) |  |  | (1,461) |  |  | (1,398) |
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization | — |  |  | 1,367 |  |  | 1,367 |
Allocation of tax benefit related to stock compensation awards | (563) |  |  | (279) |  |  | (559) |
Non-deductible compensation | 547 |  |  | 1,554 |  |  | 683 |
Transaction costs | 22 |  |  | — |  |  | — |
Other | (2,280) |  |  | (1,112) |  |  | (1,250) |
Total income taxes (benefits) | $ | 26,992 |  |  | $ | 21,857 |  |  | $ | (25,962) |
Effective tax rate | 13.59 | % |  | 12.02 | % |  | (88.13) | %
The differences are attributable to the following factors:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In thousands)
Federal income tax at statutory rates | $ | 15,076 |  |  | $ | 13,628 |  |  | $ | 12,778 |
Amortization of excess deferred income tax | (9,326) |  |  | (9,113) |  |  | (8,876) |
State income tax, net of federal (benefit) | 1,763 |  |  | 1,625 |  |  | 1,532 |
Allocation of tax benefit related to stock compensation awards | (224) |  |  | (112) |  |  | (236) |
Non-deductible compensation | 351 |  |  | 1,071 |  |  | 471 |
Transaction costs | (4) |  |  | — |  |  | — |
Other | 276 |  |  | (791) |  |  | (623) |
Total income taxes | $ | 7,912 |  |  | $ | 6,308 |  |  | $ | 5,046 |
Effective tax rate | 11.02 | % |  | 9.71 | % |  | 8.29 | %
Components of Deferred Tax Assets and Liabilities | The components of PNMR’s net accumulated deferred income tax liability were:
| December 31,
| 2021 |  | 2020
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 32,441 |  |  | $ | 41,419 |
Regulatory liabilities related to income taxes | 120,651 |  |  | 148,961 |
Federal tax credit carryforwards | 122,436 |  |  | 121,354 |
Regulatory disallowances | 38,835 |  |  | 38,531 |
Other | 34,812 |  |  | 42,885 |
Total deferred tax assets | 349,175 |  |  | 393,150 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (787,295) |  |  | (738,342) |
Investment tax credit | (97,409) |  |  | (98,669) |
Regulatory assets related to income taxes | (78,211) |  |  | (61,330) |
Pension | (40,828) |  |  | (37,099) |
Regulatory asset for shutdown of SJGS Units 2 and 3 | (25,643) |  |  | (27,237) |
Other | (84,639) |  |  | (124,985) |
Total deferred tax liabilities | (1,114,025) |  |  | (1,087,662) |
Net accumulated deferred income tax liabilities | $ | (764,850) |  |  | $ | (694,512) |
The components of PNM’s net accumulated deferred income tax liability were:
| December 31,
| 2021 |  | 2020
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss | $ | 1,854 |  |  | $ | — |
Regulatory liabilities related to income taxes | 96,161 |  |  | 121,569 |
Federal tax credit carryforwards | 86,811 |  |  | 84,719 |
Regulatory disallowance | 38,835 |  |  | 38,531 |
Other | 36,599 |  |  | 46,444 |
Total deferred tax assets | 260,260 |  |  | 291,263 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (616,567) |  |  | (576,079) |
Investment tax credit | (74,187) |  |  | (74,424) |
Regulatory assets related to income taxes | (68,687) |  |  | (51,493) |
Pension | (36,283) |  |  | (32,413) |
Regulatory asset for shutdown of SJGS Units 2 and 3 | (25,643) |  |  | (27,237) |
Other | (69,575) |  |  | (108,767) |
Total deferred tax liabilities | (890,942) |  |  | (870,413) |
Net accumulated deferred income tax liabilities | $ | (630,682) |  |  | $ | (579,150) |
The components of TNMP’s net accumulated deferred income tax liability at December 31, were:
| December 31,
| 2021 |  | 2020
| (In thousands)
Deferred tax assets: |  |  |
Regulatory liabilities related to income taxes | $ | 24,490 |  |  | $ | 27,392 |
Other | 3,648 |  |  | 4,548 |
Total deferred tax assets | 28,138 |  |  | 31,940 |
Deferred tax liabilities: |  |  |
Depreciation and plant related | (157,649) |  |  | (148,279) |
Regulatory assets related to income taxes | (9,525) |  |  | (9,836) |
Loss on reacquired debt | (5,799) |  |  | (6,072) |
