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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Federal Income Tax Reform

In 2017, comprehensive changes in U.S. federal income taxes were enacted through legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made many significant modifications to the tax laws, including reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The Tax Act also eliminated federal bonus depreciation for utilities, limited interest deductibility for non-utility businesses and limited the deductibility of officer compensation. During 2020, the IRS issued final regulations related to certain officer compensation and, in January 2021, issued final regulations on interest deductibility that provide a 10% “de minimis” exception that allows entities with predominantly regulated activities to fully deduct interest expenses.

As a result of the change in the federal income tax rate, the Company re-measured and adjusted its deferred tax assets and liabilities as of December 31, 2017. The portion of that adjustment not related to PNM’s and TNMP’s regulated activities was recorded as a reduction in net deferred tax assets and an increase in income tax expense. The portion related to PNM’s and TNMP’s regulated activities was recorded as a reduction in net deferred tax liabilities and an increase in regulatory liabilities.

Beginning February 2018, PNM’s NM 2016 Rate Case reflected the reduction in the federal and state corporate income tax rates, including amortization of excess deferred federal and state income taxes. In accordance with the order in that case and amortization requirements of the tax laws, PNM is returning the protected portion of excess deferred federal income taxes to customers over the average remaining life of plant in service as of December 31, 2017. The remaining balance of the unprotected portion of excess deferred federal income taxes, which was being returned to customers over a period of approximately twenty-three years, will be returned over a five-year period when new rates go into effect from the 2024 Rate Change. Excess deferred state income taxes were returned to customers over a three-year period, which concluded in the first quarter of 2021. The approved settlement in the TNMP 2018 Rate Case includes a reduction in customer rates to reflect the impacts of the Tax Act beginning on January 1, 2019. TXNM, PNM, and TNMP amortized federal excess deferred income taxes of $23.4 million, $20.8 million, and $2.6 million in 2024.
TXNM
TXNM’s income taxes (benefits) consist of the following components:
 Year Ended December 31,
 202420232022
 (In thousands)
Current federal income tax$— $— $— 
Current state income tax (benefit)
(1,984)(2,841)1,597 
Deferred federal income tax (benefit)
13,042 (11,503)18,413 
Deferred state income tax (benefit)
10,630 (825)7,302 
Amortization of accumulated investment tax credits(170)(1,181)(1,182)
Total income taxes (benefits)
$21,518 $(16,350)$26,130 

TXNM’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,
 202420232022
 (In thousands)
Federal income tax at statutory rates$58,850 $19,011 $44,375 
Amortization of accumulated investment tax credits(170)(1,181)(1,182)
Amortization of excess deferred income tax(23,362)(22,859)(23,599)
Flow-through of depreciation items1,003 1,281 2,795 
(Earnings) attributable to non-controlling interest in Valencia(3,368)(3,892)(3,176)
State income tax (benefit), net of federal (benefit)
6,284 (2,239)6,826 
Allowance for equity funds used during construction(3,756)(3,145)(2,898)
Allocation of tax (benefit) related to stock compensation awards(17)(261)91 
Non-deductible compensation1,332 1,659 1,125 
Non-deductible merger related costs
— (1,959)74 
Sale of NMRD
(15,822)— — 
R&D credit
(1,500)(2,050)(1,320)
Other2,044 (715)3,019 
Total income taxes (benefits)
$21,518 $(16,350)$26,130 
Effective tax rate7.68 %(18.06)%12.37 %
The components of TXNM’s net accumulated deferred income tax liability were:
 December 31,
 20242023
 (In thousands)
Deferred tax assets:
Net operating loss$31,592 $16,833 
Regulatory liabilities related to income taxes82,702 90,461 
Federal tax credit carryforwards126,770 124,510 
Regulatory disallowances42,330 42,330 
Regulatory liability SJGS retirement credits40 28,797 
Other52,955 35,492 
Total deferred tax assets336,389 338,423 
Deferred tax liabilities:
Depreciation and plant related(794,203)(738,078)
Investment tax credit(81,068)(95,046)
Regulatory assets related to income taxes(84,053)(80,643)
Pension(41,383)(41,141)
Regulatory asset for shutdown of SJGS Units 2 and 3(20,860)(22,454)
Regulatory asset SJGS energy transition property
(85,365)(86,521)
Regulatory asset PVNGS investment
(21,044)(20,503)
PVNGS trusts
(48,421)(41,767)
Other(59,384)(57,550)
Total deferred tax liabilities(1,235,781)(1,183,703)
Net accumulated deferred income tax liabilities$(899,392)$(845,280)

