Income Taxes

6 Months Ended

Jun. 30, 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
Six Months Ended June 30,	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		25.0			—			—			—
State taxes, net of federal benefit		7.9			2.3			4.4			4.5
Investment tax credits		(9.8	)		(5.3	)		(6.9	)		(5.8	)
Production tax credits		(1.1	)		(0.4	)		(1.0	)		(0.6	)
Reversal of excess deferred income    taxes		(10.2	)		(3.5	)		(3.9	)		(2.1	)
State legislative change		—			(1.5	)		—			(1.7	)
Changes in state deferred taxes associated    with assets held for sale		1.4			—			—			—
AFUDC - equity		(1.3	)		(0.5	)		(1.0	)		(0.6	)
Other, net		0.2			(0.4	)		0.6			0.3
Effective tax rate		33.1	%		11.7	%		13.2	%		15.0	%

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 has recorded $90 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 June 30, 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.

The Companies’ 2021 effective tax rate reflect the benefit of a state legislative change enacted in April 2021 for tax years beginning January 1, 2022. Dominion Energy’s effective tax rate reflects a $21 million deferred tax benefit, inclusive of a $16 million deferred tax benefit at Virginia Power.

Discontinued operations

Income tax expense reflected in discontinued operations is $4 million and $11 million for the six months ended June 30, 2022 and 2021, respectively.