Pension | (4,545) |  |  | (4,685) |
AMS | (5,249) |  |  | (6,915) |
Other | (2,619) |  |  | (1,522) |
Total deferred tax liabilities | (185,386) |  |  | (177,309) |
Net accumulated deferred income tax liabilities | $ | (157,248) |  |  | $ | (145,369) |
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, 2021
| (In thousands)
Net change in deferred income tax liability per above table | $ | 70,338 |
Change in tax effects of income tax related regulatory assets and liabilities | (12,424) |
Amortization of excess deferred income tax | (24,484) |
Tax effect of mark-to-market adjustments | 2,729 |
Tax effect of excess pension liability | (5,196) |
Adjustment for uncertain income tax positions | 562 |
Reclassification of unrecognized tax benefits | (562) |
Other | (216) |
Deferred income taxes | $ | 30,747 |
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, 2021
| (In thousands)
Net change in deferred income tax liability per above table | $ | 51,532 |
Change in tax effects of income tax related regulatory assets and liabilities | (9,834) |
Amortization of excess deferred income tax | (15,158) |
Tax effect of mark-to-market adjustments | 2,957 |
Tax effect of excess pension liability | (5,196) |
Adjustment for uncertain income tax positions | 541 |
Reclassification of unrecognized tax benefits | 2,278 |
Deferred income taxes | $ | 27,120 |
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, 2021
| (In thousands)
Net change in deferred income tax liability per above table | $ | 11,879 |
Change in tax effects of income tax related regulatory assets and liabilities | (2,591) |
Amortization of excess deferred income tax (benefit) | (9,326) |
Other | (215) |
Deferred income tax (benefits) | $ | (253) |
Reconciliation of Unrecognized Tax Benefits (Expenses) | A reconciliation of unrecognized tax benefits is as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
Balance at December 31, 2018 | $ | 10,194 |  |  | $ | 7,288 |  |  | $ | 103 |
Additions based on tax positions related to 2019 | 329 |  |  | 329 |  |  | — |
Additions 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 for tax positions of prior years | 173 |  |  | 168 |  |  | 5 |
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2020 | 13,152 |  |  | 10,230 |  |  | 119 |
Additions based on tax positions related to 2021 | 305 |  |  | 295 |  |  | 11 |
Additions for tax positions of prior years | 257 |  |  | 246 |  |  | 11 |
Settlement payments | — |  |  | — |  |  | — |
Balance at December 31, 2021 | $ | 13,714 |  |  | $ | 10,771 |  |  | $ | 141 |
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 2019 through 2021 are as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2021: |  |  |  |  |
Federal tax credit carryforwards | $ | 1,029 |  |  | $ | — |  |  | $ | — |
Compensation expense | $ | 119 |  |  | $ | 84 |  |  | $ | 35 |
December 31, 2020: |  |  |  |  |
State tax credit carryforwards | $ | (425) |  |  | $ | — |  |  | $ | — |
Compensation expense | $ | 96 |  |  | $ | 61 |  |  | $ | 35 |
December 31, 2019: |  |  |  |  |
State tax credit carryforwards | $ | 425 |  |  | $ | — |  |  | $ | — |
Compensation expense | $ | (99) |  |  | $ | (100) |  |  | $ | 2 |
Summary of Tax Credit Carryforwards | The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2021 and 2020 are as follows:
| PNMR |  | PNM |  | TNMP
| (In thousands)
December 31, 2021: |  |  |  |  |
Federal tax credit carryforwards | $ | 1,029 |  |  | $ | — |  |  | $ | — |
Compensation expense | $ | 526 |  |  | $ | 343 |  |  | $ | 182 |
December 31, 2020: |  |  |  |  |
Compensation expense | $ | 407 |  |  | $ | 259 |  |  | $ | 148 |

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- Definition Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32639-109319 + Details
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