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Income Taxes (Tables)

12 Months Ended

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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