TXNM ENERGY INCTXNM
TXNM ENERGY INC Income Taxes Disclosure
Income Taxes
Federal Income Tax Reform
In 2017, comprehensive changes in U.S. federal income taxes were enacted through legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made many significant modifications to the tax laws, including reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The Tax Act also eliminated federal bonus depreciation for utilities, limited interest deductibility for non-utility businesses and limited the deductibility of officer compensation. During 2020, the IRS issued final regulations related to certain officer compensation and, in January 2021, issued final regulations on interest deductibility that provide a 10% “de minimis” exception that allows entities with predominantly regulated activities to fully deduct interest expenses.
As a result of the change in the federal income tax rate, the Company re-measured and adjusted its deferred tax assets and liabilities as of December 31, 2017. The portion of that adjustment not related to PNM’s and TNMP’s regulated activities was recorded as a reduction in net deferred tax assets and an increase in income tax expense. The portion related to PNM’s and TNMP’s regulated activities was recorded as a reduction in net deferred tax liabilities and an increase in regulatory liabilities.
Beginning February 2018, PNM’s NM 2016 Rate Case reflected the reduction in the federal and state corporate income tax rates, including amortization of excess deferred federal and state income taxes. In accordance with the order in that case and amortization requirements of the tax laws, PNM is returning the protected portion of excess deferred federal income taxes to customers over the average remaining life of plant in service as of December 31, 2017. The remaining balance of the unprotected portion of excess deferred federal income taxes, which was being returned to customers over a period of approximately twenty-three years, will be returned over a five-year period when new rates go into effect from the 2024 Rate Change. Excess deferred state income taxes were returned to customers over a three-year period, which concluded in the first quarter of 2021. The approved settlement in the TNMP 2018 Rate Case includes a reduction in customer rates to reflect the impacts of the Tax Act beginning on January 1, 2019. TXNM, PNM, and TNMP amortized federal excess deferred income taxes of $25.7 million, $23.0 million, and $2.7 million in 2025.
On July 4, 2025, changes in U.S. federal income tax laws were enacted through the OBBBA. The OBBBA generally extends and makes permanent the changes from the Tax Act, including maintaining the 21% corporate tax rate, interest deductibility for regulated electric utilities, and state and local tax deductibility. The OBBBA also accelerates the phase-out of certain Inflation Reduction Act of 2022 energy tax credits and restricts the availability of credits for “foreign entities of concern.” As a result, TXNM anticipates potentially higher costs associated with any future renewable energy development but does not expect other aspects of the OBBBA to have a material impact on its financial statements.
TXNM
TXNM’s income taxes (benefits) consist of the following components:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
U.S. Income from continuing operations before income taxes (benefits) | $ | 180,013 | $ | 280,240 | $ | 90,529 | |||||||||||
Current tax expense (benefit) | |||||||||||||||||
U.S. federal | $ | — | $ | — | $ | — | |||||||||||
U.S. state | 1,712 | (1,984) | (2,841) | ||||||||||||||
Total current tax expense (benefit) | 1,712 | (1,984) | (2,841) | ||||||||||||||
Deferred tax expense (benefit) | |||||||||||||||||
U.S. federal | 6,284 | 13,042 | (11,503) | ||||||||||||||
U.S. state | 2,360 | 10,630 | (825) | ||||||||||||||
