The differences between the Company’s provisions for Income Taxes and the provisions calculated at the statutory federal tax rate, expressed in percentages, are shown below:


	2019			2018			2017
Statutory Federal Income Tax Rate		21	%		21	%		34	%
Income Tax Effects of:
State Income Taxes, net		6			6			6
Utility Plant Differences		(3	)		(7	)		(1	)
Tax Credits		—			—			(1	)
Other, net		—			—			—

Effective Income Tax Rate		24	%		20	%		38	%

Temporary differences which gave rise to deferred tax assets and liabilities in 2019 and 2018 are shown below:


Temporary Differences (000’s)	2019		2018
Deferred Tax Assets
Retirement Benefit Obligations	$	36,551	$	32,249
Net Operating Loss Carryforwards		1,609		10,773
Tax Credit Carryforwards		1,489		2,704
Other, net		1,589		1,571

Total Deferred Tax Assets	$	41,238	$	47,297

Deferred Tax Liabilities
Utility Plant Differences	$	134,011	$	132,682
Regulatory Assets & Liabilities		5,239		6,429
Other, net		5,539		5,964

Total Deferred Tax Liabilities		144,789		145,075

Net Deferred Tax Liabilities	$	103,551	$	97,778

In June 2019 the Company received notice that the Internal Revenue Service (IRS) completed all fieldwork for the tax years December 31, 2015 and December 31, 2016 income tax audit and closed the audit with no adjustment. Income tax filings for the year ended December 31, 2018 have been filed with the IRS, Massachusetts Department of Revenue, the Maine Revenue Service, and the New Hampshire Department of Revenue Administration. The Company evaluated its tax positions in accordance with the

FASB Codification, and has concluded that no adjustment for recognition,

de-recognition,

settlement and foreseeable future events to any tax liabilities or assets as defined by the FASB Codification is required. The Company remains subject to examination by Maine, Massachusetts, and New Hampshire tax authorities for the tax periods ended December 31

, 2016

; December 31

, 2017

; and December 31

, 2018

In December 2017

, the TCJA, which included a reduction to the corporate federal income tax rate to 21

% effective January 1

, 2018

, was signed into law. In accordance with GAAP Accounting Standard 740

, the Company revalued its ADIT at the new 21

% tax rate at which the ADIT will be reversed in future periods. The Company recorded a net Regulatory Liability in the amount of $48.9

million at December 31

, 2017

as a result of the ADIT revaluation.

The MDPU issued a multi-utility Order D.P.U.

-15

-E

(the “Order”) on December 21

, 2018

. The Order clarified the categories of Excess ADIT for Massachusetts ratemaking: 1)

Excess protected ADIT directly related to utility plant fixed assets (rate base), 2)

other

non-plant

excess ADIT amounts (unprotected), and 3)

excess ADIT created through reconciling mechanisms. In the Order, all Massachusetts utilities were ordered to begin flow back of protected and unprotected excess ADIT on February 1

, 2019

and to reconcile excess ADIT amounts previously collected from ratepayers through reconciliation mechanisms in the next filing of each of those individual reconciling mechanisms. Fitchburg was ordered to begin flowing back to customers excess ADIT of $10.1 million and $10.4 million to electric

and gas ratepayers, respectively

, over approximately

fifteen years

. Fitchburg filed its compliance filing under

D.P.U.

-15

-E

on January 4

, 2019

for rates effective February 1

, 2019

. The MDPU approved this filing on January 16

, 2019

. The filing will be updated and the balances of excess ADIT will be reconciled annually

until the next rate case

On November 15

, 2018

the FERC issued two pronouncements regarding the accounting for income taxes due to the TCJA; 1)

Notice of Proposed Rulemaking Docket No. RM

-5

-000

and 2)

Policy Statement PL

-2

-000

providing specific guidance on the flow back of excess ADIT created by the implementation of the TCJA.

According to the FERC guidance; the amount of the reduction to ADIT that was previously collected from customers but is no longer payable to the IRS is excess ADIT and should be flowed back to ratepayers under general ratemaking principles. On November 21

, 2019

the FERC issued a final order Docket No.

RM19

-5

-000

regarding the 2018

Notice of Proposed Rulemaking and Policy Statement (“Notice”) and affirmed the regulatory treatment outlined in the 2018

Notice.

