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Note 14 - Income Tax Expense
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

14. Income Tax Expense

 

The following table provides a reconciliation of income tax expense calculated at the net composite federal and state statutory rate on income before income taxes and income tax expense reported on the Company’s consolidated statements of income for the three- and nine-month periods ended September 30, 2020 and 2019:

 

  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 

(in thousands)

 

2020

  

2019

  

2020

  

2019

 

Income Before Income Taxes

 $45,031  $29,681  $95,726  $80,402 

Tax Computed at Company’s Net Composite Federal and State Statutory Rate (26%)

 $11,708  $7,717  $24,889  $20,905 

(Decreases) Increases in Tax from:

                

Differences Reversing in Excess of Federal Rates

  (1,678)  (933)  (3,450)  (2,690)

Allowance for Funds Used During Construction – Equity

  (388)  (239)  (948)  (419)

North Dakota Wind Tax Credit Amortization – Net of Federal Taxes

  (259)  (258)  (775)  (774)

Research and Development and Other Tax Credits

  (263)  (612)  (649)  (987)

Excess Tax Deduction – Equity Method Stock Awards

  -   -   (535)  (827)

Corporate Owned Life Insurance

  (155)  (50)  (141)  (609)

Reconciliation and Prior Period Adjustments

  172   (688)  172   (722)

Other Items – Net

  (40)  (1)  (20)  30 

Income Tax Expense

 $9,097  $4,936  $18,543  $13,907 

Effective Income Tax Rate

  20.2%  16.6%  19.4%  17.3%

 

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

 

(in thousands)

 

2020

  

2019

 

Balance on January 1

 $1,488  $1,282 

(Decreases) Increases Related to Tax Positions for Prior Years

  (27)  37 

Increases Related to Tax Positions for Current Year

  123   153 

Uncertain Positions Resolved During Year

  (586)  - 

Decrease from the Expiration of Statute of Limitations

  (139)  (170)

Balance on September 30

 $859  $1,302 

 

The balance of unrecognized tax benefits as of September 30, 2020 would reduce the Company’s effective tax rate if recognized. The total amount of unrecognized tax benefits as of September 30, 2020 could be reduced by as much as $139,000 within the next 12 months due to expected settlement. The Company classifies interest and penalties on tax uncertainties as components of the provision for income taxes in its consolidated statement of income.

 

The Company and its subsidiaries file a consolidated U.S. federal income tax return and various state income tax returns. As of November 1, 2020, with limited exceptions, the Company is no longer subject to examinations by taxing authorities for tax years prior to 2017 for federal and North Dakota income taxes and prior to 2016 for Minnesota income taxes.