U.S. amortization of accumulated investment tax credits | (169) | (170) | (1,181) | ||||||||||||||
Total deferred tax expense (benefit) | 8,475 | 23,502 | (13,509) | ||||||||||||||
Total income taxes (benefits) | $ | 10,187 | $ | 21,518 | $ | (16,350) | |||||||||||
TXNM’s provision for income taxes (benefits) differed from the federal income tax computed at the statutory rate for each of the years shown. The differences are attributable to the following factors:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
(In thousands except for rates) | ||||||||||||||||||||||||||
U.S. federal statutory income tax rate | $ | 37,803 | 21.00% | $ | 58,850 | 21.00% | $ | 19,011 | 21.00% | |||||||||||||||||
U.S. federal | ||||||||||||||||||||||||||
Nontaxable and nondeductible items | ||||||||||||||||||||||||||
(Earnings) attributable to non-controlling interest in Valencia | (3,767) | (2.09) | (3,368) | (1.20) | (3,892) | (4.30) | ||||||||||||||||||||
| Allowance for equity funds used during construction | (3,906) | (2.17) | (3,756) | (1.34) | (3,145) | (3.48) | ||||||||||||||||||||
| Non-deductible compensation | 1,999 | 1.11 | 1,450 | 0.52 | 1,659 | 1.83 | ||||||||||||||||||||
| Non-deductible merger related costs | — | — | — | — | (1,959) | (2.16) | ||||||||||||||||||||
Other | 545 | 0.30 | 714 | 0.26 | 17 | 0.02 | ||||||||||||||||||||
Tax Credits | ||||||||||||||||||||||||||
Research credits | (1,273) | (0.71) | (533) | (0.19) | (2,074) | (2.29) | ||||||||||||||||||||
Amortization of investment tax credits | (169) | (0.09) | (170) | (0.06) | (1,181) | (1.31) | ||||||||||||||||||||
| Sale of NMRD | — | — | (15,713) | (5.61) | — | — | ||||||||||||||||||||
Other | — | — | (109) | (0.04) | (536) | (0.59) | ||||||||||||||||||||
Changes in unrecognized tax benefits | 82 | 0.05 | (155) | (0.06) | 260 | 0.29 | ||||||||||||||||||||
Changes in valuation allowances | 1,356 | 0.75 | 890 | 0.32 | 1,183 | 1.31 | ||||||||||||||||||||
Other adjustments | ||||||||||||||||||||||||||
| Amortization of excess deferred income tax | (25,649) | (14.25) | (23,362) | (8.34) | (22,859) | (25.25) | ||||||||||||||||||||
Other | (50) | (0.03) | (50) | (0.02) | 17 | 0.02 | ||||||||||||||||||||
U.S. state income taxes (benefits), net of federal effect | 3,216 | 1.79 | 6,830 | 2.44 | (2,851) | (3.15) | ||||||||||||||||||||
| Total income taxes (benefits) | $ | 10,187 | 5.66% | $ | 21,518 | 7.68% | $ | (16,350) | (18.06)% | |||||||||||||||||
The components of TXNM’s income taxes paid were:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
U.S. federal | $ | — | $ | — | $ | — | |||||||||||
U.S. state | |||||||||||||||||
New Mexico | — | (1,707) | 350 | ||||||||||||||
Texas | 2,350 | 709 | 1,155 | ||||||||||||||
Total paid (refunded) | $ | 2,350 | $ | (998) | $ | 1,505 | |||||||||||
The components of TXNM’s net accumulated deferred income tax liability were:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss | $ | 70,959 | $ | 31,592 | |||||||
| Regulatory liabilities related to income taxes | 74,169 | 82,702 | |||||||||
| Federal tax credit carryforwards | 127,140 | 126,770 | |||||||||
| Regulatory disallowances | 42,136 | 42,330 | |||||||||
| Regulatory liability SJGS retirement credits | 20 | 40 | |||||||||
| Other | 48,599 | 52,955 | |||||||||
| Total deferred tax assets | 363,023 | 336,389 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and plant related | (880,253) | (794,203) | |||||||||
| Investment tax credit | (80,899) | (81,068) | |||||||||
| Regulatory assets related to income taxes | (85,926) | (84,053) | |||||||||
| Pension | (42,568) | (41,383) | |||||||||
| Regulatory asset for shutdown of SJGS Units 2 and 3 | (19,265) | (20,860) | |||||||||
Regulatory asset SJGS energy transition property | (83,601) | (85,365) | |||||||||
Regulatory asset PVNGS investment | (19,939) | (21,044) | |||||||||
