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Income Tax Expense
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Tax Expense [Text Block] INCOME TAX EXPENSE
Income Tax Expense   
Year Ended December 31202120202019
Millions   
Current Income Tax Expense (a)
   
Federal— — — 
State— — $0.1 
Total Current Income Tax Expense— — $0.1 
Deferred Income Tax Expense (Benefit)   
Federal (b)
$(37.2)$(48.8)$(27.8)
State10.8 9.8 21.7 
Investment Tax Credit Amortization(0.5)(0.5)(0.6)
Total Deferred Income Tax Expense (Benefit)$(26.9)$(39.5)$(6.7)
Total Income Tax Expense (Benefit)$(26.9)$(39.5)$(6.6)
(a)For the years ended December 31, 2021, 2020 and 2019, the federal and state current tax expense was minimal due to NOLs which resulted from the bonus depreciation and related tax attributes from large wind projects. Federal and state NOLs are being carried forward to offset current and future taxable income.
(b)For the years ended December 31, 2021, 2020 and 2019, the federal tax benefit is primarily due to production tax credits.
NOTE 10. INCOME TAX EXPENSE (Continued)

Reconciliation of Taxes from Federal Statutory   
Rate to Total Income Tax Expense   
Year Ended December 31202120202019
Millions   
Income Before Non-Controlling Interest and Income Taxes$110.9 $122.1 $178.9 
Statutory Federal Income Tax Rate21 %21 %21 %
Income Taxes Computed at Statutory Federal Rate$23.3 $25.6 $37.6 
Increase (Decrease) in Tax Due to:   
State Income Taxes – Net of Federal Income Tax Benefit8.6 7.7 17.2 
Production Tax Credits(53.5)(62.7)(50.7)
Regulatory Differences – Excess Deferred Tax Benefit (a)
(9.5)(9.9)(8.8)
U.S. Water Services Sale of Stock Basis Difference— — 1.7 
Non-Controlling Interest6.3 2.7 — 
Share-Based Compensation0.5 — — 
Other(2.6)(2.9)(3.6)
Total Income Tax Expense (Benefit)$(26.9)$(39.5)$(6.6)
(a)Excess deferred income taxes are being returned to customers under both the Average Rate Assumption Method and amortization periods as approved by regulators. (See Note 4. Regulatory Matters.)

The effective tax rate was a benefit of 24.3 percent for 2021 (benefit of 32.4 percent for 2020; benefit of 3.7 percent for 2019). The 2021 effective tax rate was primarily impacted by production tax credits and non-controlling interests in subsidiaries. The 2020 effective tax rate was primarily impacted by production tax credits. The 2019 effective tax rate was primarily impacted by production tax credits and the gain on sale of U.S. Water Services.

Deferred Income Tax Assets and Liabilities  
As of December 3120212020
Millions  
Deferred Income Tax Assets  
Employee Benefits and Compensation$44.5 $67.6 
Property-Related54.8 61.4 
NOL Carryforwards67.5 60.7 
Tax Credit Carryforwards509.1 455.7 
Power Sales Agreements16.5 20.1 
Regulatory Liabilities101.5 107.7 
Other— 22.4 
Gross Deferred Income Tax Assets793.9 795.6 
Deferred Income Tax Asset Valuation Allowance(69.0)(69.9)
Total Deferred Income Tax Assets$724.9 $725.7 
Deferred Income Tax Liabilities  
Property-Related$680.8 $691.5 
Regulatory Asset for Benefit Obligations54.9 71.5 
Unamortized Investment Tax Credits30.5 31.1 
Partnership Basis Differences106.3 86.7 
Regulatory Assets30.0 32.6 
Other8.1 8.0 
Total Deferred Income Tax Liabilities$910.6 $921.4 
Net Deferred Income Taxes (a)
$185.7 $195.7 
(a)Recorded as a net long-term Deferred Income Tax liability on the Consolidated Balance Sheet.
NOTE 10. INCOME TAX EXPENSE (Continued)

NOL and Tax Credit Carryforwards  
As of December 3120212020
Millions  
Federal NOL Carryforwards (a)
$177.3$197.5 
Federal Tax Credit Carryforwards$416.4$362.9
State NOL Carryforwards (a)
$506.9$270.1
State Tax Credit Carryforwards (b)
$24.2$23.4
(a)Pre-tax amounts.
(b)Net of a $68.6 million valuation allowance as of December 31, 2021 ($69.4 million as of December 31, 2020).

The federal NOL and tax credit carryforward periods expire between 2030 and 2042. We expect to fully utilize the federal NOL and federal tax credit carryforwards; therefore, no federal valuation allowance has been recognized as of December 31, 2021. The state NOL and tax credit carryforward periods expire between 2022 and 2045. We have established a valuation allowance against certain state NOL and tax credits that we do not expect to utilize before their expiration.

Gross Unrecognized Income Tax Benefits202120202019
Millions   
Balance at January 1$1.4 $1.4 $1.6 
Additions for Tax Positions Related to the Current Year— 0.1 0.1 
Additions for Tax Positions Related to Prior Years— — 0.1 
Reductions for Tax Positions Related to Prior Years(0.1)(0.1)(0.4)
Lapse of Statute— — — 
Balance as of December 31$1.3 $1.4 $1.4 

Unrecognized tax benefits are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the “more-likely-than-not” criteria. The unrecognized tax benefit balance includes permanent tax positions which, if recognized would affect the annual effective income tax rate. In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The gross unrecognized tax benefits as of December 31, 2021, included $0.6 million of net unrecognized tax benefits which, if recognized, would affect the annual effective income tax rate.

As of December 31, 2021, we had no accrued interest (none as of December 31, 2020, and 2019) related to unrecognized tax benefits included on the Consolidated Balance Sheet due to our NOL carryforwards. We classify interest related to unrecognized tax benefits as interest expense and tax-related penalties in operating expenses on the Consolidated Statement of Income. Interest expense related to unrecognized tax benefits on the Consolidated Statement of Income was immaterial in 2021, 2020 and 2019. There were no penalties recognized in 2021, 2020 or 2019. The unrecognized tax benefit amounts have been presented as reductions to the tax benefits associated with NOL and tax credit carryforwards on the Consolidated Balance Sheet.

No material changes to unrecognized tax benefits are expected during the next 12 months.

ALLETE and its subsidiaries file a consolidated federal income tax return as well as combined and separate state income tax returns in various jurisdictions. ALLETE has no open federal or state audits, and is no longer subject to federal examination for years before 2018 or state examination for years before 2017.