Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 14: Income Taxes

Presented in the table below are the components of income tax expense for the years ended December 31:

	2022		2021		2020
Current income taxes:
State	$	26	$	72	$	8
Federal	82		75		—
Total current income taxes	$	108	$	147	$	8
Deferred income taxes:
State	$	24	$	10	$	49
Federal	57		221		159
Amortization of deferred investment tax credits	(1)		(1)		(1)
Total deferred income taxes	80		230		207
Provision for income taxes	$	188	$	377	$	215

Presented in the table below is a reconciliation between the statutory federal income tax rate and the Company’s effective tax rate for the years ended December 31:

	2022		2021		2020
Income tax at statutory rate	21.0	%	21.0	%	21.0	%
Increases (decreases) resulting from:
State taxes, net of federal taxes	4.1	%	3.9	%	4.8	%
EADIT	(6.5)	%	(3.6)	%	(2.1)	%
Tax impact due to the sale of HOS	—	%	1.6	%	—	%
Other, net	0.1	%	0.1	%	(0.4)	%
Effective tax rate	18.7	%	23.0	%	23.3	%

Presented in the table below are the components of the net deferred tax liability as of December 31:

	2022		2021
Deferred tax assets:
Advances and contributions	$	351	$	439
Tax losses and credits	19		10
Regulatory income tax assets	203		301
Pension and other postretirement benefits	64		50
Other	140		144
Total deferred tax assets	777		944
Valuation allowance	(11)		(10)
Total deferred tax assets, net of allowance	$	766	$	934
Deferred tax liabilities:
Property, plant and equipment	$	2,872	$	3,087
Deferred pension and other postretirement benefits	64		69
Other	249		180
Total deferred tax liabilities	3,185		3,336
Total deferred tax liabilities, net of deferred tax assets	$	(2,419)	$	(2,402)

The Company recognized no federal net operating loss (“NOL”) carryforwards as of December 31, 2022 and 2021. The Company fully utilized its federal NOL carryforwards in 2021 due to the sale of HOS, and therefore, no valuation allowance is required.

As of December 31, 2022 and 2021, the Company had state NOLs of $240 million and $123 million, respectively, a portion of which are offset by a valuation allowance as the Company does not believe these NOLs are more likely than not to be realized. The state NOL carryforwards expire in 2023 through 2042.

The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local or non-U.S. income tax examinations by tax authorities for years on or before 2015. The Company has state income tax examinations in progress and does not expect material adjustments to result.

Presented in the table below are the changes in gross liability, excluding interest and penalties, for unrecognized tax benefits:

	Amount
Balance as of January 1, 2021	$	122
Increases in current period tax positions	23
Decreases in prior period measurement of tax positions	(5)
Balance as of December 31, 2021	$	140
Increases in current period tax positions	26
Decreases in prior period measurement of tax positions	(8)
Balance as of December 31, 2022	$	158

The Company’s tax positions relate primarily to the deductions claimed for repair and maintenance costs on its utility plant. The Company does not anticipate material changes to its unrecognized tax benefits within the next year. As discussed above, the Company utilized its remaining federal NOLs in 2021, and therefore this federal tax attribute will not be available to reduce the federal liabilities for uncertain tax positions or interest accrued as presented on the Company’s Consolidated Financial Statements.

If the Company sustains all of its positions as of December 31, 2022, an unrecognized tax benefit of $10 million, excluding interest and penalties, would impact the Company’s effective tax rate. The Company had an immaterial amount of interest and penalties related to its tax positions as of December 31, 2022 and 2021.

Presented in the table below are the changes in the valuation allowance:

	Amount
Balance as of January 1, 2020	$	21
Decreases in current period tax positions	(2)
Balance as of December 31, 2020	$	19
Decreases in current period tax positions	(9)
Balance as of December 31, 2021	$	10
Increases in current period tax positions	1
Balance as of December 31, 2022	$	11