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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
(14)  Income Taxes

The details of income tax (benefit) expense are as follows:
Puget EnergyYear Ended December 31,
(Dollars in Thousands)202220212020
Charged to operating expenses:
Current:
Federal$41,198 $25,395 $7,962 
State628 721 7 
Deferred:
Federal17,866 (1,759)(6,414)
State6 158 109 
Total income tax expense$59,698 $24,515 $1,664 

Puget Sound EnergyYear Ended December 31,
(Dollars in Thousands)202220212020
Charged to operating expenses:
Current:
Federal$81,597 $52,616 $10,607 
State869 670 383 
Deferred:
Federal(2,171)(9,027)15,252 
State— — — 
Total income tax expense$80,295 $44,259 $26,242 
The following reconciliation compares pre-tax book income at the federal statutory rate of 21.0% to the actual income tax expense in the Statements of Income:
Puget EnergyYear Ended December 31,
(Dollars in Thousands)202220212020
Income taxes at the statutory rate$99,549 $59,927 $38,720 
Increase (decrease):
Utility plant differences1
$(23,028)$(22,325)$(22,991)
AFUDC, net(3,567)1,509 (6,095)
Executive compensation1,821 1,386 2,440 
Treasury grant amortization(5,717)(5,424)(8,935)
Excess deferred tax amortization(13,722)(13,392)(3,038)
Other–net4,362 2,834 1,563 
Total income tax expense$59,698 $24,515 $1,664 
Effective tax rate12.6 %8.6 %0.9 %

Puget Sound EnergyYear Ended December 31,
(Dollars in Thousands)202220212020
Income taxes at the statutory rate$119,962 $79,868 $63,110 
Increase (decrease):
Utility plant differences1
$(23,028)$(22,325)$(22,991)
AFUDC, net(3,567)1,509 (6,095)
Executive compensation1,821 1,386 2,440 
Treasury grant amortization(5,717)(5,424)(8,935)
Excess deferred tax amortization(13,722)(13,392)(3,038)
Other–net4,546 2,637 1,751 
Total income tax expense$80,295 $44,259 $26,242 
Effective tax rate14.1 %11.6 %8.7 %
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1.Utility plant differences include the reversal of excess deferred taxes using the average rate assumption method in the amount of $27.2 million and $27.6 million in 2022 and 2021, respectively.
The Company’s net deferred tax liability at December 31, 2022, and 2021, is composed of amounts related to the following types of temporary differences:
Puget EnergyAt December 31,
(Dollars in Thousands)20222021
Utility plant and equipment$1,853,450 $1,892,692 
Unrealized gain on derivative instruments158,175 50,971 
Other deferred tax liabilities365,035 313,270 
Subtotal deferred tax liabilities2,376,660 2,256,933 
Net operating loss carryforward(234,825)(254,007)
Net regulatory liability for income taxes(811,161)(865,976)
Other deferred tax assets(299,597)(184,023)
Unrealized loss on derivative instruments(45,130)(40,443)
Subtotal deferred tax assets(1,390,713)(1,344,449)
Total net deferred tax liabilities$985,947 $912,484 

Puget Sound EnergyAt December 31,
(Dollars in Thousands)20222021
Utility plant and equipment$1,852,644 $1,892,674 
Unrealized gain on derivative instruments143,147 31,940 
Other deferred tax liabilities279,612 225,753 
Subtotal deferred tax liabilities2,275,403 2,150,367 
Net regulatory liability for income taxes(811,724)(866,541)
Other deferred tax assets(293,977)(178,211)
Unrealized loss on derivative instruments(30,102)(21,412)
Subtotal deferred tax assets(1,135,803)(1,066,164)
Total net deferred tax liabilities$1,139,600 $1,084,203 

The Company calculates its deferred tax assets and liabilities under ASC 740, “Income Taxes” (ASC 740).  ASC 740 requires recording deferred tax balances, at the currently enacted tax rate, on assets and liabilities that are reported differently for income tax purposes than for financial reporting purposes.  The utilization of deferred tax assets requires sufficient taxable income in future years.  ASC 740 requires a valuation allowance on deferred tax assets when it is more likely than not that the deferred tax assets will not be realized.  PSE fully utilized its PTC balance in 2021 and had no carryforwards at the end of 2021.  Puget Energy’s net operating loss carryforwards expire from 2029 through 2037. Net operating losses generated in 2018 and thereafter have no expiration date. No valuation allowance has been provided for net operating loss carryforwards.

Unrecognized Tax Benefits
The Company accounts for uncertain tax positions under ASC 740, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements.  ASC 740 requires the use of a two-step approach for recognizing and measuring tax positions taken or expected to be taken in a tax return.  First, a tax position should only be recognized when it is more likely than not, based on technical merits, that the position will be sustained upon challenge by the taxing authorities and taken by management to the court of last resort.  Second, a tax position that meets the recognition threshold should be measured at the largest amount that has a greater than 50.0% likelihood of being sustained.
As of December 31, 2022, and 2021, the Company had no material unrecognized tax benefits.  As a result, no interest or penalties were accrued for unrecognized tax benefits during the year.
The Company has open tax years from 2019 through 2022. The Company classifies interest as interest expense and penalties as other expense in the financial statements.