PVNGS trusts | (47,214) | (48,421) | |||||||||
| Other | (64,588) | (59,384) | |||||||||
| Total deferred tax liabilities | (1,324,253) | (1,235,781) | |||||||||
| Net accumulated deferred income tax liabilities | $ | (961,230) | $ | (899,392) | |||||||
The following table reconciles the change in TXNM’s net accumulated deferred income tax liability to the deferred income tax (benefit) included in the Consolidated Statement of Earnings:
| Year Ended | |||||
| December 31, 2025 | |||||
| (In thousands) | |||||
| Net change in deferred income tax liability per above table | $ | 61,838 | |||
| Change in tax effects of income tax related regulatory assets and liabilities | (11,079) | ||||
| Amortization of excess deferred income tax | (25,649) | ||||
| Tax effect of mark-to-market adjustments | 389 | ||||
| Tax effect of excess pension liability | (17,024) | ||||
| Adjustment for uncertain income tax positions | 641 | ||||
| Reclassification of unrecognized tax benefits | (641) | ||||
| Other | — | ||||
Deferred income tax (benefit) | $ | 8,475 | |||
PNM
PNM’s income taxes (benefits) consist of the following components:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
U.S. Income from continuing operations before income taxes (benefits) | $ | 101,099 | $ | 237,469 | $ | 37,960 | |||||||||||
Current tax expense (benefit) | |||||||||||||||||
U.S. federal | $ | (9,044) | $ | (7,005) | $ | 9,518 | |||||||||||
U.S. state | (1,114) | (5,681) | (4,304) | ||||||||||||||
Total current tax expense (benefit) | (10,158) | (12,686) | 5,214 | ||||||||||||||
Deferred tax expense (benefit) | |||||||||||||||||
U.S. federal | 841 | 28,183 | (22,951) | ||||||||||||||
U.S. state | 5,044 | 13,890 | 1,150 | ||||||||||||||
U.S. amortization of accumulated investment tax credits | (169) | (170) | (171) | ||||||||||||||
Total deferred tax expense (benefit) | 5,716 | 41,903 | (21,972) | ||||||||||||||
Total income taxes (benefits) | $ | (4,442) | $ | 29,217 | $ | (16,758) | |||||||||||
PNM’s provision for income taxes (benefits) differed from the federal income tax computed at the statutory rate for each of the years shown. The differences are attributable to the following factors:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
(In thousands except for rates) | ||||||||||||||||||||||||||
U.S. federal statutory income tax rate | $ | 21,231 | 21.00% | $ | 49,868 | 21.00% | $ | 7,972 | 21.00% | |||||||||||||||||
U.S. federal | ||||||||||||||||||||||||||
Nontaxable and nondeductible items | ||||||||||||||||||||||||||
(Earnings) attributable to non-controlling interest in Valencia | (3,767) | (3.72) | (3,368) | (1.42) | (3,892) | (10.25) | ||||||||||||||||||||
| Allowance for equity funds used during construction | (2,038) | (2.01) | (2,739) | (1.15) | (2,065) | (5.44) | ||||||||||||||||||||
| Non-deductible compensation | 1,277 | 1.26 | 894 | 0.38 | 1,015 | 2.67 | ||||||||||||||||||||
Other | (83) | (0.08) | (38) | (0.02) | (870) | (2.29) | ||||||||||||||||||||
Tax Credits | ||||||||||||||||||||||||||
Research credits | (1,170) | (1.16) | (475) | (0.20) | (1,985) | (5.23) | ||||||||||||||||||||
Other | (169) | (0.17) | (170) | (0.07) | (171) | (0.45) | ||||||||||||||||||||
Changes in unrecognized tax benefits | 53 | 0.05 | (163) | (0.07) | 240 | 0.63 | ||||||||||||||||||||
Changes in valuation allowances | 136 | 0.14 | (277) | (0.12) | (224) | (0.59) | ||||||||||||||||||||
Other adjustments | ||||||||||||||||||||||||||
| Amortization of excess deferred income tax | (22,966) | (22.72) | (20,750) | (8.74) | (14,252) | (37.54) | ||||||||||||||||||||
Other | (50) | (0.05) | (49) | (0.02) | (34) | (0.09) | ||||||||||||||||||||
U.S. state income taxes (benefits), net of federal effect | 3,104 | 3.07 | 6,484 | 2.73 | (2,492) | (6.57) | ||||||||||||||||||||
| Total income taxes (benefits) | $ | (4,442) | (4.39)% | $ | 29,217 | 12.30% | $ | (16,758) | (44.15)% | |||||||||||||||||
