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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

PNMR’s income taxes consist of the following components:

			Year Ended December 31,
			2022						2021						2020
			(In thousands)
Current federal income tax			$	—					$	—					$	—
Current state income tax			1,597						1,835						231
Deferred federal income tax			18,413						20,679						17,574
Deferred state income tax			7,302						11,315						3,721
Amortization of accumulated investment tax credits			(1,182)						(1,247)						(890)
Total income taxes			$	26,130					$	32,582					$	20,636

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

			Year Ended December 31,
			2022						2021						2020
			(In thousands)
Current federal income tax (benefit)			$	(13,533)					$	—					$	—
Current state income tax (benefit)			3,244						(128)						(585)
Deferred federal income tax			25,298						18,774						20,125
Deferred state income tax			4,361						8,583						2,560
Amortization of accumulated investment tax credits			(172)						(237)						(243)
Total income taxes			$	19,198					$	26,992					$	21,857

TNMP’s income taxes consist of the following components:

			Year Ended December 31,
			2022						2021						2020
			(In thousands)
Current federal income tax			$	17,055					$	5,770					$	12,048
Current state income tax			2,662						2,395						2,033
Deferred federal income tax (benefit)			(4,527)						(224)						(7,744)
Deferred state income tax (benefit)			(29)						(29)						(29)
Total income taxes			$	15,161					$	7,912					$	6,308

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,
			2022						2021						2020
			(In thousands)
Federal income tax at statutory rates			$	44,375					$	51,330					$	43,670
Amortization of accumulated investment tax credits			(1,182)						(1,247)						(890)
Amortization of excess deferred income tax			(23,599)						(24,484)						(30,723)
Flow-through of depreciation items			2,795						798						1,368
(Earnings) attributable to non-controlling interest in Valencia			(3,176)						(3,253)						(2,943)
State income tax, net of federal (benefit)			6,826						9,660						6,961
Allowance for equity funds used during construction			(2,898)						(2,776)						(2,363)
Regulatory recovery of prior year impairments of state net operating loss carryforward, including amortization			—						—						1,367
Allocation of tax (benefit) related to stock compensation awards			91						(788)						(392)
Non-deductible compensation			1,125						899						2,630
Transaction costs			74						848						—
Other			1,699						1,595						1,951
Total income taxes			$	26,130					$	32,582					$	20,636

Effective tax rate 12.37  % 13.33  % 9.92  %

The differences are attributable to the following factors:

			Year Ended December 31,
			2022						2021						2020
			(In thousands)
Federal income tax at statutory rates			$	29,026					$	41,696					$	38,193
Amortization of accumulated investment tax credits			(172)						(237)						(243)
Amortization of excess deferred income tax			(14,421)						(15,158)						(21,609)
Flow-through of depreciation items			2,641						689						1,279
(Earnings) attributable to non-controlling interest in Valencia			(3,176)						(3,253)						(2,943)
State income tax, net of federal (benefit)			5,694						7,609						7,111
Allowance for equity funds used during construction			(1,958)						(2,080)						(1,461)
Regulatory recovery of prior year impairment of state net operating loss carryforward, net of amortization			—						—						1,367
Allocation of tax (benefit) related to stock compensation awards			65						(563)						(279)
Non-deductible compensation			701						547						1,554
Transaction costs			10						22						—
Other			788						(2,280)						(1,112)
Total income taxes			$	19,198					$	26,992					$	21,857

Effective tax rate 13.89  % 13.59  % 12.02  %

The differences are attributable to the following factors:

			Year Ended December 31,
			2022						2021						2020
			(In thousands)
Federal income tax at statutory rates			$	22,560					$	15,076					$	13,628
Amortization of excess deferred income tax			(9,177)						(9,326)						(9,113)
State income tax, net of federal (benefit)			2,103						1,763						1,625
Allocation of tax (benefit) related to stock compensation awards			26						(224)						(112)
Non-deductible compensation			422						351						1,071
Transaction costs			1						(4)						—
Other			(774)						276						(791)
Total income taxes			$	15,161					$	7,912					$	6,308

Effective tax rate 14.11  % 11.02  % 9.71  %

Components of Deferred Tax Assets and Liabilities

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

			December 31,
			2022						2021
			(In thousands)
Deferred tax assets:
Net operating loss			$	85,382					$	32,441
Regulatory liabilities related to income taxes			98,371						120,651
Federal tax credit carryforwards			122,557						122,436
Regulatory disallowances			28,037						38,835
Other			33,849						34,812
Total deferred tax assets			368,196						349,175
Deferred tax liabilities:
Depreciation and plant related			(801,022)						(787,295)
Investment tax credit			(96,227)						(97,409)
Regulatory assets related to income taxes			(77,013)						(78,211)
Pension			(40,651)						(40,828)
Regulatory asset for shutdown of SJGS Units 2 and 3			(24,048)						(25,643)
Regulatory asset SJGS investment			(69,828)						—
Other			(82,238)						(84,639)
Total deferred tax liabilities			(1,191,027)						(1,114,025)
Net accumulated deferred income tax liabilities			$	(822,831)					$	(764,850)

