XML 33 R17.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Taxes on Income | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Taxes on Income | Taxes on Income Registrant records deferred income taxes for temporary differences pursuant to the accounting guidance that addresses items recognized for income tax purposes in a different period from when these items are reported in the financial statements. These items include differences in net asset basis (primarily related to differences in depreciation lives and methods, and differences in capitalization methods) and the treatment of certain regulatory balancing accounts and construction contributions and advances. The accounting guidance for income taxes requires that rate-regulated enterprises record deferred income taxes and offsetting regulatory liabilities and assets for temporary differences where the rate regulator has prescribed flow-through treatment for ratemaking purposes (Note 2). Deferred investment tax credits (“ITC”) are amortized ratably to deferred tax expense over the remaining lives of the property that gave rise to these credits. GSWC is included in both AWR’s consolidated federal income tax and its combined California state franchise tax returns. The impact of California’s unitary apportionment on the amount of AWR’s California income tax liability is a function of both the profitability of AWR’s non-California activities and the proportion of AWR’s California sales to its total sales. GSWC’s income tax expense is computed as if GSWC were autonomous and separately files its income tax returns, which is consistent with the method adopted by the CPUC in setting GSWC’s customer rates. The AWR and GSWC effective tax rates (“ETRs”) differ from the federal statutory tax rate primarily due to state taxes, flow-through items, and permanent differences. As a regulated utility, GSWC treats certain temporary differences as flow-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ratemaking. Flow-through items either increase or decrease tax expense and thus impact the ETR. On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into federal law. The provisions of this major tax reform are generally effective January 1, 2018. Among its significant provisions, the Tax Act (i) reduces the federal corporate income tax rate from 35% to 21%; (ii) eliminates bonus depreciation for regulated utilities, but allows 100% expensing for the cost of qualified property for non-regulated businesses; (iii) eliminates the provision that treated contributions in aid of construction provided to regulated water utilities as non-taxable; (iv) eliminates the domestic production activities deduction, and (v) limits the amount of net interest that can be deducted; however, this limitation is not applicable to regulated utilities and, therefore is not anticipated to have a material impact to Registrant’s ability to deduct net interest. Pursuant to ASC Topic 740, "Income Taxes", the effects of changes in tax laws must be recognized within the period in which the tax law is enacted. This required AWR and GSWC to record an adjustment in its 2017 financial statements to reflect the impact of the reduction in the corporate income tax rate from 35% to 21% on its cumulative deferred income-tax balances and its tax-related regulatory assets/liabilities. Registrant was able to make reasonable estimates in order to remeasure and account for the effects of the Tax Act, which are reflected in the December 31, 2017 financial statements. Any further technical corrections or other forms of guidance addressing the Tax Act, as well as regulatory or governmental actions, could result in adjustments to Registrant's remeasurement and accounting for the effects of the Tax Act. Registrant will finalize and record any adjustments related to the Tax Act within the one-year measurement period provided under Staff Accounting Bulletin