XML 53 R29.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income taxes |
Note 11 · Income taxes
The components of income taxes attributable to net income for common stock were as follows:
| HEI consolidated |  | Hawaiian Electric consolidated
Years ended December 31 | 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current | $ | 42,903 |  |  | $ | 61,534 |  |  | $ | 59,873 |  |  | $ | 29,649 |  |  | $ | 36,267 |  |  | $ | 952 |
Deferred* | (6,099 | ) |  | 33,967 |  |  | 43,666 |  |  | (5,245 | ) |  | 35,229 |  |  | 70,513 |
Deferred tax credits, net | (12 | ) |  | (20 | ) |  | 268 |  |  | (12 | ) |  | (20 | ) |  | 268 |
| 36,792 |  |  | 95,481 |  |  | 103,807 |  |  | 24,392 |  |  | 71,476 |  |  | 71,733 |
State |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current | 17,361 |  |  | 10,076 |  |  | 16,473 |  |  | 13,210 |  |  | 8,947 |  |  | 9,232 |
Deferred | (3,269 | ) |  | 3,868 |  |  | 3,452 |  |  | (2,737 | ) |  | 2,808 |  |  | 3,873 |
Deferred tax credits, net | (87 | ) |  | (32 | ) |  | (37 | ) |  | (87 | ) |  | (32 | ) |  | (37 | )
| 14,005 |  |  | 13,912 |  |  | 19,888 |  |  | 10,386 |  |  | 11,723 |  |  | 13,068 |
Total | $ | 50,797 |  |  | $ | 109,393 |  |  | $ | 123,695 |  |  | $ | 34,778 |  |  | $ | 83,199 |  |  | $ | 84,801 |
* | The 2018 deferred income tax expense includes the final adjustment to reduce the provisional amount recorded in 2017 pursuant to Staff Accounting Bulletin No. 118 (SAB No. 118). See SAB No. 118 disclosure below for details of the accounting for the enactment of the Tax Act.
A reconciliation of the amount of income taxes computed at the federal statutory rate to the amount provided in the consolidated statements of income was as follows:
| HEI consolidated |  | Hawaiian Electric consolidated
Years ended December 31 | 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount at the federal statutory income tax rate | $ | 53,437 |  |  | $ | 96,796 |  |  | $ | 130,844 |  |  | $ | 37,889 |  |  | $ | 71,801 |  |  | $ | 80,190 |
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 11,832 |  |  | 9,789 |  |  | 13,915 |  |  | 8,080 |  |  | 7,584 |  |  | 8,494 |
Net deferred tax asset (liability) adjustment related to the Tax Act | (9,540 | ) |  | 13,420 |  |  | — |  |  | (9,285 | ) |  | 9,168 |  |  | — |
Other, net | (4,932 | ) |  | (10,612 | ) |  | (21,064 | ) |  | (1,906 | ) |  | (5,354 | ) |  | (3,883 | )
Total | $ | 50,797 |  |  | $ | 109,393 |  |  | $ | 123,695 |  |  | $ | 34,778 |  |  | $ | 83,199 |  |  | $ | 84,801 |
Effective income tax rate | 20.0 | % |  | 39.6 | % |  | 33.1 | % |  | 19.3 | % |  | 40.6 | % |  | 37.0 | %
The tax effects of book and tax basis differences that give rise to deferred tax assets and liabilities were as follows:
| HEI consolidated |  | Hawaiian Electric consolidated
December 31 | 2018 |  | 2017 |  | 2018 |  | 2017
(in thousands) |  |  |  |  |  |  |  |  |
Deferred tax assets |  |  |  |  |  |  |  |  |
Regulatory liabilities, excluding amounts attributable to property, plant and equipment | $ | 104,868 |  |  | $ | 104,984 |  |  | $ | 104,868 |  |  | $ | 104,984 |
Allowance for bad debts | 14,647 |  |  | 16,192 |  |  | 659 |  |  | 1,812 |
Other | 46,036 |  |  | 24,397 |  |  | 26,522 |  |  | 11,253 |
Total deferred tax assets | 165,551 |  |  | 145,573 |  |  | 132,049 |  |  | 118,049 |
Deferred tax liabilities |  |  |  |  |  |  |  |  |
Property, plant and equipment related | 437,644 |  |  | 415,452 |  |  | 434,831 |  |  | 413,891 |
Regulatory assets, excluding amounts attributable to property, plant and equipment | 37,345 |  |  | 38,314 |  |  | 37,345 |  |  | 38,314 |
Deferred RAM and RBA revenues | 11,278 |  |  | 15,038 |  |  | 11,278 |  |  | 15,038 |
Retirement benefits | 20,173 |  |  | 32,952 |  |  | 25,430 |  |  | 38,020 |
Other | 31,629 |  |  | 32,247 |  |  | 6,362 |  |  | 6,827 |
Total deferred tax liabilities | 538,069 |  |  | 534,003 |  |  | 515,246 |  |  | 512,090 |
Net deferred income tax liability | $ | 372,518 |  |  | $ | 388,430 |  |  | $ | 383,197 |  |  | $ | 394,041 |