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

			December 31,
			2022						2021
			(In thousands)
Deferred tax assets:
Net operating loss			$	54,681					$	1,854
Regulatory liabilities related to income taxes			76,744						96,161
Federal tax credit carryforwards			84,902						86,811
Regulatory disallowance			28,037						38,835
Other			33,079						36,599
Total deferred tax assets			277,443						260,260
Deferred tax liabilities:
Depreciation and plant related			(620,814)						(616,567)
Investment tax credit			(74,015)						(74,187)
Regulatory assets related to income taxes			(67,912)						(68,687)
Pension			(36,048)						(36,283)
Regulatory asset for shutdown of SJGS Units 2 and 3			(24,048)						(25,643)
Regulatory asset SJGS investment			(69,828)						—
Other			(66,818)						(69,575)
Total deferred tax liabilities			(959,483)						(890,942)
Net accumulated deferred income tax liabilities			$	(682,040)					$	(630,682)

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

			December 31,
			2022						2021
			(In thousands)
Deferred tax assets:
Regulatory liabilities related to income taxes			$	21,627					$	24,490
Other			5,353						3,648
Total deferred tax assets			26,980						28,138
Deferred tax liabilities:
Depreciation and plant related			(166,230)						(157,649)
Regulatory assets related to income taxes			(9,213)						(9,525)
Loss on reacquired debt			(5,527)						(5,799)
Pension			(4,603)						(4,545)
AMS			(3,989)						(5,249)
Other			(2,055)						(2,619)
Total deferred tax liabilities			(191,617)						(185,386)
Net accumulated deferred income tax liabilities			$	(164,637)					$	(157,248)

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 included in the Consolidated Statement of Earnings:

			Year Ended
			December 31, 2022
			(In thousands)
Net change in deferred income tax liability per above table			$	57,981
Change in tax effects of income tax related regulatory assets and liabilities			(7,546)
Amortization of excess deferred income tax			(23,599)
Tax effect of mark-to-market adjustments			(1,359)
Tax effect of excess pension liability			(645)
Adjustment for uncertain income tax positions			1,439
Reclassification of unrecognized tax benefits			(1,439)
Other			(299)
Deferred income tax			$	24,533

The following table reconciles the change in PNM’s net accumulated deferred income tax liability to the deferred income tax included in the Consolidated Statement of Earnings:

			Year Ended
			December 31, 2022
			(In thousands)
Net change in deferred income tax liability per above table			$	51,358
Change in tax effects of income tax related regulatory assets and liabilities			(4,995)
Amortization of excess deferred income tax			(14,421)
Tax effect of mark-to-market adjustments			1,462
Tax effect of excess pension liability			(646)
Adjustment for uncertain income tax positions			1,430
Reclassification of unrecognized tax benefits			(4,701)
Deferred income tax			$	29,487

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, 2022
			(In thousands)
Net change in deferred income tax liability per above table			$	7,389
Change in tax effects of income tax related regulatory assets and liabilities			(2,552)
Amortization of excess deferred income tax			(9,177)
Other			(216)
Deferred income tax (benefits)			$	(4,556)

Reconciliation of Unrecognized Tax Benefits (Expenses)

A reconciliation of unrecognized tax benefits is as follows:

			PNMR						PNM						TNMP
			(In thousands)
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
Additions based on tax positions related to 2022			1,444						1,437						7
Additions (reductions) for tax positions of prior years			(4)						(7)						3
Settlement payments			—						—						—
Balance at December 31, 2022			$	15,154					$	12,201					$	151

Tax Carryforward, Impairments, net of Federal Tax Benefit

Impairments of tax attributes after reflecting the expiration of carryforwards under applicable tax laws, net of federal tax benefit, for 2020 through 2022 are as follows:

			PNMR						PNM						TNMP
			(In thousands)
December 31, 2022:
Federal tax credit carryforwards			$	187					$	427					$	—
Compensation expense			$	199					$	140					$	59
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

Summary of Tax Credit Carryforwards

The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2022 and 2021 are as follows:

			PNMR						PNM						TNMP
			(In thousands)
December 31, 2022:
Federal tax credit carryforwards			$	1,216					$	427					$	—
Compensation expense			$	725					$	483					$	241
December 31, 2021:
Federal tax credit carryforwards			$	1,029					$	—					$	—
Compensation expense			$	526					$	343					$	182

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