No. 118 issued by the Securities and Exchange Commission in December 2017. The most significant change from the Tax Act impacting Registrant is the reduction of the corporate federal income tax rate from 35% to 21% effective January 1, 2018. As of December 31, 2017, the cumulative net deferred income tax liabilities (for both flow-through and normalized temporary differences) related to GSWC’s rate-regulated activities were reduced by approximately $90.1 million to reflect the new 21% tax rate. However, this did not impact GSWC's earnings since this reduction in net deferred income tax liabilities was offset by a corresponding increase to a regulatory liability (Note 2). The impact to future customer rates related to this regulatory liability is anticipated to generally occur over a period consistent with the remaining lives of the property giving rise to this regulatory liability. The remeasurement of other deferred income tax balances not related to rate-regulated activities did not have a significant impact to Registrant's consolidated results of operations; however, income tax expense was affected among the reporting segments. The significant components of the deferred tax assets and liabilities as reflected in the balance sheets at December 31, 2017 and 2016 are:
|  | AWR |  | GSWC
|  | December 31, |  | December 31,
(dollars in thousands) |  | 2017 |  | 2016 |  | 2017 |  | 2016
Deferred tax assets: |  |  |  |  |  |  |  |  |  |  |  |
Regulatory-liability-related: ITC and excess deferred taxes (1) |  | $ | 32,761 |  |  | $ | 903 |  |  | $ | 32,761 |  |  | $ | 903 |
Regulatory-liability-related: California Corp Franchise Tax |  | 1,806 |  |  | 3,365 |  |  | 1,806 |  |  | 3,365 |
Other nonproperty-related |  | 2,509 |  |  | 1,993 |  |  | 2,230 |  |  | 1,901 |
Contributions and advances |  | 4,679 |  |  | 7,464 |  |  | 5,022 |  |  | 7,712 |
|  | $ | 41,755 |  |  | $ | 13,725 |  |  | $ | 41,819 |  |  | $ | 13,881 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Fixed assets |  | $ | (130,115 | ) |  | $ | (200,378 | ) |  | $ | (134,437 | ) |  | $ | (203,133 | )
Regulatory-asset-related: depreciation and other |  | (16,851 | ) |  | (24,402 | ) |  | (16,851 | ) |  | (24,402 | )
California Corp Franchise Tax |  | (528 | ) |  | (2,033 | ) |  | (552 | ) |  | (2,208 | )
Other property-related |  | (47 | ) |  | — |  |  | (53 | ) |  | (68 | )
Balancing and memorandum accounts |  | (7,311 | ) |  | (7,010 | ) |  | (7,897 | ) |  | (7,271 | )
Deferred charges |  | (2,594 | ) |  | (4,429 | ) |  | (2,809 | ) |  | (4,597 | )
|  | (157,446 | ) |  | (238,252 | ) |  | (162,599 | ) |  | (241,679 | )
Accumulated deferred income taxes - net |  | $ | (115,691 | ) |  | $ | (224,527 | ) |  | $ | (120,780 | ) |  | $ | (227,798 | )
(1) Primarily represents the gross-up portion of the deferred income tax (on the excess-deferred-tax regulatory liability) brought about by the Tax Act’s reduction in the federal income tax rate. The current and deferred components of income tax expense are as follows:
|  | AWR
|  | Year Ended December 31,
(dollars in thousands) |  | 2017 |  | 2016 |  | 2015
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 20,978 |  |  | $ | 2,297 |  |  | $ | 21,866 |
State |  | 5,844 |  |  | 4,798 |  |  | 5,442 |
Total current tax expense |  | $ | 26,822 |  |  | $ | 7,095 |  |  | $ | 27,308 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  | $ | 11,543 |  |  | $ | 26,715 |  |  | $ | 8,948 |
State |  | 609 |  |  | 925 |  |  | 1,475 |
Total deferred tax expense |  | 12,152 |  |  | 27,640 |  |  | 10,423 |
Total income tax expense |  | $ | 38,974 |  |  | $ | 34,735 |  |  | $ | 37,731 |
|  | GSWC
|  | Year Ended December 31,
(dollars in thousands) |  | 2017 |  | 2016 |  | 2015
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 15,044 |  |  | $ | (3,115 | ) |  | $ | 16,196 |
State |  | 5,045 |  |  | 3,625 |  |  | 5,557 |