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. Based upon historical taxable income and projections for future taxable income, management believes it is more likely than not the Company and the Utilities will realize substantially all of the benefits of the deferred tax assets. As of December 31, 2018 and 2017, valuation allowances for deferred tax benefits were nil. The Utilities are included in the consolidated federal and Hawaii income tax returns of HEI and are subject to the provisions of HEI’s tax sharing agreement, which determines each subsidiary’s (or subgroup’s) income tax return liabilities and refunds on a standalone basis as if it filed a separate return (or subgroup consolidated return). The following is a reconciliation of the Company’s liability for unrecognized tax benefits for 2018, 2017 and 2016.
| HEI consolidated |  | Hawaiian Electric consolidated
(in millions) | 2018 |  | 2017 |  | 2016 |  | 2018 |  | 2017 |  | 2016
Unrecognized tax benefits, January 1 | $ | 4.0 |  |  | $ | 3.8 |  |  | $ | 3.6 |  |  | $ | 3.5 |  |  | $ | 3.8 |  |  | 3.6 |
Additions based on tax positions taken during the year | 0.3 |  |  | 0.9 |  |  | — |  |  | 0.3 |  |  | 0.4 |  |  | — |
Reductions based on tax positions taken during the year | — |  |  | (0.2 | ) |  | (0.1 | ) |  | — |  |  | (0.2 | ) |  | (0.1 | )
Additions for tax positions of prior years | 0.1 |  |  | — |  |  | 0.3 |  |  | 0.1 |  |  | — |  |  | 0.3 |
Reductions for tax positions of prior years | (0.1 | ) |  | (0.5 | ) |  | — |  |  | (0.1 | ) |  | (0.5 | ) |  | — |
Lapses of statute of limitations | (2.2 | ) |  | — |  |  | — |  |  | (2.2 | ) |  | — |  |  | — |
Unrecognized tax benefits, December 31 | $ | 2.1 |  |  | $ | 4.0 |  |  | $ | 3.8 |  |  | $ | 1.6 |  |  | $ | 3.5 |  |  | $ | 3.8 |
At December 31, 2018 and 2017, there were $0.5 million and $0.5 million, respectively, of unrecognized tax benefits that, if recognized, would affect the Company’s annual effective tax rate. As of December 31, 2018 and 2017, the Utilities had no unrecognized tax benefits that, if recognized, would affect the Utilities’ annual effective tax rate. The Company and Utilities believe that the unrecognized tax benefits will not significantly increase or decrease within the next 12 months. HEI consolidated. The Company recognizes interest accrued related to unrecognized tax benefits in “Interest expense-other than on deposit liabilities and other bank borrowings” and penalties, if any, in operating expenses. In 2018, 2017 and 2016, the Company recognized approximately $(0.1) million, $0.2 million and $0.2 million in interest expense. The Company had $0.4 million and $0.5 million of interest accrued as of December 31, 2018 and 2017, respectively. Hawaiian Electric consolidated. The Utilities recognize interest accrued related to unrecognized tax benefits in “Interest expense and other charges, net” and penalties, if any, in operating expenses. In 2018, 2017 and 2016, the Utilities recognized approximately $0.1 million, $0.1 million and $0.03 million, respectively, in interest expense. Additional interest expense related to the Utilities’ unrecognized tax benefits was recognized at HEI Consolidated because of the Utilities NOL position. The Utilities had $0.3 million and $0.2 million of interest accrued as of December 31, 2018 and 2017, respectively. As of December 31, 2018, the disclosures above present the Company’s and the Utilities’ accruals for potential tax liabilities, which involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts. Based on information currently available, the Company and the Utilities believe these accruals have adequately provided for potential income tax issues with federal and state tax authorities, and that the ultimate resolution of tax issues for all open tax periods will not have a material adverse effect on its results of operations, financial condition or liquidity. IRS examinations have been completed and settled through the tax year 2011 and the statute of limitations has expired for years prior to 2015, leaving subsequent years subject to IRS examination. The tax years 