Based on communications received by the Company from its state regulators in rate cases and other regulatory proceedings in the first quarter of 2018

and as prescribed in the TCJA, the recent FERC guidance noted above and IRS normalization rules; the benefit of these protected excess ADIT amounts will be subject to flow back to customers in future utility rates according to the Average Rate Assumption Method (ARAM). ARAM reconciles excess ADIT at the reversal rate of the underlying book/tax temporary timing differences. The Company estimates the ARAM flow back period for protected and unprotected excess ADIT to be

between

fifteen

and

twenty

years, over

the remaining life of the related utility plant. Subject to regulatory approval, the Company expects to flow back to customers a

net $47.1

million

of protected excess ADIT created as a result of the lowering of the statutory tax rate by the TCJA over periods estimated to be fifteen to twenty years.

In addition to the protected

excess $47.1 million

ADIT amounts the Company expects to flow through to customers in utility rates, as noted above, there were approximately

$1.8 million of excess

ADIT created through reconciling mechanisms at December 31

, 2017

, related to the implementation of the new federal tax rate of the TCJA, which had not been previously collected from

customers through utility rates. The Company reconciles these excess ADIT amounts through the specific reconciliation mechanisms in the filing of each of those individual reconciling mechanisms which will be subject to the review of state regulators. In 2018

and 2019

, the Company recognized $

0.7

million and $

, respectively, of this excess ADIT amount due to the completed filings in the associated jurisdictions. The Company expects to recognize the remaining $

1.1

million of this excess ADIT in future periods, which is currently expected to be in 2020

, after the Company has filed all of its reconciling mechanisms related to the excess ADIT.

In addition to the $48.9

million of net excess ADIT noted above

as of December 31, 2018, there was

$2.0

million of remaining excess ADIT created by the recognition of Net Operating Loss Carryforward

assets (NOLC), discussed below, and related to the implementation of the new federal tax rate of the TCJA, which had not been previously included in utility rates. The Company is recognizing the benefit of this excess ADIT in accordance with the regulatory treatment of excess ADIT for each of jurisdiction. The Company recognized

$1.7

million of this tax benefit in the current year due to the turning of book/tax temporary differences associated with this excess ADIT. The Company expects to recognize the remaining

0.3

million of this excess ADIT in future periods, which is currently expected to be in 2020, in accordance with regulatory guidance as discussed above.

The Company has not yet received regulatory orders in all of its jurisdictions regarding the flow-back of excess deferred taxes. The Company’s regulators are expected to issue additional ratemaking guidance in future periods that will determine the final disposition of the

re-measurement

of regulatory deferred tax balances. At this time, the Company has applied a reasonable interpretation of the TCJA and a reasonable estimate of the regulatory resolution. Future clarification of TCJA matters with the Company’s regulators may change the amounts estimated.

Under the Company’s Tax Sharing Agreement (the “Agreement

”) which was approved upon the formation of Unitil as a

public utility holding company

; the Company files consolidated Federal and State tax returns and Unitil Corporation and each of its utility operating subsidiaries recognize the results of their operations in its tax returns as if it were a stand-alone taxpayer. The Agreement provides that the Company will account for income taxes in compliance with U.S. GAAP and regulatory accounting principles. The Company filed its tax returns for the year ended December 31

, 2018

with the IRS in September 2019

and utilized federal NOLC

assets of $5.7

million principally

due

to pension cost deductions, tax repair deductions, tax depreciation and research and development deductions. For the tax year ended December 31

, 2019

, the Company used $3.5 million of the NOLC in calculating the 2019

federal tax provision. As of December 31

, 2019

, the Company had recorded cumulative federal NOLC assets

1.6

million

to offset against taxes payable in future periods. If unused, the Company’s NOLC carryforward assets will begin to expire in 2029

. The Company

received

0.9

million of

the Alternative Minimum Tax (AMT) credits in 2019

and

will receive

0.3

million

of the AMT credits in 2020

. In addition, at December 31

, 2019

, the

Company had

2.3

million of

cumulative alternative minimum tax credits, general business tax credit and other state tax credit carryforwards to offset future income taxes payable.

In assessing the near-term use of NOLCs and tax credits, the Company evaluates the expected level of future taxable income, available tax planning strategies, reversals of existing taxable temporary differences and taxable income available in carryback years. Based on all available evidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, the Company expects to utilize all of its NOLCs by December 31

, 2020

prior to their expiration in 2029

The Company bills its customers for sales tax in Massachusetts and Maine. These taxes are remitted to the appropriate departments of revenue in each state and are excluded from revenues on the Company’s unaudited Consolidated Statements of Earnings.