Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income (loss) before income taxes are as follows:

	Years Ended December 31,
	2023		2022		2021
	(millions)
Continuing operations	$	(257)	$	1,130	$	303
Discontinuing operations(a)	509		162		169
Total income before income taxes	$	252	$	1,292	$	472

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(a)    See Note 4.

The components of income tax expense (benefit) are as follows:

	Years Ended December 31,
	2023		2022		2021
	(millions)
Federal:
Current	$	—	$	—	$	1
Deferred	(28)		118		24
Total federal	(28)		118		25
State:
Current	—		—		1
Deferred	3		43		11
Total state	3		43		12
Income tax expense (benefit) from continuing operations	(25)		161		37
Income taxes from discontinued operations	59		10		11
Total income taxes	$	34	$	171	$	48

A reconciliation of U.S. federal income tax at the statutory rate to the actual income taxes is as follows:

	Years Ended December 31,
	2023		2022		2021
	(millions)
Income tax expense (benefit) at U.S. statutory rate of 21%	$	(54)	$	237	$	63
Increases (reductions) resulting from:
Taxes attributable to noncontrolling interests	54		(110)		(32)
State income taxes – net of federal income tax benefit	2		33		10
Renewable energy tax credits	(28)		(2)		(2)
Other – net	1		3		(2)
Income tax expense (benefit) from continuing operations	$	(25)	$	161	$	37

The effective tax rate for continuing operations was approximately 10%, 14% and 12% for the years ended December 31, 2023, 2022 and 2021, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These items are stated at the enacted tax rates that are expected to be in effect when taxes are actually paid or recovered. NEP believes that it is more likely than not that the deferred tax assets at December 31, 2023 shown in the table below, net of the valuation allowances, will be realized due to sufficient future income.

The income tax effects of temporary differences giving rise to NEP's deferred income tax liabilities and assets are as follows:

	December 31,
	2023		2022
	(millions)
Deferred tax liabilities:
Investment in partnership(a)(b)	$	(263)	$	(199)
Total deferred tax liabilities	(263)		(199)
Deferred tax assets:
Net operating loss carryforwards(b)	418		363
Tax credit carryforwards	41		15
Valuation allowance	(3)		(4)
Total deferred tax assets	456		374
Net deferred income taxes	$	193	$	175

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(a)    At December 31, 2023 and 2022, includes a deferred tax asset of approximately $10 million and $18 million, respectively, of interest limitation carryforward with an indefinite expiration period.

(b)    In 2023, excludes approximately $65 million of tax impacts relating to taxable gains, which are estimated to be $258 million as of December 31, 2023, expected to be allocated to NEE Equity. See Note 15 – Tax Allocations.

Deferred tax assets and liabilities included on NEP's consolidated balance sheets are as follows:

	December 31,
	2023		2022
	(millions)
Noncurrent other assets	$	215	$	195
Noncurrent other liabilities	(22)		(20)
Net deferred income taxes	$	193	$	175

The components of deferred tax assets, before valuation allowance, relating to net operating loss carryforwards and tax credit carryforwards at December 31, 2023 are as follows:

	Amount			Expiration Dates
	(millions)
Net operating loss carryforwards:
Federal	$	363		2034 – 2037
State	55			2028 – 2043
Total net operating loss carryforwards	$	418	(a)
Tax credit carryforwards	$	41	(b)	2024 – 2043

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(a)    Includes approximately $218 million and $7 million of federal and state, respectively, net operating loss carryforwards with an indefinite expiration period.

(b)    In December 2023, NEP OpCo entered into an agreement to sell renewable energy tax credits earned in 2023. NEP expects to receive cash of approximately $24 million relating to its portion of the proceeds in the first quarter of 2024.

During 2023 and 2022, NEP recorded state tax liabilities of approximately less than $1 million and $1 million (net of federal tax benefit), respectively, related to unrecognized tax benefits of prior year state tax filing positions. The total amount of unrecognized tax benefit that, if recognized, would affect the effective tax rate is approximately $5 million (net of federal tax benefit). The open tax years in all jurisdictions are 2014 through 2022.