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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income TaxesIncome before income taxes for the years ended December 31, 2021, 2020 and 2019 consists entirely of domestic earnings. The provision for income taxes charged to income for the years ended December 31, 2021, 2020 and 2019 consisted of the following:
(in thousands) | 2021 |  | 2020 |  | 2019
Current |  |  |  |  |
Federal Income Taxes | $ | 6,806 |  |  | $ | 3,631 |  |  | $ | 5,156 |
State Income Taxes | 939 |  |  | 2,415 |  |  | 1,333 |
Deferred |  |  |  |  |
Federal Income Taxes | 18,180 |  |  | 11,450 |  |  | 8,859 |
State Income Taxes | 10,716 |  |  | 3,751 |  |  | 3,167 |
Tax Credits |  |  |  |  |
North Dakota Wind Tax Credit Amortization, Net of Federal Tax | (586) |  |  | (1,033) |  |  | (1,033) |
Investment Tax Credit Amortization | (3) |  |  | (8) |  |  | (41) |
Total | $ | 36,052 |  |  | $ | 20,206 |  |  | $ | 17,441 |
The reconciliation of the statutory federal income tax rate to our effective tax rate for each of the years ended December 31, 2021, 2020 and 2019 is as follows:
| 2021 |  | 2020 |  | 2019
Federal Statutory Rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increases (Decreases) in Tax from: |  |  |  |  |
State Taxes on Income, Net of Federal Tax | 4.7 |  |  | 4.0 |  |  | 3.4 |
Production Tax Credits (PTCs) | (5.9) |  |  | (1.1) |  |  | — |
Amortization of Excess Deferred Income Taxes | (2.0) |  |  | (3.6) |  |  | (3.2) |
North Dakota Wind Tax Credit Amortization, Net of Federal Tax | (0.3) |  |  | (0.9) |  |  | (1.0) |
Allowance for Equity Funds Used During Construction | (0.1) |  |  | (0.7) |  |  | (0.5) |
Other, Net | (0.5) |  |  | (1.3) |  |  | (3.0) |
Effective Tax Rate | 16.9 | % |  | 17.4 | % |  | 16.7 | %
We began to generate PTCs from our Merricourt wind farm in the fourth quarter of 2020, once the asset was placed in service and commenced operations. Deferred tax assets and liabilities were composed of the following on December 31, 2021 and 2020:
(in thousands) | 2021 |  | 2020
Deferred Tax Assets |  |  |
Benefit Liabilities | $ | 41,724 |  |  | $ | 41,292 |
Retirement Benefits Liabilities | 40,766 |  |  | 40,650 |
Tax Credit Carryforward | 32,420 |  |  | 35,132 |
Regulatory Tax Liability | 34,527 |  |  | 33,124 |
Cost of Removal | 26,512 |  |  | 25,920 |
Differences Related to Property | 10,251 |  |  | 7,486 |
Net Operating Loss Carryforward | 1,323 |  |  | 1,379 |
Other | 6,999 |  |  | 3,423 |
Valuation Allowance | — |  |  | (800) |
Total Deferred Tax Assets | $ | 194,522 |  |  | $ | 187,606 |
Deferred Tax Liabilities |  |  |
Differences Related to Property | $ | (307,542) |  |  | $ | (271,064) |
Retirement Benefits Regulatory Asset | (40,766) |  |  | (40,650) |
Excess Tax Over Book Pension | (24,578) |  |  | (18,696) |
Other | (9,904) |  |  | (10,572) |
Total Deferred Tax Liabilities | $ | (382,790) |  |  | $ | (340,982) |
Deferred Income Taxes | $ | (188,268) |  |  | $ | (153,376) |
At December 31, 2021, we concluded, based upon all available evidence, it was more likely than not that we will generate sufficient future taxable income to realize certain of our state deferred tax assets. As a result, we released the $0.8 million valuation allowance associated with these deferred tax assets and recognized a corresponding benefit from income taxes in the consolidated statements of income for the year ended December 31, 2021. Our conclusions regarding the realizability of such deferred tax assets was based on anticipated future taxable income within the respective state jurisdiction and the recent extension of the net operating loss carryforward period in this state. The following is a schedule of tax credits and tax net operating losses available as of December 31, 2021 and the respective periods of expiration:
(in thousands) | Amount |  | 2022-2032 |  | 2033-2038 |  | 2039-2043
Federal Tax Credits | $ | 9,136 |  |  | $ | — |  |  | $ | — |  |  | $ | 9,136 |
State Net Operating Losses | 1,675 |  |  | 1,675 |  |  | — |  |  | — |
State Tax Credits | 29,318 |  |  | — |  |  | 39 |  |  | 29,279 |
The following table summarizes the activity for unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019:
(in thousands) | 2021 |  | 2020 |  | 2019
Balance on January 1 | $ | 771 |  |  | $ | 1,488 |  |  | $ | 1,282 |
Increases (decreases) for tax positions taken during a prior period | 11 |  |  | (178) |  |  | 37 |
Increases for tax positions taken during the current period | 189 |  |  | 175 |  |  | 339 |
Decreases due to settlements with taxing authorities | — |  |  | (575) |  |  | — |
Decreases as a result of a lapse of applicable statutes of limitations | (144) |  |  | (139) |  |  | (170) |
Balance on December 31 | $ | 827 |  |  | $ | 771 |  |  | $ | 1,488 |
The balance of unrecognized tax benefits as of December 31, 2021 would reduce our effective tax rate if recognized. The total amount of unrecognized tax benefits as of December 31, 2021 is not expected to change significantly within the next 12 months. We classify interest and penalties on tax uncertainties as components of the provision for income taxes in the consolidated statements of income. The Company and its subsidiaries file a consolidated U.S. federal income tax return and various state income tax returns. As of December 31, 2021, with limited exceptions, we are no longer subject to examinations by taxing authorities for tax years prior to 2018 for federal and North Dakota income taxes and prior to 2017 for Minnesota state income taxes.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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