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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)

Income tax expense (benefit) from continuing operations for the years ended December 31 was (in thousands):

			2021			2020			2019
Current:
Federal			$	574		$	(6,020)		$	(8,578)
State			(666)			847			138
Current income tax (benefit)			(92)			(5,173)			(8,440)
Deferred:
Federal			2,170			35,672			34,551
State			5,091			2,419			3,469
Deferred income tax expense			7,261			38,091			38,020
Income tax expense			$	7,169		$	32,918		$	29,580

Schedule of Effective Income Tax Rate Reconciliation

Effective Tax Rates

The effective tax rate differs from the federal statutory rate for the years ended December 31, as follows:

			2021			2020			2019
Federal statutory rate			21.0		%	21.0		%	21.0		%
State income tax (net of federal tax effect)			1.2			2.4			1.5
Non-controlling interest (a)			(1.2)			(1.2)			(1.2)
Tax credits(b)			(8.4)			(9.2)			(3.9)
Flow-through adjustments (c)			(3.2)			(1.6)			(2.4)
Uncertain Tax Benefits			0.3			1.5			—
Valuation Allowance			—			0.7			—
Other tax differences			(0.2)			0.6			(1.6)
Amortization of excess deferred income tax expense (d)			(3.1)			(2.3)			(1.2)
TCJA bill credits (e)			(3.6)			—			—
Effective Tax Rate			2.8		%	11.9		%	12.2		%

____________________

(a)    The effective tax rate reflects the income attributable to the non-controlling interest in Black Hills Colorado IPP for which a tax provision was not recorded.

(b)    In 2020, the Company completed a research and development study which encompassed tax years from 2013 to 2019.

(c)    Flow-through adjustments related primarily to accounting method changes for tax purposes that allow us to take a current tax deduction for repair costs, certain indirect costs and gain deferral. We recorded a deferred income tax liability in recognition of the temporary difference created between book and tax treatment and flowed the tax benefit through to tax expense. A regulatory asset was established to reflect the recovery of future increases in taxes payable from customers as the temporary differences reverse. As a result of this regulatory treatment, we continue to record tax benefits consistent with the flow-through method.

(d)    Primarily TCJA - see above.

(e)    As discussed in Note 2 above, Colorado Electric and Nebraska Gas bill credits, which represent a disposition of excess deferred income tax benefits resulting from the TCJA, were delivered to customers in 2021. These bill credits, which resulted in a reduction in revenue, were offset by a reduction in income tax expense and resulted in a minimal impact to Net income for the year ended December 31, 2021.

Schedule of Deferred Tax Assets and Liabilities

The temporary differences, which gave rise to the net deferred tax liability, for the years ended December 31 were as follows (in thousands):

			2021			2020
Deferred tax assets:
Regulatory liabilities			$	77,099		$	90,535
State tax credits			23,342			23,339
Federal NOL (a)			227,535			96,155
State NOL (a)			33,639			9,914
Partnership			13,395			15,601
Credit Carryovers			68,646			51,445
Other deferred tax assets			31,996			40,143
Less: Valuation allowance			(14,719)			(13,943)
Total deferred tax assets			460,933			313,189
Deferred tax liabilities:
Accelerated depreciation, amortization and other property-related differences			(597,284)			(551,137)
Regulatory assets (a)			(124,582)			(28,007)
Goodwill			(45,471)			(30,590)
State deferred tax liability (a)			(109,136)			(73,910)
Other deferred tax liabilities			(49,848)			(38,169)
Total deferred tax liabilities			(926,321)			(721,813)
Net deferred tax liability			$	(465,388)		$	(408,624)

____________________

(a)    Increase primarily driven by Winter Storm Uri — see above.

Summary of Operating Loss Carryforwards

At December 31, 2021, we have federal and state NOL carryforwards that will expire at various dates as follows (in thousands):

						Amounts						Expiration Dates
Federal NOL Carryforward						$	476,033					2022			to			2037
Federal NOL Carryforward						$	607,465					No expiration
State NOL Carryforward (a)						$	572,203					2022			to			2041

____________________

(a)    The carryforward balance is reflected on the basis of apportioned tax losses to jurisdictions imposing state income taxes.

Summary of Income Tax Contingencies

The following table reconciles the total amounts of unrecognized tax benefits, without interest, at the beginning and end of the period included in Other deferred credits and other liabilities on the accompanying Consolidated Balance Sheets (in thousands):

Changes in Uncertain Tax Positions:			2021			2020			2019
Beginning balance			$	8,383		$	4,165		$	3,583
Additions for prior year tax positions			448			3,788			446
Reductions for prior year tax positions			(732)			(1,313)			(862)
Additions for current year tax positions			2,455			1,743			998
Ending balance			$	10,554		$	8,383		$	4,165

Summary of State Tax Carryforwards

State tax credits have been generated and are available to offset future state income taxes. At December 31, 2021, we had the following state tax credit carryforwards (in thousands):

State Tax Credit Carryforwards			Amounts			Expiration Year
ITC			$	23,060		2023			to			2041
Research and development			$	282		No expiration

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