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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 3 – Income Taxes Income tax expense differs from the amount computed by applying the statutory rate on book income subject to tax for the following reasons:
|  | (Thousands of Dollars)
|  | Years Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Income Tax at Statutory Rate |  | $ | 6,457 |  |  | $ | 7,009 |  |  | $ | 11,868 |
Tax Effect of: |  |  |  |  |  |  |  |  |  |  |  |
Utility Plant Related |  |  | (802 | ) |  |  | 422 |  |  |  | (1,016 | )
Tangible Property Repairs |  |  | (10,156 | ) |  |  | (7,763 | ) |  |  | — |
State Income Taxes – Net |  |  | 1,173 |  |  |  | 1,207 |  |  |  | 895 |
Tax Act |  |  | — |  |  |  | — |  |  |  | (610 | )
Other |  |  | 188 |  |  |  | 49 |  |  |  | (37 | )
Total Income Tax Expense |  | $ | (3,140 | ) |  | $ | 924 |  |  | $ | 11,100 |
Income tax expense is comprised of the following:
|  | (Thousands of Dollars)
|  | Years Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |  |
Federal |  | $ | (3,822 | ) |  | $ | (188 | ) |  | $ | 2,090 |
State |  |  | 2,246 |  |  |  | 2,073 |  |  |  | 1,066 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (726 | ) |  |  | (338 | ) |  |  | 7,713 |
State |  |  | (761 | ) |  |  | (545 | ) |  |  | 310 |
Investment Tax Credits |  |  | (77 | ) |  |  | (78 | ) |  |  | (79 | )
Total Income Tax Expense |  | $ | (3,140 | ) |  | $ | 924 |  |  | $ | 11,100 |
As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for regulatory accounting treatment of accumulated deferred income tax benefits associated with the adoption of tangible property regulations issued by the IRS as well as immediate recognition of current year tangible property regulations tax benefits (see Note 2 – Rate and Regulatory Matters). This results in significant reductions in the Company’s effective income tax rate, current income tax expense and deferred income tax expense. 49 Index Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. The components of the net deferred tax liability are as follows:
|  | (Thousands of Dollars)
|  | December 31,
|  | 2019 |  | 2018
Utility Plant Related |  | $ | 50,608 |  |  | $ | 44,777 |
Customer Advances |  |  | (3,661 | ) |  |  | (3,702 | )
Employee Benefits |  |  | 6,543 |  |  |  | 5,490 |
Investment Tax Credits (ITC) |  |  | 519 |  |  |  | 596 |
Other |  |  | 399 |  |  |  | 109 |
Total Deferred Tax Liability and ITC |  | $ | 54,408 |  |  | $ | 47,270 |
As part of its 2014 Federal income tax return, the Company adopted the final IRS tangible property regulations and changed its accounting method for the tax treatment of expenditures that qualified as deductible repairs. The adoption resulted in a net reduction of $17.6 million in taxes previously remitted to the IRS, for which the Company has already sought and received the tax refunds. A reserve provision against refunded taxes of $2.3 million was recorded in 2015 at the time of filing its change in accounting method based on a possible challenge by the IRS during an audit examination. The Company’s 2014 federal income tax return was subsequently selected for examination by the IRS. In 2018, the Company increased its income tax reserve provision to $4.1 million. During the first quarter of 2019, the Company agreed to certain modifications of its accounting method for expenditures that qualify as deductible repairs and the IRS concluded its audit of the Company’s 2014 federal income tax return. The modifications also impacted the Company’s filed 2015, 2016 and 2017 federal income tax returns. In March 2019 and June 2019, the Company paid $0.8 million in income taxes and $0.1 million in interest, respectively, in connection with the conclusion and closing of the 2014 and 2015 tax return audits. In October 2019, the Company paid $1.9 million in income taxes in connection with the conclusion and closing of the 2016 and 2017 tax return audits. As of December 31, 2019, the Company has reduced its income tax reserve provision and interest expense liability to $0.5 million and $0.1 million, respectively. The statutory review periods for federal income tax returns for the years prior to 2016 have been closed. Other than the effects of the provision against refundable taxes discussed above, there are no unrecognized tax benefits resulting from prior period tax positions.

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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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