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INCOME TAX EXPENSE | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
INCOME TAX EXPENSE | INCOME TAX EXPENSE
|  | Quarter Ended |  | Nine Months Ended
|  | September 30, |  | September 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
Millions |  |  |  |  |  |  |  |
Current Income Tax Expense |  |  |  |  |  |  |  |
Federal (a) |  | $1.5 |  | $4.0 |  | $8.3 |  | $12.6
State |  | 0.6 |  | 1.1 |  | 7.2 |  | 6.5
Total Current Income Tax Expense |  | $2.1 |  | $5.1 |  | $15.5 |  | $19.1
Deferred Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Federal (b) |  | $(2.7) |  | $5.2 |  | $(12.7) |  | $(10.9)
State |  | 3.6 |  |  | 9.1 |  |  | 6.1 |  |  | 12.5 |
Investment Tax Credit Amortization |  | (0.1) |  |  | (0.1) |  |  | (0.6) |  |  | (0.3) |
Total Deferred Income Tax Expense (Benefit) |  | $0.8 |  | $14.2 |  | $(7.2) |  | $1.3
Total Income Tax Expense |  | $2.9 |  | $19.3 |  | $8.3 |  | $20.4
(a)For the quarter and nine months ended September 30, 2024 and 2023, the federal current tax expense is partially offset by tax credits. (b)For the quarter and nine months ended September 30, 2024, the federal deferred income tax benefit is primarily due to tax credits. For the nine months ended September 30, 2023, the federal deferred income tax benefit is primarily due to tax credits, partially offset by deferred partnership income. For quarter ended September 30, 2023, the federal deferred tax expense was due to deferred partnership income, partially offset by tax credits. NOTE 8. INCOME TAX EXPENSE (Continued) The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate and if the estimated annual effective tax rate changes, the Company would make a cumulative adjustment in that quarter.
| Quarter Ended | Nine Months Ended
Reconciliation of Taxes from Federal Statutory | September 30, | September 30,
Rate to Total Income Tax Expense | 2024 |  | 2023 | 2024 |  | 2023
Millions |  |  |  |  |  |
Income Before Income Taxes | $35.6 |  |  | $88.9 |  | $97.7 |  |  | $168.3 |
Statutory Federal Income Tax Rate | 21 | % |  | 21 | % | 21 | % |  | 21 | %
Income Taxes Computed at Statutory Federal Rate | $7.5 |  |  | $18.7 |  | $20.5 |  |  | $35.3 |
Increase (Decrease) in Income Tax Due to: |  |  |  |  |  |
State Income Taxes – Net of Federal Income Tax Benefit | 3.4 |  |  | 8.0 |  | 10.5 |  |  | 15.0 |
Production Tax Credits (a) | (8.3) |  |  | (7.7) |  | (25.0) |  |  | (28.3) |
Investment Tax Credits (a) | (0.4) |  |  | (1.6) |  | (1.6) |  |  | (5.2) |
Regulatory Differences – Excess Deferred Tax | (2.0) |  |  | (2.3) |  | (7.7) |  |  | (7.5) |
Non-Controlling Interest in Subsidiaries | 2.4 |  |  | 3.0 |  | 7.6 |  |  | 8.9 |
AFUDC – Equity | (0.4) |  |  | — |  | (1.3) |  |  | — |
Nondeductible Portion of Transaction Costs | 0.7 |  |  | — |  | 4.0 |  |  | — |
Other | — |  |  | 1.2 |  | 1.3 |  |  | 2.2 |
Total Income Tax Expense | $2.9 |  |  | $19.3 | $8.3 |  |  | $20.4 |
(a)For the quarter and nine months ended September 30, 2024 and 2023, the credits are presented net of any estimated discount on the sale of certain credits. For the nine months ended September 30, 2024, the effective tax rate was 8.5 percent (12.1 percent for the nine months ended September 30, 2023). The effective tax rates for 2024 and 2023 were primarily impacted by production tax credits. Uncertain Tax Positions. As of September 30, 2024, we had gross unrecognized tax benefits of $1.1 million ($1.1 million as of December 31, 2023). Of the total gross unrecognized tax benefits, $0.6 million represents the amount of unrecognized tax benefits included on the Consolidated Balance Sheet that, if recognized, would favorably impact the effective income tax rate. The unrecognized tax benefit amounts have been presented as an increase to the net deferred tax liability on the Consolidated Balance Sheet. 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 2021 or state examination for years before 2020. 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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