Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:

	Dominion Energy						Virginia Power
Three Months Ended March 31,	2022			2021			2022			2021
U.S. statutory rate		21.0	%		21.0	%		21.0	%		21.0	%
Increases (reductions) resulting from:
Recognition of deferred taxes - stock of subsidiary held for sale	9.4				—			—			—
State taxes, net of federal benefit		3.3			3.5			4.4			4.5
Investment tax credits		(3.9	)		(3.8	)		(6.7	)		(6.6	)
Production tax credits		(0.4	)		(0.3	)		(0.8	)		(0.6	)
Reversal of excess deferred income    taxes		(4.1	)		(2.2	)		(3.0	)		(2.2	)
Changes in state deferred taxes associated    with assets held for sale		0.5			—			—			—
AFUDC - equity		(0.6	)		(0.4	)		(0.9	)		(0.7	)
Other, net		0.2			—			0.6			0.3
Effective tax rate		25.4	%		17.8	%		14.6	%		15.7	%

As described in Note 3, Dominion Energy entered into an agreement to sell 100% of the equity interests in Hope that will be treated as a stock sale for income tax purposes.  In connection with the pending sale, Dominion Energy established $87 million of deferred tax liabilities reflecting the excess of the financial reporting basis over the tax basis in Hope’s stock.  These deferred taxes will reverse upon closing of the sale, which is expected to occur by the end of 2022.  

As of March 31, 2022, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of these unrecognized tax benefits.

Discontinued operations

Income tax expense reflected in discontinued operations is $6 million and $7 million for the three months ended March 31, 2022 and 2021, respectively.