XML 29 R15.htm IDEA: XBRL DOCUMENT v3.21.2
INCOME TAXES
 6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 8: INCOME TAXES
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 in the following table:
 
  
Six Months Ended June 30,
 
 
  
2021
 
 
2020
 
Statutory Federal Income Tax Rate
   
 
21
% 
     21 % 
Income Tax Effects of:
                 
State Income Taxes, net
   
 
6
 
     6  
Utility Plant Differences
   
 
(2
) 
     (4 ) 
Other, net
   
 
—  
 
     —    
    
 
 
    
 
 
  
Effective Income Tax Rate
   
 
25
% 
     23 % 
    
 
 
    
 
 
  
In December 2020, the Consolidated Appropriations Act, 2021 (CAA) was signed into law. The CAA included additional funding through tax credits as part of its economic package for 2021. These changes include the temporary removal of deduction limitations on business meals through December 2022 and additional funding for the ERC with expanded benefits extended through June 30, 2021. The expanded ERC is a
70%
 
credit on employee wages for employees that are retained and cannot perform their job duties at
 100
% capacity
as a result of coronavirus pandemic restrictions.
In March 2021, the American Rescue Plan Act of 2021 (ARPA) was signed into law. The ARPA included certain provisions that provide economic relief for the ongoing COVID-19 pandemic, such as extending the Employment Retention Credit (ERC) through December 31, 2021, and other future governmental revenue producing provisions, such as expanding the scope for deduction limitations on executive compensation in future years. 
The Company has evaluated each of the CARES, CAA and ARPA provisions and determined that they do not have a material effect on the Company’s financial statements as of June 30, 2021. The Company has recorded a reduction in payroll taxes related to the ERC
for $
0.6
 million
 in the third quarter of 2020
 
and
 $0.4 
million in the six months ended June 30, 2021. These were recorded as a reduction to payroll tax expense which is recorded in Taxes Other Than Income Taxes in the Consolidated Statements of Earnings.
Income tax filings for the year ended December 31, 2019 have been filed with the IRS, Massachusetts Department of Revenue, the Maine Revenue Service, and the New Hampshire Department of Revenue Administration. In the Company’s federal tax returns for the year ended December 31, 2019 which were filed with the IRS in October 2020, the Company utilized federal NOLC assets of $8.2 million. As of December 31, 2020, the Company had recognized the utilization of the remaining federal NOLC assets of $2.7 million to offset against current taxes payable. The Company received $0.9 million of Alternative Minimum Tax (AMT) credits in 2019 and will receive $0.9 million of AMT credits in 2021 as provided for in the CARES Act. In addition, at December 31, 2020, the Company had $0.3 million of cumulative state tax credit carryforwards to offset against future income taxes payable. If unused, the Company’s state tax credit carryforwards will begin to expire in 2023.
In December 2017, the Tax Cuts and Jobs Act (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 FASB Codification Topic 740, the Company revalued its Accumulated Deferred Income Taxes (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 Company expects to flow through to customers $47.1 million of excess ADIT in utility base rates. Approximately $1.8 million of excess ADIT was created through reconciling mechanisms at December 31, 2017, which had not been previously collected from customers through utility rates. The Company reconciled these excess ADIT amounts through the specific reconciliation mechanisms in each of those individual reconciling mechanisms which were reviewed by state regulators. In addition to the $48.9 million of net excess ADIT, 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), 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 recognized the benefit of this excess ADIT in accordance with the regulatory treatment of excess ADIT for each jurisdiction. In 2019, the Company recognized $1.7 million of this amount and the remaining $0.3 million was recognized in 2020.
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, recent FERC guidance 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. As of June 30, 2021, the Company flowed back $2.5 million to customers in its Massachusetts, Maine, and federal jurisdictions. New Hampshire liabilities will begin to flow back once rate proceedings have finalized in that jurisdiction.