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Income Tax Expense | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Tax Expense | INCOME TAX EXPENSE
Income Tax Expense |  |  |
Year Ended December 31 | 2023 | 2022 | 2021
Millions |  |  |
Current Income Tax Expense (a) |  |  |
Federal | $9.4 |  | $1.2 |  | — |
State | 0.9 |  | 6.1 |  | — |
Total Current Income Tax Expense | $10.3 |  | $7.3 |  | — |
Deferred Income Tax Expense (Benefit) |  |  |
Federal (b) | $(6.0) | $(32.8) | $(37.2)
State (c) | 24.0 | (5.2) | 10.8
Investment Tax Credit Amortization | (0.4) | (0.5) | (0.5)
Total Deferred Income Tax Expense (Benefit) | $17.6 |  | $(38.5) | $(26.9)
Total Income Tax Expense (Benefit) | $27.9 |  | $(31.2) | $(26.9)
(a)For the years ended December 31, 2023 and 2022, the federal current tax expense was partially offset by production tax credits and NOLs. For the year ended December 31, 2021, the federal and state current tax expense was minimal due to NOLs. (b)For the year ended December 31, 2023, the federal deferred income tax benefit was due to tax credits, partially offset by deferred partnership income. For the years ended December 31, 2022 and 2021, the federal deferred income tax benefit is primarily due to production tax credits. (c)For the year ended December 31, 2022, the state impact includes the benefit of deferred repricing as a result of the New Energy acquisition.
Reconciliation of Taxes from Federal Statutory |  |  |  |
Rate to Total Income Tax Expense |  |  |  |
Year Ended December 31 | 2023 | 2022 | 2021 |
Millions |  |  |  |
Income Before Non-Controlling Interest and Income Taxes | $206.8 |  | $100.1 |  | $110.9 |  |
Statutory Federal Income Tax Rate | 21 | % | 21 | % | 21 | % |
Income Taxes Computed at Statutory Federal Rate | $43.4 |  | $21.0 |  | $23.3 |  |
Increase (Decrease) in Tax Due to: |  |  |  |
State Income Taxes – Net of Federal Income Tax Benefit | 19.7 |  | 8.6 |  | 8.6 |  |
Deferred Revaluation – Net of Federal Income Tax Benefit | — |  | (7.9) |  | — |  |
Production Tax Credits (a) | (31.6) |  | (50.7) |  | (53.5) |  |
Investment Tax Credits (a) | (5.8) |  | (4.1) |  | — |  |
Regulatory Differences – Excess Deferred Tax Benefit | (9.9) |  | (9.1) |  | (9.5) |  |
Non-Controlling Interest | 13.3 |  | 11.2 |  | 6.3 |  |
AFUDC - Equity | (1.3) |  | (1.1) |  | (1.0) |  |
Other | 0.1 |  | 0.9 |  | (1.1) |  |
Total Income Tax Expense (Benefit) | $27.9 | $(31.2) | $(26.9) |
(a)For the year ended December 31, 2023, the credits are presented net of any estimated discount on the sale of certain credits. The effective tax rate was an expense of 13.5 percent for 2023 (benefit of 31.2 percent for 2022; benefit of 24.3 percent for 2021). The 2023, 2022 and 2021 effective tax rates were primarily impacted by production tax credits and non-controlling interests in subsidiaries. NOTE 11. INCOME TAX EXPENSE (Continued)
Deferred Income Tax Assets and Liabilities |  |
As of December 31 | 2023 | 2022
Millions |  |
Deferred Income Tax Assets |  |
Employee Benefits and Compensation | $29.3 |  | $46.4 |
Property-Related | 58.1 |  | 61.9 |
NOL Carryforwards | 13.0 |  | 16.7 |
Capital Loss Carryforwards | 2.1 |  | 13.1 |
Tax Credit Carryforwards | 557.4 |  | 548.7 |
Power Sales Agreements | 9.0 |  | 13.7 |
Regulatory Liabilities | 89.0 |  | 95.5 |
Other | 8.7 |  | 28.1 |
Gross Deferred Income Tax Assets | 766.6 |  | 824.1 |
Deferred Income Tax Asset Valuation Allowance | (58.0) |  | (60.2) |
Total Deferred Income Tax Assets | $708.6 |  | $763.9 |
Deferred Income Tax Liabilities |  |
Deferred Gain | $7.9 |  | $7.9 |
Property-Related | 632.0 |  | 661.7 |
Regulatory Asset for Benefit Obligations | 48.1 |  | 57.7 |
Unamortized Investment Tax Credits | 29.6 |  | 30.0 |
Partnership Basis Differences | 156.5 |  | 126.0 |
Fuel Adjustment Clause | 1.9 |  | 10.7 |
Regulatory Assets | 25.3 |  | 28.0 |
Total Deferred Income Tax Liabilities | $901.3 |  | $922.0 |
Net Deferred Income Taxes (a) | $192.7 |  | $158.1 |
(a)Recorded as a net Deferred Income Tax liability on the Consolidated Balance Sheet.
NOL and Tax Credit Carryforwards |  |
As of December 31 | 2023 | 2022
Millions |  |
Federal Tax Credit Carryforwards | $480.4 | $464.5
Federal Capital Loss Carryforwards (a) | — |  | $35.1
State NOL Carryforwards (a) | $280.9 | $323.0
State Tax Credit Carryforwards (b) | $21.5 | $24.5
State Capital Loss Carryforwards (a) | — |  | $83.2
(a)Pre-tax amounts; state NOL carryforwards net of a $10.5 million valuation allowance and state capital loss carryforwards net of a $58.7 million valuation allowance. (b)Net of a $55.4 million valuation allowance as of December 31, 2023 ($59.6 million as of December 31, 2022). The federal tax credit carryforward periods expire between 2034 and 2043. We expect to fully utilize the tax credit carryforwards; therefore, no federal valuation allowance has been recognized as of December 31, 2023. The apportioned state NOL, capital loss and tax credit carryforward periods expire between 2024 and 2045. We have established a valuation allowance against certain state NOL, capital loss and tax credits that we do not expect to utilize before their expiration. NOTE 11. INCOME TAX EXPENSE (Continued)
Gross Unrecognized Income Tax Benefits | 2023 | 2022 | 2021
Millions |  |  |
Balance at January 1 | $1.3 |  | $1.3 |  | $1.4 |
Reductions for Tax Positions Related to Prior Years | (0.2) |  | — |  | (0.1) |
Balance as of December 31 | $1.1 |  | $1.3 |  | $1.3 |
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, 2023, included $0.6 million of net unrecognized tax benefits which, if recognized, would affect the annual effective income tax rate. As of December 31, 2023, we had accrued interest of $0.1 million (none as of December 31, 2022, and 2021) 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 2023, 2022 and 2021. There were no penalties recognized in 2023, 2022 or 2021. The unrecognized tax benefit amounts have been presented as an increase to the net deferred tax liability 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 is currently under examination by the state of Minnesota for the tax years 2020 through 2022. ALLETE has no open federal audits, and is no longer subject to federal examination for years before 2020 or state examination for years before 2019. Additionally, the statute of limitations related to the federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
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