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Accounting For Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Accounting for Income Taxes | ACCOUNTING FOR INCOME TAXES Federal Income Tax Law Changes On December 22, 2017, the TCJA was signed into law. The legislation included substantial changes to the taxation of individuals as well as U.S. businesses, multi-national enterprises, and other types of taxpayers. Highlights of provisions most relevant to Avista Corp. included:
• | A permanent reduction in the statutory corporate tax rate from 35 percent to 21 percent, beginning with tax years after 2017;
• | Statutory provisions requiring that excess deferred taxes associated with public utility property be normalized using the ARAM or the Reverse South Georgia Method for determining the timing of the return of excess deferred taxes to customers. Excess deferred taxes result from revaluing deferred tax assets and liabilities based on the newly enacted tax rate instead of the previous tax rate, which, for most rate-regulated utilities like Avista Utilities and AEL&P, results in a net benefit to customers that will be deferred as a regulatory liability and passed through to customers over future periods;
• | Repeal of the corporate AMT;
• | Bonus depreciation (expensing of capital investment on an accelerated basis) was removed as a deduction for property predominantly used in certain rate-regulated businesses (like Avista Utilities and AEL&P), but is still allowed for the Company's non-regulated businesses; and
• | NOL carryback deductions were eliminated, but carryforward deductions are allowed indefinitely with some annual limitations versus the previous 20-year limitation.
As a result of the TCJA and its reduction of the corporate income tax rate from 35 percent to 21 percent (among many other changes in the law), the Company recorded a regulatory liability associated with the revaluing of its deferred income tax assets and liabilities to the new corporate tax rate. The total net amount of the regulatory liability for excess deferred income taxes associated with the TCJA is $416.7 million as of December 31, 2019, compared to $436.7 million as of December 31, 2018, which reflects the amounts to be refunded to customers through the regulatory process. The Avista Utilities amounts related to utility plant commenced being returned to customers in 2018 and the Company expects they will be returned to customers over a period of approximately 36 years using the ARAM. The AEL&P amounts related to utility plant commenced being returned to customers in 2018 and the Company expects they will be returned to customers over a period of approximately 40 years using the Reverse South Georgia Method. The return of the regulatory liability attributable to non-plant excess deferred taxes has begun through tariffs or other regulatory mechanisms or proceedings. Because most of the provisions of the TCJA were effective as of January 1, 2018 but customers' rates included a 35 percent corporate tax rate built in from prior general rate cases, the Company began accruing for a refund to customers for the change in federal income tax expense beginning January 1, 2018 forward. For Washington and Idaho, this accrual was recorded until all benefits prior to a permanent rate change were properly captured through the deferral process. For Oregon, this accrual was recorded through 2019 with new customer rates effective January 15, 2020. Refunds have begun to Washington, Idaho, and Oregon customers through tariffs or other regulatory mechanisms or proceedings. Income Tax Expense Income tax expense consisted of the following for the years ended December 31 (dollars in thousands):
| 2019 |  | 2018 |  | 2017
Current income tax expense | $ | 16,276 |  |  | $ | 17,490 |  |  | $ | 13,101 |
Deferred income tax expense | 15,098 |  |  | 8,570 |  |  | 69,657 |
Total income tax expense | $ | 31,374 |  |  | $ | 26,060 |  |  | $ | 82,758 |
State income taxes do not represent a significant portion of total income tax expense on the Consolidated Statements of Income for any periods presented. A reconciliation of federal income taxes derived from statutory federal tax rates (21 percent in 2019 and 2018 and 35 percent in 2017) applied to income before income taxes as set forth in the accompanying Consolidated Statements of Income is as follows for the years ended December 31 (dollars in thousands):
| 2019 |  | 2018 |  | 2017
Federal income taxes at statutory rates | $ | 47,909 |  | 21.0 | % |  | $ | 34,158 |  | 21.0 | % |  | $ | 69,542 |  | 35.0 | %
Increase (decrease) in tax resulting from: |  |  |  |  |  |  |  |
Tax effect of regulatory treatment of utility plant differences | (9,967 | ) | (4.3 | ) |  | (8,153 | ) | (5.0 | ) |  | 3,482 |  | 1.7 |
State income tax expense | 1,465 |  | 0.6 |  |  | 1,191 |  | 0.7 |  |  | 1,110 |  | 0.6 |
Settlement of prior year tax returns and adjustment of tax reserves | 643 |  | 0.3 |  |  | (140 | ) | (0.1 | ) |  | (384 | ) | (0.2 | )
Manufacturing deduction | — |  | — |  |  | — |  | — |  |  | (1,119 | ) | (0.6 | )
Settlement of equity awards | 612 |  | 0.3 |  |  | (990 | ) | (0.6 | ) |  | (1,439 | ) | (0.7 | )
Acquisition costs | (1,712 | ) | (0.7 | ) |  | 329 |  | 0.2 |  |  | 2,491 |  | 1.3 |
Federal income tax rate change | — |  | — |  |  | — |  | — |  |  | 10,169 |  | 5.1 |
Non-plant excess deferred turnaround | (5,690 | ) | (2.5 | ) |  | — |  | — |  |  | — |  | — |
Tax loss on sale of METALfx | (1,272 | ) | (0.6 | ) |  | — |  | — |  |  | — |  | — |
Valuation allowance | 267 |  | 0.1 |  |  | — |  | — |  |  | — |  | — |
Other | (881 | ) | (0.4 | ) |  | (335 | ) | (0.2 | ) |  | (1,094 | ) | (0.5 | )
Total income tax expense | $ | 31,374 |  | 13.8 | % |  | $ | 26,060 |  | 16.0 | % |  | $ | 82,758 |  | 41.7 | %
Deferred Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carryforwards. The total net deferred income tax liability consisted of the following as of December 31 (dollars in thousands):
| 2019 |  | 2018
Deferred income tax assets: |  |  |
Unfunded benefit obligation | $ | 43,224 |  |  | $ | 45,842 |
Utility energy commodity and interest rate swap derivatives | 8,436 |  |  | 11,724 |
Regulatory deferred tax credits | 6,394 |  |  | 6,244 |
Tax credits | 21,696 |  |  | 21,008 |
Power and natural gas deferrals | 8,624 |  |  | 17,618 |
Deferred compensation | 7,171 |  |  | 5,536 |
Deferred taxes on regulatory liabilities | 101,648 |  |  | 106,909 |
Other | 17,423 |  |  | 16,793 |
Total gross deferred income tax assets | 214,616 |  |  | 231,674 |
Valuation allowances for deferred tax assets | (16,550 | ) |  | (13,651 | )
Total deferred income tax assets after valuation allowances | 198,066 |  |  | 218,023 |
Deferred income tax liabilities: |  |  |
Differences between book and tax basis of utility plant | 525,931 |  |  | 509,789 |
Regulatory asset on utility, property plant and equipment | 86,701 |  |  | 83,141 |
Regulatory asset for pensions and other postretirement benefits | 43,838 |  |  | 47,893 |
Utility energy commodity and interest rate swap derivatives | 8,436 |  |  | 11,724 |
Long-term debt and borrowing costs | 26,552 |  |  | 24,609 |
Settlement with Coeur d’Alene Tribe | 6,250 |  |  | 6,400 |
Other regulatory assets | 20,137 |  |  | 15,318 |
Other | 8,734 |  |  | 6,751 |
Total deferred income tax liabilities | 726,579 |  |  | 705,625 |
Net long-term deferred income tax liability | $ | 528,513 |  |  | $ | 487,602 |
The realization of deferred income tax assets is dependent upon the ability to generate taxable income in future periods. The Company evaluated available evidence supporting the realization of its deferred income tax assets and determined it is more likely than not that deferred income tax assets will be realized. As of December 31, 2019, the Company had $22.3 million of state tax credit carryforwards. Of the total amount, the Company believes that it is more likely than not that it will only be able to utilize $6.0 million of the state tax credits. As such, the Company has recorded a valuation allowance of $16.3 million against the state tax credit carryforwards and reflected the net amount of $6.0 million as an asset as of December 31, 2019. State tax credits expire from 2020 to 2033. Status of Internal Revenue Service (IRS) and State Examinations The Company and its eligible subsidiaries file consolidated federal income tax returns. The Company also files state income tax returns in certain jurisdictions, including Idaho, Oregon, Montana and Alaska. Subsidiaries are charged or credited with the tax effects of their operations on a stand-alone basis. All tax years after 2016 are open for an IRS tax examination. The Idaho State Tax Commission is currently reviewing tax years 2014 through 2017. The statute of limitations for Montana and Oregon to review 2015 and earlier tax years has expired. The Company believes that any open tax years for federal or state income taxes will not result in adjustments that would be significant to the consolidated financial statements.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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