XML 35 R24.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Note 14 - Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 14. Income Taxes The total income tax expense differs from the amount computed by applying the federal income tax rate (21% in 2019 and 2018, and 35% in 2017) to net income before total income tax expense for the following reasons:
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Tax Computed at Federal Statutory Rate |  | $ | 21,901 |  |  | $ | 20,356 |  |  | $ | 34,893 |
Increases (Decreases) in Tax from: |  |  |  |  |  |  |  |  |  |  |  |
State Income Taxes Net of Federal Income Tax Expense |  |  | 3,561 |  |  |  | 5,210 |  |  |  | 4,368 |
Differences Reversing in Excess of Federal Rates |  |  | (3,357 | ) |  |  | (3,432 | ) |  |  | 551 |
Permanent Differences, R&D Tax Credits, Unitary Tax and Other Adjustments |  |  | (1,315 | ) |  |  | (1,864 | ) |  |  | (1,873 | )
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes |  |  | (1,033 | ) |  |  | (1,033 | ) |  |  | (850 | )
Corporate-owned Life Insurance |  |  | (749 | ) |  |  | (3 | ) |  |  | (845 | )
Excess Tax deduction – Equity Method Stock Awards |  |  | (744 | ) |  |  | (708 | ) |  |  | (751 | )
Allowance for Funds Used During Construction – Equity |  |  | (501 | ) |  |  | (431 | ) |  |  | (322 | )
Employee Stock Ownership Plan Dividend Deduction |  |  | (281 | ) |  |  | (298 | ) |  |  | (509 | )
Investment Tax Credit Amortization |  |  | (41 | ) |  |  | (98 | ) |  |  | (164 | )
Federal Production Tax Credits (PTCs) |  |  | - |  |  |  | (3,111 | ) |  |  | (7,527 | )
Section 199 Domestic Production Activities Deduction |  |  | - |  |  |  | - |  |  |  | (1,471 | )
Effect of TCJA Tax Rate Reduction on Value of Net Deferred Tax Assets |  |  | - |  |  |  | - |  |  |  | 1,756 |
Income Tax Expense |  | $ | 17,441 |  |  | $ | 14,588 |  |  | $ | 27,256 |
Overall Effective Federal and State Income Tax Rate |  |  | 16.7 | % |  |  | 15.0 | % |  |  | 27.3 | %
Income Tax Expense Includes the Following: |  |  |  |  |  |  |  |  |  |  |  |
Current Federal Income Taxes |  | $ | 5,156 |  |  | $ | 4,960 |  |  | $ | 4,434 |
Current State Income Taxes |  |  | 1,333 |  |  |  | 1,395 |  |  |  | 1,128 |
Deferred Federal Income Taxes |  |  | 8,859 |  |  |  | 8,065 |  |  |  | 25,648 |
Deferred State Income Taxes |  |  | 3,167 |  |  |  | 4,410 |  |  |  | 4,587 |
Federal PTCs |  |  | - |  |  |  | (3,111 | ) |  |  | (7,527 | )
North Dakota Wind Tax Credit Amortization – Net of Federal Taxes |  |  | (1,033 | ) |  |  | (1,033 | ) |  |  | (850 | )
Investment Tax Credit Amortization |  |  | (41 | ) |  |  | (98 | ) |  |  | (164 | )
Total |  | $ | 17,441 |  |  | $ | 14,588 |  |  | $ | 27,256 |
Total Income Before Income Taxes |  | $ | 104,288 |  |  | $ | 96,933 |  |  | $ | 99,695 |
The Company's deferred tax assets and liabilities were composed of the following on December 31:
(in thousands) |  | 2019 |  |  | 2018 |
Deferred Tax Assets |  |  |  |  |  |  |  |
Benefit Liabilities |  | $ | 36,246 |  |  | $ | 33,967 |
Retirement Benefits Liabilities |  |  | 36,206 |  |  |  | 32,664 |
Regulatory Tax Liability |  |  | 35,700 |  |  |  | 33,228 |
North Dakota Wind Tax Credits |  |  | 31,611 |  |  |  | 32,570 |
Cost of Removal |  |  | 25,604 |  |  |  | 21,787 |
Federal PTCs |  |  | 20,017 |  |  |  | 32,101 |
Differences Related to Property |  |  | 6,979 |  |  |  | 6,842 |
Lease Liability |  |  | 5,733 |  |  |  | - |
Vacation Accrual |  |  | 1,884 |  |  |  | 1,919 |
Net Operating Loss Carryforward |  |  | 1,860 |  |  |  | 2,489 |
Investment Tax Credits |  |  | 408 |  |  |  | 449 |
Other |  |  | 344 |  |  |  | 3,218 |
Valuation Allowance |  |  | (800 | ) |  |  | (600 | )
Total Deferred Tax Assets |  | $ | 201,792 |  |  | $ | 200,634 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Differences Related to Property |  | $ | (268,495 | ) |  | $ | (261,396 | )
Retirement Benefits Regulatory Asset |  |  | (36,206 | ) |  |  | (32,664 | )
Excess Tax over Book Pension |  |  | (17,556 | ) |  |  | (15,145 | )
Right of Use Asset |  |  | (5,705 | ) |  |  | - |