The following table reconciles the change in TXNM’s net accumulated deferred income tax liability to the deferred income tax (benefit) included in the Consolidated Statement of Earnings:
 Year Ended
December 31, 2024
 (In thousands)
Net change in deferred income tax liability per above table$54,112 
Change in tax effects of income tax related regulatory assets and liabilities(11,629)
Amortization of excess deferred income tax(23,362)
Tax effect of mark-to-market adjustments4,802 
Tax effect of excess pension liability(421)
Adjustment for uncertain income tax positions(135)
Reclassification of unrecognized tax benefits135 
Other— 
Deferred income tax (benefit)
$23,502 
PNM

PNM’s income taxes (benefits) consist of the following components:
 Year Ended December 31,
 202420232022
 (In thousands)
Current federal income tax (benefit)$(7,005)$9,518 $(13,533)
Current state income tax (benefit)(5,681)(4,304)3,244 
Deferred federal income tax (benefit)
28,183 (22,951)25,298 
Deferred state income tax13,890 1,150 4,361 
Amortization of accumulated investment tax credits(170)(171)(172)
Total income taxes (benefits)
$29,217 $(16,758)$19,198 

PNM’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,
 202420232022
 (In thousands)
Federal income tax at statutory rates$49,868 $7,972 $29,026 
Amortization of accumulated investment tax credits(170)(171)(172)
Amortization of excess deferred income tax(20,750)(14,252)(14,421)
Flow-through of depreciation items796 1,114 2,641 
(Earnings) attributable to non-controlling interest in Valencia(3,368)(3,892)(3,176)
State income tax (benefit), net of federal (benefit)
6,594 (2,216)5,694 
Allowance for equity funds used during construction(2,739)(2,065)(1,958)
Allocation of tax (benefit) related to stock compensation awards(10)(185)65 
Non-deductible compensation822 1,015 701 
Non-deductible merger costs
— (33)10 
R&D credit
(1,450)(2,000)(1,300)
Other(376)(2,045)2,088 
Total income taxes (benefits)
$29,217 $(16,758)$19,198 
Effective tax rate12.30 %(44.15)%13.89 %
The components of PNM’s net accumulated deferred income tax liability were:
 December 31,
 20242023
 (In thousands)
Deferred tax assets:
Net operating loss$— $— 
Regulatory liabilities related to income taxes64,481 71,546 
Federal tax credit carryforwards93,481 80,586 
Regulatory disallowance42,330 42,330 
Regulatory liability SJGS retirement credits
40 28,797 
Other35,650 35,993 
Total deferred tax assets235,982 259,252 
Deferred tax liabilities:
Depreciation and plant related(582,089)(545,815)
Investment tax credit(81,068)(73,844)
Regulatory assets related to income taxes(75,464)(71,742)
Pension(36,678)(36,483)
Regulatory asset for shutdown of SJGS Units 2 and 3(20,860)(22,454)
Regulatory asset SJGS energy transition property(85,365)(86,521)
Regulatory asset PVNGS investment
(21,044)(20,503)
PVNGS Trusts
(48,421)(41,767)
Other(41,211)(44,160)
Total deferred tax liabilities(992,200)(943,289)
Net accumulated deferred income tax liabilities$(756,218)$(684,037)

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, 2024
 (In thousands)
Net change in deferred income tax liability per above table$72,181 
Change in tax effects of income tax related regulatory assets and liabilities(11,246)
Amortization of excess deferred income tax(20,750)
Tax effect of mark-to-market adjustments3,554 
Tax effect of excess pension liability(421)
Adjustment for uncertain income tax positions(161)
Reclassification of unrecognized tax benefits(1,254)
Deferred income tax (benefit)
$41,903 
TNMP
TNMP’s income taxes consist of the following components:
 Year Ended December 31,
 202420232022
 (In thousands)
Current federal income tax$(2,549)$11,354 $17,055 
Current state income tax3,300 3,055 2,662 
Deferred federal income tax (benefit)26,363 2,917 (4,527)
Deferred state income tax (benefit)— (29)(29)
Total income taxes$27,114 $17,297 $15,161 
 
TNMP’s provision for income taxes differed from the federal income tax computed at the statutory rate for each of the periods shown. The differences are attributable to the following factors:
 Year Ended December 31,
 202420232022
 (In thousands)
Federal income tax at statutory rates$27,435 $23,569 $22,560 
Amortization of excess deferred income tax(2,612)(8,607)(9,177)
State income tax, net of federal (benefit)2,606 2,414 2,103 
Allocation of tax (benefit) related to stock compensation awards(4)(77)26 
Non-deductible compensation509 642 422 
Transaction costs— 3 1 
Other(820)(647)(774)
Total income taxes$27,114 $17,297 $15,161 
Effective tax rate20.75 %15.41 %14.11 %

The components of TNMP’s net accumulated deferred income tax liability were:
 December 31,
 20242023
 (In thousands)
Deferred tax assets:
Regulatory liabilities related to income taxes$18,221 $18,915 
Other4,522 5,534 
Total deferred tax assets22,743 24,449 
Deferred tax liabilities:
Depreciation and plant related(200,709)(179,483)
Regulatory assets related to income taxes(8,589)(8,901)
Loss on reacquired debt(4,981)(5,254)
Pension(4,706)(4,659)
AMS(2,709)(2,613)
Other(9,156)(2,287)
Total deferred tax liabilities(230,850)(203,197)
Net accumulated deferred income tax liabilities$(208,107)$(178,748)

