Income taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income taxes

(19)Income taxes

Liabilities for income taxes reflected in our Consolidated Balance Sheets are as follows (in millions).

	December 31,
	2022		2021
Currently payable (receivable)	$	511	$	(482	)
Deferred		76,069		89,679
Other		440		1,046
	$	77,020	$	90,243

The tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are shown below (in millions).

	December 31,
	2022			2021
Deferred income tax liabilities:
Investments – unrealized appreciation	$	41,150		$	55,437
Deferred charges reinsurance assumed		2,073			2,234
Property, plant and equipment and equipment held for lease		32,080			31,323
Goodwill and other intangible assets		7,010			6,748
Other		4,695			4,094
		87,008			99,836
Deferred income tax assets:
Unpaid losses and loss adjustment expenses		(1,290	)		(1,091	)
Unearned premiums		(1,196	)		(990	)
Accrued liabilities		(1,790	)		(1,868	)
Regulatory liabilities		(1,323	)		(1,349	)
Other		(5,340	)		(4,859	)
		(10,939	)		(10,157	)
Net deferred income tax liability	$	76,069		$	89,679

Notes to Consolidated Financial Statements (Continued)

(19)Income taxes (Continued)

We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries, which are expected to be reinvested indefinitely. Repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to the extent that such earnings represent capital to support ongoing business operations. Generally, no U.S. federal income taxes will be imposed on future distributions of foreign earnings under current law. However, distributions to the U.S. or other foreign jurisdictions could be subject to withholding and other local taxes.

Income tax expense (benefit) reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2022 was as follows (in millions).

	2022			2021			2020
Federal	$	(10,360	)	$	20,345		$	10,596
State		762			(527	)		1,086
Foreign		1,080			1,061			758
	$	(8,518	)	$	20,879		$	12,440
Current	$	4,815		$	5,326		$	5,052
Deferred		(13,333	)		15,553			7,388
	$	(8,518	)	$	20,879		$	12,440

Income tax expense (benefit) is reconciled to hypothetical amounts computed at the U.S. federal statutory rate for each of the three years ending December 31, 2022 in the table below (in millions).

	2022			2021			2020
Earnings (loss) before income taxes	$	(30,576	)	$	111,686		$	55,693
Hypothetical income tax expense (benefit) at the U.S. federal statutory rate	$	(6,421	)	$	23,454		$	11,696
Dividends received deduction and tax-exempt interest		(512	)		(457	)		(448	)
State income taxes, less U.S. federal income tax effect		602			(417	)		858
U.S. income tax credits*		(2,187	)		(1,860	)		(1,519	)
Goodwill impairments		—			—			1,977
Other differences, net		—			159			(124	)
	$	(8,518	)	$	20,879		$	12,440
Effective income tax rate		27.9	%		18.7	%		22.3	%

* U.S. income tax credits derive primarily from production tax credits associated with wind-energy generation of BHE and tax credits arising from affordable housing investments.

We file income tax returns in the United States and in state, local and foreign jurisdictions. We have settled income tax liabilities with the U.S. federal taxing authority (“IRS”) for tax years through 2011. The 2012 and 2013 tax years are under review by the IRS’s Independent Office of Appeals, and the IRS is currently auditing tax years 2014 through 2019. We are also under audit or subject to audit with respect to income taxes in state and foreign jurisdictions. It is reasonably possible that certain of these income tax examinations will be settled in 2023. We currently do not believe that the outcome of unresolved issues or claims will be material to our Consolidated Financial Statements.

At December 31, 2022 and 2021, net unrecognized tax benefits were $440 million and $1,046 million, respectively. Included in the balance at December 31, 2022, were $383 million of tax positions that, if recognized, would impact the effective tax rate. The remaining balance in net unrecognized tax benefits principally relates to tax positions where the ultimate recognition is highly certain but there is uncertainty about the timing of recognition. Because of the impact of deferred income tax accounting, these positions, when recognized, would not affect the annual effective income tax rate. We do not expect material increases to the estimated amount of unrecognized tax benefits during 2023.