2011 and subsequent are still subject to examination by the Hawaii Department of Taxation. Major tax developments. The 2017 Tax Cuts and Jobs Act was the first comprehensive change in the law since the 1986 Tax Reform Act and has a continuing impact on U.S. taxpayers. The changes for corporate taxpayers are numerous but the following summarizes the provisions that have a major impact on the Company. Lower tax rate. The corporate income tax rate reduction from 35% to 21% lowers the Company’s effective tax rate in 2018 and the subsequent years. For the regulated Utilities, the excess ADIT resulting from the rate change is being returned to customers over various periods determined with the approval of the PUC. Bonus depreciation. The Tax Act allows 100% bonus depreciation through the end of 2022 for qualified property purchased and placed in service after September 27, 2017. However, property placed into service after September 27, 2017 are grandfathered under the pre-Tax Act rules allowing 50% bonus depreciation if subject to written binding purchase contracts prior to September 28, 2017. The Tax Act provides that property used in the trade or business of a regulated utility (including the furnishing or selling electrical energy) is not qualified property. Other applicable provisions. There are a number of other provisions in the Tax Act that have an impact on the Company, including the narrowing of the exclusions from taxability of certain contributions in aid of construction (CIAC), the repeal of the domestic production activities deduction (DPAD), non-deductibility of transportation fringe benefits excluded from employees income, and the increased limitation on the deductibility of executive compensation. SAB No. 118. On December 22, 2017, the SEC staff issued SAB No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company applied the guidance in SAB No. 118 when accounting for enactment date effects of the Tax Act in 2017 and throughout 2018. At December 31, 2017, the Company had not completed its re-measurement of deferred tax assets and liabilities as a result of the reduction in the US federal corporate income tax rate to 21% and in accordance with SAB No. 118, recorded a provisional amount. The Tax Act’s reduction of the corporate tax rate to 21% resulted in a net deferred tax balance that was in excess of the taxes the Company expected to pay or be refunded in the future when the temporary differences creating these deferred taxes reverse. The excess related to the Utilities’ deferred taxes that are expected to be refunded in rates was reclassified to a regulatory liability that will be returned to the customers prospectively. The remaining excess was written off through deferred tax expense. Consequently, the Company recorded a provisional decrease in net deferred tax liabilities of $271.5 million ($275.7 million at the Utilities) with the corresponding net adjustment to increase deferred tax expense of $13.4 million ($9.2 million at the Utilities) and to increase the Utilities’ regulatory liabilities by $284.9 million. December 22, 2018 marked the end of the measurement period for purposes of SAB No. 118. Consequently, the Company (and Utilities) has completed the analysis, based on available Treasury and legislative guidance relating to the Tax Act. In 2018, the Company re-measured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future. For the period ended December 31, 2018, the net deferred tax liabilities decreased by $13.9 million ($13.6 million at the Utilities) with the corresponding net adjustment that decreased deferred tax expense by $5.5 million ($5.2 million at the Utilities) and increased the regulatory liability by $11.3 million. The decrease in deferred tax expense is included as a component of income tax expense and had the effect of decreasing the effective tax rate in 2018 from 22.1% to 20.0% (22.2% to 19.3% at the Utilities).

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://fasb.org/us-gaap/role/ref/legacyRef -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