The following table reconciles the change in TNMP’s net accumulated deferred income tax liability to the deferred income tax included in the Consolidated Statement of Earnings:
 Year Ended
December 31, 2024
 (In thousands)
Net change in deferred income tax liability per above table$29,359 
Change in tax effects of income tax related regulatory assets and liabilities(383)
Amortization of excess deferred income tax(2,612)
Other(1)
Deferred income tax
$26,363 
Other Disclosures

The Company is required to recognize only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority. A reconciliation of unrecognized tax benefits is as follows:
TXNM
PNMTNMP
 (In thousands)
Balance at December 31, 2021$13,714 $10,771 $141 
Additions based on tax positions related to 2021
1,444 1,437 7 
Additions (reductions) for tax positions of prior years
(4)(7)3 
Balance at December 31, 202215,154 12,201 151 
Additions based on tax positions related to 2022
(277)(294)17 
Additions (reductions) for tax positions of prior years
259 239 20 
Balance at December 31, 202315,136 12,146 188 
Additions (reductions) based on tax positions related to 2023
19 2 17 
Additions for tax positions of prior years
(154)(163)9 
Balance at December 31, 2024$15,001 $11,985 $214 

Included in the balance of unrecognized tax benefits at December 31, 2024 are $14.9 million, $11.9 million, and $0.2 million that, if recognized, would affect the effective tax rate for TXNM, PNM, and TNMP. The Company does not anticipate that any unrecognized tax expenses or unrecognized tax benefits will be reduced or settled in 2025.

TXNM, PNM, and TNMP had no estimated interest income or expense related to income taxes for the years ended December 31, 2024, 2023, and 2022. There was no accumulated accrued interest receivable or payable related to income taxes as of December 31, 2024 and 2023.

The Company files a federal consolidated and several consolidated and separate state income tax returns. The tax years prior to 2021 are closed to examination by either federal or state taxing authorities other than Arizona. The tax years prior to 2020 are closed to examination by Arizona taxing authorities. Other tax years are open to examination by federal and state taxing authorities and net operating loss carryforwards are open to examination for the years in which the carryforwards are utilized. At December 31, 2024, the Company has $186.2 million of federal net operating loss carryforwards that expire beginning in 2036 and $129.0 million of federal tax credit carryforwards that expire beginning in 2025. State net operating losses expire beginning in 2037 and vary from federal due to differences between state and federal tax law.

In 2008, fifty percent bonus tax depreciation was enacted as a temporary two-year stimulus measure as part of the Economic Stimulus Act of 2008. Bonus tax depreciation in various forms has been extended since that time, including by the Protecting Americans from Tax Hikes Act of 2015. The 2015 act extended and phased-out bonus tax depreciation through 2019. As discussed above, the Tax Act eliminated bonus depreciation for utilities effective September 28, 2017. However, in 2020 the IRS issued regulations interpreting Tax Act amendments to depreciation provisions of the IRC which allowed the Company to claim a bonus depreciation deduction on certain construction projects placed in service after the third quarter of 2017. As a result of the net operating loss carryforwards for income tax purposes created by bonus depreciation, certain tax carryforwards were not expected to be utilized before their expiration. In addition, as a result of Tax Act changes to the deductibility of officer compensation, certain deferred tax benefits related to compensation are not expected to be realized. The Company has impaired the deferred tax assets for tax carryforwards which are not expected to be utilized and for compensation that is not expected to be deductible.

The Company earns investment tax credits for construction or purchase of eligible property. The Company uses the deferral method of accounting for these investment tax credits.
Impairments of tax attributes after reflecting the expiration of carryforwards under applicable tax laws, net of federal tax benefit, for 2022 through 2024 are as follows:
TXNM
PNMTNMP
(In thousands)
December 31, 2024:
Federal tax credit carryforwards$131 $— $— 
Compensation expense$(516)$(335)$(179)
December 31, 2023:
Federal tax credit carryforwards
$839 $(427)$— 
Compensation expense$387 $246 $140 
December 31, 2022:
Federal tax credit carryforwards
$187 $427 $— 
Compensation expense$199 $140 $59 


The tax effect of compensation that is not expected to be deductible and impairments of unexpired tax credits are reflected as a valuation allowance against deferred tax assets. The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2024 and 2023 are as follows:
TXNM
PNMTNMP
(In thousands)
December 31, 2024:
Federal tax credit carryforwards$2,186 $— $— 
Compensation expense$596 $394 $202 
December 31, 2023:
Federal tax credit carryforwards$2,055 $— $— 
Compensation expense$1,112 $729 $381