Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 8. INCOME TAXES

In accordance with interim reporting requirements, the Company uses an estimated annual effective tax rate for computing its provisions for income taxes. An estimate of annual income tax expense (or benefit) is made each interim period using estimates for annual pre-tax income, income tax adjustments, and tax credits. The estimated annual effective tax rates do not include discrete events such as tax law changes, examination settlements, accounting method changes, or adjustments to tax expense or benefits attributable to prior years. Discrete events are recorded in the interim period in which they occur or become known. The estimated annual tax rate is applied to year-to-date pre-tax income to determine income tax expense (or benefit) for the interim period consistent with the annual estimate. In subsequent interim periods, income tax expense (or benefit) for the period is computed as the difference between the year-to-date amount reported for the previous interim period and the current period’s year-to-date amount.

The following table summarizes the significant factors impacting the difference between the Company's effective tax rate and the federal statutory rate for the three and six months ended June 30 (dollars in thousands):

	Three months ended June 30,										Six months ended June 30,
	2023					2022					2023					2022
Federal income taxes at statutory rates	$	2,452		21.0	%	$	2,195		21.0	%	$	12,577		21.0	%	$	14,948		21.0	%
Increase (decrease) in tax resulting from:
Flow through related to deduction of meters      and mixed service costs (1)		(5,689	)	(48.7	)		(2,401	)	(23.0	)		(19,212	)	(32.1	)		(19,835	)	(27.9	)
Tax effect of regulatory treatment of utility       plant differences		(1,525	)	(13.1	)		(976	)	(9.3	)		(5,212	)	(8.7	)		(7,298	)	(10.3	)
State income tax expense		232		2.0			78		0.7			798		1.3			901		1.3
Tax credits		(1,135	)	(9.7	)		—		—			(1,135	)	(1.9	)		—		—
Other		(145	)	(1.3	)		105		1.0			(254	)	(0.4	)		(551	)	(0.7	)
Total income tax benefit	$	(5,810	)	(49.8	)%	$	(999	)	(9.6	)%	$	(12,438	)	(20.8	)%	$	(11,835	)	(16.6	)%

(1)The Company's general rate cases included approval of base rate increases, offset by tax customer credits. As the tax customer credits are returned to customers, this results in a decrease to income tax expense as a result of flowing through the benefits related to meters and mixed service costs. The decrease in income tax expense offsets the increases in base rates granted to the Company in these general rate cases.