The Company had a federal net operating loss in 2016 and 2015 in the amounts of
approximately $1.6 million and $3.5 million, respectively. The federal tax benefit of the
cumulative net operating loss is approximately $3.8 million which begins to expire in 2032,
and is included in deferred income taxes in the Consolidated Balance Sheet as of December
31, 2016.
The Company also had a New Hampshire net operating loss in 2016 and 2015 in the amounts
of approximately $2.5 million and $4.4 million, respectively. The New Hampshire tax benefit
of the cumulative net operating loss is approximately $637,000 which begins to expire in
2022, and is included in deferred income taxes in the Consolidated Balance Sheet as of
December 31, 2016.
As of December 31, 2016 and 2015, it is estimated that approximately $476,000 and
$476,000, respectively, of cumulative federal alternative minimum tax credits may be carried
forward indefinitely as a credit against our regular tax liability.
As of December 31, 2016 and 2015, the Company had New Hampshire Business Enterprise
Tax (““NHBET”) credits of approximately $727,000 and $369,000, respectively. NHBET
credits begin to expire in 2017. It is anticipated that these NHBET credits will not be fully
utilized before they expire; therefore, a valuation allowance has been recorded related to
these credits. The valuation allowance increased by $358,000 and $369,000 in the years
ended December 31, 2016 and 2015, respectively.
Investment tax credits resulting from utility plant additions are deferred and amortized. The
unamortized investment tax credits are being amortized through the year 2033.
The Company had a regulatory liability related to income taxes of approximately $760,000
and $781,000 as of December 31, 2016 and 2015, respectively. This represents the estimated
future reduction in revenues associated with deferred taxes which were collected at rates
higher than the currently enacted rates and the amortization of deferred investment tax
credits.
A review of the portfolio of uncertain tax positions was performed. In this regard, an
uncertain tax position represents the expected treatment of a tax position taken in a filed tax
retum, or planned to be taken in a future tax return, that has not been reflected in measuring
income tax expense for financial reporting purposes. As a result of this review, it was
determined that the Company had no material uncertain tax positions, and tax planning
strategies will be used, if required and when possible, to avoid the expiration of any future
net operating loss and/or tax credits.
The Company’s practice is to recognize interest and/or penalties related to income tax
matters in “Other, Net” in the Consolidated Statements of Income. We incurred no interest in
2016 and 2015. We incurred $0 and $3,000 of penalties during the years ended December 31,
2016 and 2015, respectively.
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