Accounting For Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Accounting for Income Taxes

NOTE 13. ACCOUNTING FOR INCOME TAXES

Income Tax Expense

Income tax expense consisted of the following for the years ended December 31 (dollars in thousands):

	2023			2022			2021
Current income tax expense	$	3,207		$	1,040		$	807
Deferred income tax expense (benefit)		(36,837	)		(18,231	)		11,224
Total income tax expense (benefit)	$	(33,630	)	$	(17,191	)	$	12,031

A reconciliation of federal income taxes derived from the statutory federal tax rate of 21 percent applied to income before income taxes is as follows for the years ended December 31 (dollars in thousands):

	2023					2022					2021
Federal income taxes at statutory rates	$	28,886		21.0	%	$	28,977		21.0	%	$	33,467		21.0	%
Increase (decrease) in tax resulting from:
Tax effect of regulatory treatment of utility    plant differences (1)		(12,270	)	(8.9	)		(12,366	)	(9.0	)		(13,820	)	(8.7	)
State income tax expense		2,077		1.5			1,676		1.2			1,385		0.8
Flow through related to deduction of meters     and mixed service costs (2)		(47,983	)	(34.9	)		(34,454	)	(25.0	)		(8,678	)	(5.4	)
Tax credits		(2,334	)	(1.7	)		(258	)	(0.2	)		(75	)	—
Other		(2,006	)	(1.4	)		(766	)	(0.5	)		(248	)	(0.2	)
Total income tax expense (benefit)	$	(33,630	)	(24.4	)%	$	(17,191	)	(12.5	)%	$	12,031		7.5	%

(1)Prior to 2022, for the depreciation-related temporary differences under the normalization tax accounting method, the Company utilized the average rate assumption method to compute the amounts returned to customers. Beginning in 2022, the Company changed to the alternative method, to comply with the revenue procedure and private letter rulings.

(2)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 due to flowing through the benefits related to meters and mixed service costs.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carryforwards. The total net deferred income tax liability consisted of the following as of December 31 (dollars in thousands):

	2023			2022
Deferred income tax assets:
Regulatory liabilities	$	192,099		$	197,998
Tax credits and net operating loss carryforwards		76,969			74,782
Provisions for pensions		19,100			20,132
Other		47,839			54,903
Total gross deferred income tax assets		336,007			347,815
Valuation allowances for deferred tax assets		(10,461	)		(3,874	)
Total deferred income tax assets after valuation allowances		325,546			343,941
Deferred income tax liabilities:
Utility property, plant, and equipment		746,876			712,470
Regulatory assets		268,833			281,483
Other		28,155			24,983
Total deferred income tax liabilities		1,043,864			1,018,936
Net long-term deferred income tax liability	$	718,318		$	674,995

The realization of deferred income tax assets is dependent upon the ability to generate taxable income in future periods. The Company evaluated available evidence supporting the realization of its deferred income tax assets and determined it is more likely than not that deferred income tax assets will be realized.

As of December 31, 2023, the Company had $17.3 million of state tax credit carryforwards. Of the total amount, the Company believes that it is more likely than not that it will only be able to utilize $6.8 million of the state tax credits. As such, the Company has recorded a valuation allowance of $10.5 million against the state tax credit carryforwards and reflected the net amount of $6.8 million as an asset as of December 31, 2023. State tax credits expire from 2024 to 2037.

Status of Internal Revenue Service (IRS) and State Examinations

The Company and its eligible subsidiaries file consolidated federal income tax returns. All tax years after 2018 are open for an IRS tax examination. The IRS is reviewing tax year 2019.

The Company files state income tax returns in certain jurisdictions, including Idaho, Oregon, Montana and Alaska. Subsidiaries are charged or credited with the tax effects of their operations on a stand-alone basis.

All tax years after 2019 are open for examination in Idaho, Oregon, Montana and Alaska.

The Company believes open tax years for federal or state income taxes will not result in adjustments that would be significant to the consolidated financial statements.