North Dakota Wind Tax Credits |  |  | (3,126 | ) |  |  | (4,386 | )
Impact of State Net Operating Losses on Federal Taxes |  |  | (385 | ) |  |  | (523 | )
Other |  |  | (2,260 | ) |  |  | (7,496 | )
Total Deferred Tax Liabilities |  | $ | (333,733 | ) |  | $ | (321,610 | )
Deferred Income Taxes |  | $ | (131,941 | ) |  | $ | (120,976 | )
In November of 2018, eligibility period for OTP to earn federal PTCs on its most recently purchased wind turbines ended. Prior to the lapse, OTP earned federal PTCs as wind energy was generated based on a per kwh rate prescribed in applicable federal statutes. OTP’s kwh generation from its wind turbines eligible for PTCs decreased 53.0% in 2018 compared with 2017 due to the PTC eligibility period ending for one of OTP’s wind farms in 2017 and ending for the last of its PTC-eligible wind farms in 2018. North Dakota wind energy credits are based on dollars invested in qualifying facilities and are being recognized on a straight-line basis over 25 years. Schedule of expiration of tax credits and tax net operating losses available as of December 31, 2019:
(in thousands) |  | Amount |  |  | 2022-2032 |  |  | 2033-2038 |  |  | 2039-2043 |
United States |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal Tax Credits |  | $ | 23,002 |  |  | $ | - |  |  | $ | 22,220 |  |  | $ | 782 |
State Net Operating Losses |  |  | 1,860 |  |  |  | 1,833 |  |  |  | 27 |  |  |  | - |
State Tax Credits |  |  | 32,177 |  |  |  | - |  |  |  | 2,643 |  |  |  | 29,534 |
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Balance on January 1 |  | $ | 1,282 |  |  | $ | 684 |  |  | $ | 891 |
Increases Related to Tax Positions for Prior Years |  |  | 37 |  |  |  | 6 |  |  |  | 28 |
Decreases Related to Tax Positions for Prior Years |  |  | - |  |  |  | - |  |  |  | (172 | )
Increases Related to Tax Positions for Current Year |  |  | 339 |  |  |  | 778 |  |  |  | 143 |
Uncertain Positions Resolved During Year |  |  | (170 | ) |  |  | (186 | ) |  |  | (206 | )
Balance on December 31 |  | $ | 1,488 |  |  | $ | 1,282 |  |  | $ | 684 |
The balance of unrecognized tax benefits as of December 31, 2019 would reduce the Company’s effective tax rate if recognized. The total amount of unrecognized tax benefits as of December 31, 2019 is not expected to change significantly within the next 12 months. The Company classifies interest and penalties on tax uncertainties as components of the provision for income taxes in the Company’s consolidated statement of income. There was no amount accrued for interest on tax uncertainties as of December 31, 2019. The Company and its subsidiaries file a consolidated U.S. federal income tax return and various state income tax returns. As of December 31, 2019, with limited exceptions, the Company is no longer subject to examinations by taxing authorities for tax years prior to 2016 for federal and North Dakota income taxes and prior to 2015 for Minnesota state income taxes. TCJA In December 2017 the TCJA was enacted. The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the federal corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21% in 2017. On a consolidated financial statement basis, the revaluation resulted in a one-time, non-cash, income tax expense of approximately $1.8 million in 2017. The Company recognized the income tax effects of the TCJA in its 2017 consolidated financial statements in accordance with Staff Accounting Bulletin No. 118, which provided SEC staff guidance for the application of ASC Topic 740, Income Taxes, and allowed up to one year to complete the required analyses and accounting for the TCJA. At December 31, 2017 the Company was able to make reasonable estimates of the impact of the TCJA for the reduction in the federal corporate tax rate, changes to bonus depreciation and consequences on the Company’s regulatory liabilities. The accounting for the income tax effects of the enactment of the TCJA was complete as of September 30, 2018. The Company did not make any material adjustments in 2018 to the amounts recorded at December 31, 2017.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration