XML 44 R22.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
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)202120202019
Current
Federal Income Taxes$6,806 $3,631 $5,156 
State Income Taxes939 2,415 1,333 
Deferred
Federal Income Taxes18,180 11,450 8,859 
State Income Taxes10,716 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:
202120202019
Federal Statutory Rate21.0 %21.0 %21.0 %
Increases (Decreases) in Tax from:
State Taxes on Income, Net of Federal Tax4.7 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 Rate16.9 %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)20212020
Deferred Tax Assets  
Benefit Liabilities$41,724 $41,292 
Retirement Benefits Liabilities40,766 40,650 
Tax Credit Carryforward32,420 35,132 
Regulatory Tax Liability34,527 33,124 
Cost of Removal26,512 25,920 
Differences Related to Property10,251 7,486 
Net Operating Loss Carryforward1,323 1,379 
Other6,999 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)Amount2022-20322033-20382039-2043
Federal Tax Credits$9,136 $— $— $9,136 
State Net Operating Losses1,675 1,675 — — 
State Tax Credits29,318 — 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)202120202019
Balance on January 1$771 $1,488 $1,282 
Increases (decreases) for tax positions taken during a prior period11 (178)37 
Increases for tax positions taken during the current period189 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.