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Income taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income taxes
Note 12 · Income taxes
The components of income taxes attributable to net income for common stock were as follows:
HEI consolidatedHawaiian Electric consolidated
Years ended December 31202020192018202020192018
(in thousands)   
Federal   
Current $23,207 $28,736 $42,903 $31,950 $21,751 $29,649 
Deferred(4,215)(4,353)(6,099)(5,408)(7,793)(5,245)
Deferred tax credits, net*10,979 13,410 (12)1,549 13,155 (12)
 29,971 37,793 36,792 28,091 27,113 24,392 
State      
Current 8,430 10,472 17,361 3,768 5,579 13,210 
Deferred 2,509 (10,732)(3,269)8,559 (8,491)(2,737)
Deferred tax credits, net*— 14,104 (87)— 14,104 (87)
 10,939 13,844 14,005 12,327 11,192 10,386 
Total$40,910 $51,637 $50,797 $40,418 $38,305 $34,778 
*     In 2020, primarily represents federal tax credits related to Mauo’s solar-plus-storage project, deferred and amortized starting in 2020. In 2019, primarily represents federal and state credits related to Hawaiian Electric’s West Loch PV project, deferred and amortized starting in 2020.
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 consolidatedHawaiian Electric consolidated
Years ended December 31202020192018202020192018
(in thousands)   
Amount at the federal statutory income tax rate $50,531 $56,996 $53,437 $44,468 $41,399 $37,889 
Increase (decrease) resulting from:      
State income taxes, net of federal income tax benefit
9,448 11,658 11,832 9,658 8,703 8,080 
Net deferred tax asset (liability) adjustment related to the Tax Act
(11,267)(9,255)(9,540)(11,267)(9,255)(9,285)
Other, net (7,802)(7,762)(4,932)(2,441)(2,542)(1,906)
Total$40,910 $51,637 $50,797 $40,418 $38,305 $34,778 
Effective income tax rate17.0 %19.0 %20.0 %19.1 %19.4 %19.3 %
The tax effects of book and tax basis differences that give rise to deferred tax assets and liabilities were as follows:
HEI consolidatedHawaiian Electric consolidated
December 312020201920202019
(in thousands)  
Deferred tax assets  
Regulatory liabilities, excluding amounts attributable to property, plant and equipment
$93,684 $100,427 $93,684 $100,427 
Operating lease liabilities41,582 51,573 34,586 45,608 
Revenue taxes22,726 20,922 22,726 20,922 
Allowance for bad debts31,973 14,858 4,835 560 
Other1
44,127 33,106 24,741 20,259 
Total deferred tax assets234,092 220,886 180,572 187,776 
Deferred tax liabilities  
Property, plant and equipment related487,209 464,312 473,734 458,349 
Operating lease right-of-use assets
41,370 51,542 34,586 45,608 
Regulatory assets, excluding amounts attributable to property, plant and equipment
25,841 33,897 25,841 33,897 
Retirement benefits18,407 9,684 20,537 13,072 
Other 56,354 40,776 23,672 14,001 
Total deferred tax liabilities629,181 600,211 578,370 564,927 
Net deferred income tax liability$395,089 $379,325 $397,798 $377,151 
1     As of December 31, 2020, HEI consolidated and Hawaiian Electric consolidated have deferred tax assets of $10.9 million and $5.8 million respectively, relating to the benefit of state tax credit carryforwards of $14.6 million and $7.8 million respectively. These state tax credit carryforwards primarily relate to the West Loch PV project and do not expire. The Company concluded that as of December 31, 2020, a valuation allowance is not required.
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, 2020 and 2019, 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 2020, 2019 and 2018.
HEI consolidatedHawaiian Electric consolidated
(in millions)202020192018202020192018
Unrecognized tax benefits, January 1$2.2 $2.1 $4.0 $1.7 $1.6 $3.5 
Additions based on tax positions taken during the year0.2 0.5 0.3 0.2 0.5 0.3 
Reductions based on tax positions taken during the year— — — — — — 
Additions for tax positions of prior years11.6 0.1 0.1 11.6 0.1 0.1 
Reductions for tax positions of prior years(0.1)(0.2)(0.1)(0.1)(0.2)(0.1)
Lapses of statute of limitations(0.2)(0.3)(2.2)(0.2)(0.3)(2.2)
Settlement(1.0)— — (0.5)— — 
Unrecognized tax benefits, December 31$12.7 $2.2 $2.1 $12.7 $1.7 $1.6 

At December 31, 2020 and 2019, there were $11.6 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, 2020 and 2019, the Utilities had $11.6 million and nil, respectively, of unrecognized tax benefits that, if recognized, would affect the Utilities’ annual effective tax rate.
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 2020, 2019 and
2018, the Company recognized approximately $(0.5) million, $0.1 million and $(0.1) million in interest expense. The Company had $0.1 million and $0.6 million of interest accrued as of December 31, 2020 and 2019, 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 2020, 2019 and 2018, the Utilities recognized approximately $(0.3) million, $0.1 million and $0.1 million in interest expense. The Utilities had $0.1 million and $0.4 million of interest accrued as of December 31, 2020 and 2019, respectively.
As of December 31, 2020, 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 benefits being sustained under governmental review. While the Company and the Utilities currently do not expect material changes to occur in the next twelve months, the Company and the Utilities are generally unable to estimate the range of impacts on the balance of uncertain tax positions or the impact on the effective tax rate from the resolution of these issues until the Internal Revenue Service addresses them in the current examination process, and therefore, it is possible that the amount of unrecognized benefit with respect to the Company’s and the Utilities’ uncertain tax positions could increase or decrease within the next 12 months. 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.
The statute of limitations for IRS examinations has expired for years prior to 2017. The Company is currently under IRS examination for the tax years 2017 and 2018. In the fourth quarter of 2020, the Company and the Hawaii Department of Taxation agreed to a final assessment of tax liabilities for the years 2011 through 2018, however, the statute of limitations for Hawaii remains open for tax years 2011 and subsequent.