The components of PNM’s income taxes paid (refunded) were:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
U.S. federal | $ | (10,774) | $ | (2,262) | $ | (4,794) | |||||||||||
U.S. state | |||||||||||||||||
New Mexico | (2,562) | (1,796) | (544) | ||||||||||||||
Texas | — | — | — | ||||||||||||||
Total paid (refunded) | $ | (13,336) | $ | (4,058) | $ | (5,338) | |||||||||||
The components of PNM’s net accumulated deferred income tax liability were:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss | $ | 23,654 | $ | — | |||||||
| Regulatory liabilities related to income taxes | 56,661 | 64,481 | |||||||||
| Federal tax credit carryforwards | 97,915 | 93,481 | |||||||||
| Regulatory disallowance | 42,136 | 42,330 | |||||||||
Regulatory liability SJGS retirement credits | 20 | 40 | |||||||||
| Other | 24,368 | 35,650 | |||||||||
| Total deferred tax assets | 244,754 | 235,982 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and plant related | (655,362) | (582,089) | |||||||||
| Investment tax credit | (80,899) | (81,068) | |||||||||
| Regulatory assets related to income taxes | (77,648) | (75,464) | |||||||||
| Pension | (37,820) | (36,678) | |||||||||
| Regulatory asset for shutdown of SJGS Units 2 and 3 | (19,265) | (20,860) | |||||||||
| Regulatory asset SJGS energy transition property | (83,601) | (85,365) | |||||||||
Regulatory asset PVNGS investment | (19,939) | (21,044) | |||||||||
PVNGS Trusts | (47,214) | (48,421) | |||||||||
| Other | (36,534) | (41,211) | |||||||||
| Total deferred tax liabilities | (1,058,282) | (992,200) | |||||||||
| Net accumulated deferred income tax liabilities | $ | (813,528) | $ | (756,218) | |||||||
The following table reconciles the change in PNM’s net accumulated deferred income tax liability to the deferred income tax (benefit) included in the Consolidated Statement of Earnings:
| Year Ended | |||||
| December 31, 2025 | |||||
| (In thousands) | |||||
| Net change in deferred income tax liability per above table | $ | 57,310 | |||
| Change in tax effects of income tax related regulatory assets and liabilities | (10,678) | ||||
| Amortization of excess deferred income tax | (22,966) | ||||
| Tax effect of mark-to-market adjustments | (2) | ||||
| Tax effect of excess pension liability | (17,024) | ||||
| Adjustment for uncertain income tax positions | 600 | ||||
| Reclassification of unrecognized tax benefits | (1,524) | ||||
Deferred income tax (benefit) | $ | 5,716 | |||
TNMP
TNMP’s income taxes consist of the following components:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
U.S. Income from continuing operations before income taxes | $ | 156,375 | $ | 130,642 | $ | 112,234 | |||||||||||
Current tax expense (benefit) | |||||||||||||||||
U.S. federal | $ | 10,188 | $ | (2,549) | $ | 11,354 | |||||||||||
U.S. state | 3,713 | 3,300 | 3,055 | ||||||||||||||
Total current tax expense | 13,901 | 751 | 14,409 | ||||||||||||||
Deferred tax expense (benefit) | |||||||||||||||||
| U.S. federal | 18,184 | 26,363 | 2,917 | ||||||||||||||
U.S. state | — | — | (29) | ||||||||||||||
Total deferred tax expense | 18,184 | 26,363 | 2,888 | ||||||||||||||
| Total income taxes | $ | 32,085 | $ | 27,114 | $ | 17,297 | |||||||||||
TNMP’s provision for income taxes differed from the federal income tax computed at the statutory rate for each of the periods shown. The differences are attributable to the following factors:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
(In thousands except for rates) | ||||||||||||||||||||||||||
U.S. federal statutory income tax rate | $ | 32,839 | 21.00% | $ | 27,435 | 21.00% | $ | 23,569 | 21.00% | |||||||||||||||||
U.S. federal | ||||||||||||||||||||||||||
Nontaxable and nondeductible items | (880) | (0.56) | (86) | (0.07) | (149) | (0.13) | ||||||||||||||||||||