Total current tax expense |  | $ | 20,089 |  |  | $ | 510 |  |  | $ | 21,753 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  | $ | 11,770 |  |  | $ | 25,864 |  |  | $ | 8,536 |
State |  | 2,200 |  |  | 2,235 |  |  | 2,183 |
Total deferred tax expense |  | 13,970 |  |  | 28,099 |  |  | 10,719 |
Total income tax expense |  | $ | 34,059 |  |  | $ | 28,609 |  |  | $ | 32,472 |
The reconciliations of the effective tax rates to the federal statutory rate are as follows:
|  | AWR
|  | Year Ended December 31,
(dollars in thousands, except percent) |  | 2017 |  | 2016 |  | 2015
Federal taxes on pretax income at statutory rate |  | $ | 37,919 |  |  | $ | 33,067 |  |  | $ | 34,375 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |
State income tax, net of federal benefit |  | 4,382 |  |  | 3,029 |  |  | 4,843 |
Change in tax rate |  | (82 | ) |  | — |  |  | — |
Flow-through on fixed assets |  | 845 |  |  | 994 |  |  | 626 |
Flow-through on pension costs |  | 412 |  |  | (247 | ) |  | 267 |
Flow-through on removal costs |  | (1,980 | ) |  | (2,068 | ) |  | (929 | )
Domestic production activities deduction |  | (1,421 | ) |  | (78 | ) |  | (1,560 | )
Investment tax credit |  | (93 | ) |  | (83 | ) |  | (88 | )
Other – net |  | (1,008 | ) |  | 121 |  |  | 197 |
Total income tax expense from operations |  | $ | 38,974 |  |  | $ | 34,735 |  |  | $ | 37,731 |
Pretax income from operations |  | $ | 108,341 |  |  | $ | 94,478 |  |  | $ | 98,215 |
Effective income tax rate |  | 36.0 | % |  | 36.8 | % |  | 38.4 | %
|  | GSWC
|  | Year Ended December 31,
(dollars in thousands, except percent) |  | 2017 |  | 2016 |  | 2015
Federal taxes on pretax income at statutory rate |  | $ | 30,736 |  |  | $ | 26,452 |  |  | $ | 28,022 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |
State income tax, net of federal benefit |  | 4,924 |  |  | 3,118 |  |  | 5,151 |
Change in tax rate |  | 1,063 |  |  | — |  |  | — |
Flow-through on fixed assets |  | 845 |  |  | 994 |  |  | 626 |
Flow-through on pension costs |  | 412 |  |  | (247 | ) |  | 267 |
Flow-through on removal costs |  | (1,980 | ) |  | (2,068 | ) |  | (929 | )
Domestic production activities deduction |  | (1,148 | ) |  | — |  |  | (1,268 | )
Investment tax credit |  | (93 | ) |  | (82 | ) |  | (88 | )
Other – net |  | (700 | ) |  | 442 |  |  | 691 |
Total income tax expense from operations |  | $ | 34,059 |  |  | $ | 28,609 |  |  | $ | 32,472 |
Pretax income from operations |  | $ | 87,816 |  |  | $ | 75,578 |  |  | $ | 80,063 |
Effective income tax rate |  | 38.8 | % |  | 37.9 | % |  | 40.6 | %
AWR and GSWC had no unrecognized tax benefits at December 31, 2017, 2016 and 2015. Registrant’s policy is to classify interest on income tax over/underpayments in interest income/expense and penalties in “other operating expenses.” Registrant did not have any material interest receivables/payables from/to taxing authorities as of December 31, 2017 and 2016, nor did it recognize any material interest income/expense or accrue any material tax-related penalties during the years ended December 31, 2017, 2016 and 2015. Registrant files federal, California and various other state income tax returns. The Internal Revenue Service (“IRS”) completed its examination of AWR’s federal 2010 through 2012 refund claims in February 2016 and issued a refund to AWR of approximately $2.1 million. AWR’s 2014 - 2016 tax years remain subject to examination by the IRS. AWR filed refund claims with the California Franchise Tax Board ("FTB") for the 2002 through 2008 tax years in connection with the matters reflected on the federal refund claims along with other state tax items. In the first quarter of 2017, the FTB issued a refund to AWR for the 2002 - 2004 claims of approximately $2.2 million. The FTB continues to review the 2005 - 2008 refund claims. The 2009 - 2016 tax years remain subject to examination by the FTB.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration