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Income Taxes | 9 Months Ended
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Sep. 30, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 7. INCOME TAXES In accordance with interim reporting requirements, the Company uses an estimated annual effective tax rate for computing its provisions for income taxes. An estimate of annual income tax expense (or benefit) is made each interim period using estimates for annual pre-tax income, income tax adjustments, and tax credits. The estimated annual effective tax rates do not include discrete events such as tax law changes, examination settlements, accounting method changes, or adjustments to tax expense or benefits attributable to prior years. Discrete events are recorded in the interim period in which they occur or become known. The estimated annual tax rate is applied to year-to-date pre-tax income to determine income tax expense (or benefit) for the interim period consistent with the annual estimate. In subsequent interim periods, income tax expense (or benefit) for the period is computed as the difference between the year-to-date amount reported for the previous interim period and the current period’s year-to-date amount. The following table summarizes the significant factors impacting the difference between our effective tax rate and the federal statutory rate for the three and nine months ended September 30 (dollars in thousands):
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Federal income taxes at statutory rates |  | $ | 1,204 |  |  |  | 21.0 | % |  | $ | 1,041 |  |  |  | 21.0 | % |  | $ | 15,167 |  |  |  | 21.0 | % |  | $ | 36,554 |  |  |  | 21.0 | %
Increase (decrease) in tax resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tax effect of regulatory treatment of utility plant differences |  |  | (2,427 | ) |  |  | (42.3 | ) |  |  | (2,139 | ) |  |  | (43.1 | ) |  |  | (7,244 | ) |  |  | (10.0 | ) |  |  | (6,358 | ) |  |  | (3.7 | )
State income tax expense |  |  | (363 | ) |  |  | (6.3 | ) |  |  | (800 | ) |  |  | (16.1 | ) |  |  | 539 |  |  |  | 0.7 |  |  |  | 851 |  |  |  | 0.5 |
Settlement of prior year tax returns |  |  | 524 |  |  |  | 9.1 |  |  |  | (604 | ) |  |  | (12.2 | ) |  |  | 1,565 |  |  |  | 2.2 |  |  |  | 1,995 |  |  |  | 1.1 |
Acquisition costs |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,712 | ) |  |  | (1.0 | )
Non-plant excess deferred turnaround (1) |  |  | — |  |  |  | — |  |  |  | (20 | ) |  |  | (0.4 | ) |  |  | (8,476 | ) |  |  | (11.8 | ) |  |  | (5,621 | ) |  |  | (3.2 | )
Tax loss on sale of METALfx |  |  | — |  |  |  | — |  |  |  | (13 | ) |  |  | (0.2 | ) |  |  | — |  |  |  | — |  |  |  | (1,272 | ) |  |  | (0.7 | )
Valuation allowance |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,245 |  |  |  | 0.7 |
Settlement of equity awards |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 165 |  |  |  | 0.2 |  |  |  | 612 |  |  |  | 0.4 |
Other |  |  | 1,921 |  |  |  | 33.5 |  |  |  | 2,404 |  |  |  | 48.4 |  |  |  | (244 | ) |  |  | (0.3 | ) |  |  | 1,851 |  |  |  | 1.1 |
Total income tax expense |  | $ | 859 |  |  |  | 15.0 | % |  | $ | (131 | ) |  |  | (2.6 | )% |  | $ | 1,472 |  |  |  | 2.0 | % |  | $ | 28,145 |  |  |  | 16.2 | %
(1) | In March 2020, the WUTC approved an all-party settlement agreement related to electric tax benefits that were set aside for Colstrip in the 2020 general rate case order. In the approved settlement agreement, the parties agreed to utilize approximately $10.9 million ($8.4 million when tax-effected) of the electric tax benefits to offset costs associated with accelerating the depreciation of Colstrip Units 3 & 4, to reflect a remaining useful life of those units through December 31, 2025. In the second quarter 2020, the Company recorded a one-time increase to depreciation expense with an offsetting decrease to income tax expense.
In March 2019, the IPUC approved an all-party settlement agreement related to electric tax benefits that were set aside for Colstrip in the 2020 general rate case order. In the approved settlement agreement, the parties agreed to utilize approximately $6.4 million ($5.1 million when tax-effected) of the electric tax benefits to offset costs associated with accelerating the depreciation of Colstrip Units 3 & 4, to reflect a remaining useful life of those units through December 31, 2027. In the second quarter 2019, the Company recorded a one-time increase to depreciation expense with an offsetting decrease to income tax expense. 2019 Tax Return In October 2020, the Company filed its 2019 tax return including multiple change in accounting methods for tax. These changes will be re-characterizing certain previous capital expenditures to expense for tax purposes. The resulting effect will increase deferred taxes by approximately $62 million. The Company intends to use the increase in deferred taxes as a tax credit to customers in order to offset potential base rate increases associated with general rate case filings.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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