Tax Credits | ||||||||||||||||||||||||||
Research credits | (103) | (0.07) | (58) | (0.04) | (90) | (0.08) | ||||||||||||||||||||
Changes in unrecognized tax benefits | 28 | 0.02 | 9 | 0.01 | 20 | 0.02 | ||||||||||||||||||||
Changes in valuation allowances | (50) | (0.03) | (180) | (0.14) | 140 | 0.12 | ||||||||||||||||||||
Other adjustments | ||||||||||||||||||||||||||
| Amortization of excess deferred income tax | (2,682) | (1.72) | (2,612) | (2.00) | (8,607) | (7.67) | ||||||||||||||||||||
U.S. state income taxes (benefits), net of federal effect | 2,933 | 1.88 | 2,606 | 1.99 | 2,414 | 2.15 | ||||||||||||||||||||
| Total income taxes | $ | 32,085 | 20.52% | $ | 27,114 | 20.75% | $ | 17,297 | 15.41% | |||||||||||||||||
The components of TNMP’s income taxes paid were:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
U.S. federal | $ | 2,579 | $ | 8,412 | $ | 13,990 | |||||||||||
U.S. state | |||||||||||||||||
New Mexico | — | — | — | ||||||||||||||
Texas | 4,940 | 2,609 | 2,914 | ||||||||||||||
Total paid (refunded) | $ | 7,519 | $ | 11,021 | $ | 16,904 | |||||||||||
The components of TNMP’s net accumulated deferred income tax liability were:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Regulatory liabilities related to income taxes | $ | 17,508 | $ | 18,221 | |||||||
| Other | 5,099 | 4,522 | |||||||||
| Total deferred tax assets | 22,607 | 22,743 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and plant related | (212,168) | (200,709) | |||||||||
| Regulatory assets related to income taxes | (8,278) | (8,589) | |||||||||
| Loss on reacquired debt | (4,709) | (4,981) | |||||||||
| Pension | (4,749) | (4,706) | |||||||||
| AMS | (2,816) | (2,709) | |||||||||
| Other | (19,262) | (9,156) | |||||||||
| Total deferred tax liabilities | (251,982) | (230,850) | |||||||||
| Net accumulated deferred income tax liabilities | $ | (229,375) | $ | (208,107) | |||||||
The following table reconciles the change in TNMP’s net accumulated deferred income tax liability to the deferred income tax included in the Consolidated Statement of Earnings:
| Year Ended | |||||
| December 31, 2025 | |||||
| (In thousands) | |||||
| Net change in deferred income tax liability per above table | $ | 21,268 | |||
| Change in tax effects of income tax related regulatory assets and liabilities | (401) | ||||
| Amortization of excess deferred income tax | (2,682) | ||||
| Other | (1) | ||||
Deferred income tax | $ | 18,184 | |||
Other Disclosures
The Company is required to recognize only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority. A reconciliation of unrecognized tax benefits is as follows:
TXNM | PNM | TNMP | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Balance at December 31, 2022 | $ | 15,154 | $ | 12,201 | $ | 151 | |||||||||||
Additions (reductions) based on tax positions related to 2023 | (277) | (294) | 17 | ||||||||||||||
Additions for tax positions of prior years | 259 | 239 | 20 | ||||||||||||||
| Balance at December 31, 2023 | 15,136 | 12,146 | 188 | ||||||||||||||
Additions based on tax positions related to 2024 | 19 | 2 | 17 | ||||||||||||||
Additions (reductions) for tax positions of prior years | (154) | (163) | 9 | ||||||||||||||
| Balance at December 31, 2024 | 15,001 | 11,985 | 214 | ||||||||||||||
Additions based on tax positions related to 2025 | 559 | 547 | 12 | ||||||||||||||
Additions for tax positions of prior years | 82 | 53 | 28 | ||||||||||||||
| Balance at December 31, 2025 | $ | 15,642 | $ | 12,585 | $ | 254 | |||||||||||
Included in the balance of unrecognized tax benefits at December 31, 2025 are $15.6 million, $12.5 million, and $0.3 million that, if recognized, would affect the effective tax rate for TXNM, PNM, and TNMP. The Company does not anticipate that any unrecognized tax expenses or unrecognized tax benefits will be reduced or settled in 2026.
TXNM, PNM, and TNMP had no estimated interest income or expense related to income taxes for the years ended December 31, 2025, 2024, and 2023. There was no accumulated accrued interest receivable or payable related to income taxes as of December 31, 2025 and 2024.
The Company files a federal consolidated and several consolidated and separate state income tax returns. The tax years prior to 2022 are closed to examination by either federal or state taxing authorities other than Arizona. The tax years prior to 2021 are closed to examination by Arizona taxing authorities. Other tax years are open to examination by federal and state taxing authorities and net operating loss carryforwards are open to examination for the years in which the carryforwards are utilized. At December 31, 2025, the Company has $330.7 million of federal net operating loss carryforwards that expire beginning in 2036 and $130.0 million of federal tax credit carryforwards that expire beginning in 2026. State net operating losses expire beginning in 2038 and vary from federal due to differences between state and federal tax law.
In 2008, fifty percent bonus tax depreciation was enacted as a temporary two-year stimulus measure as part of the Economic Stimulus Act of 2008. Bonus tax depreciation in various forms has been extended since that time, including by the Protecting Americans from Tax Hikes Act of 2015. The 2015 act extended and phased-out bonus tax depreciation through 2019. As discussed above, the Tax Act eliminated bonus depreciation for utilities effective September 28, 2017. However, in 2020 the IRS issued regulations interpreting Tax Act amendments to depreciation provisions of the IRC which allowed the Company to claim a bonus depreciation deduction on certain construction projects placed in service after the third quarter of 2017. As a result of the net operating loss carryforwards for income tax purposes created by bonus depreciation, certain tax carryforwards were not expected to be utilized before their expiration. In addition, as a result of Tax Act changes to the deductibility of officer compensation, certain deferred tax benefits related to compensation are not expected to be realized. The Company has impaired the deferred tax assets for tax carryforwards which are not expected to be utilized and for compensation that is not expected to be deductible.
The Company earns investment tax credits for construction or purchase of eligible property. The Company uses the deferral method of accounting for these investment tax credits. Impairments of tax attributes after reflecting the expiration of carryforwards under applicable tax laws for 2023 through 2025 are as follows:
TXNM | PNM | TNMP | |||||||||||||||
| (In thousands) | |||||||||||||||||
December 31, 2025: | |||||||||||||||||
| Federal tax credit carryforwards | $ | 625 | $ | 194 | $ | — | |||||||||||
| Compensation expense | $ | (120) | $ | (70) | $ | (50) | |||||||||||
December 31, 2024: | |||||||||||||||||
Federal tax credit carryforwards | $ | 131 | $ | — | $ | — | |||||||||||
| Compensation expense | $ | (516) | $ | (335) | $ | (179) | |||||||||||
December 31, 2023: | |||||||||||||||||
Federal tax credit carryforwards | $ | 839 | $ | (427) | $ | — | |||||||||||
| Compensation expense | $ | 387 | $ | 246 | $ | 140 | |||||||||||
The tax effect of compensation that is not expected to be deductible and impairments of unexpired tax credits are reflected as a valuation allowance against deferred tax assets. The reserve balances, after reflecting expiration of carryforwards under applicable tax laws, at December 31, 2025 and 2024 are as follows:
TXNM | PNM | TNMP | |||||||||||||||
| (In thousands) | |||||||||||||||||
| December 31, 2025: | |||||||||||||||||
| Federal tax credit carryforwards | $ | 2,811 | $ | 194 | $ | — | |||||||||||
| Compensation expense | $ | 476 | $ | 324 | $ | 152 | |||||||||||
| December 31, 2024: | |||||||||||||||||
| Federal tax credit carryforwards | $ | 2,186 | $ | — | $ | — | |||||||||||
| Compensation expense | $ | 596 | $ | 394 | $ | 202 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.