Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

Effective Tax Rate Reconciliations

The reconciliations of the effective tax rate for the periods were:

	Successor				Predecessor		Successor				Predecessor
	Three Months Ended June 30, 2024		May 18 through June 30, 2023		April 1 through May 17, 2023		Six Months Ended June 30, 2024		May 18 through June 30, 2023		January 1 through May 17, 2023
Income (loss) before income taxes	$	570	$	50	$	617	$	958	$	50	$	677
Income tax benefit (expense)	(112)		(19)		(198)		(181)		(19)		(212)
Effective tax rate	19.6%		38.0%		32.1%		18.9%		38.0%		31.3%
Federal income tax statutory tax rate	21 %		21 %		21 %		21 %		21 %		21 %
Income tax benefit (expense) computed at the federal income tax statutory tax rate	(120)		(10)		(130)		(201)		(10)		(143)
Income tax increase (decrease) due to:
State income taxes, net of federal benefit	(17)		(2)		(32)		(29)		(2)		(34)
Change in valuation allowance	14		2		116		34		2		129
Production tax credits	9		—		—		18		—		—
Other permanent differences	6		(3)		(11)		12		(3)		(16)
Nuclear decommissioning trust taxes	(4)		(6)		(2)		(15)		(6)		(9)
Reorganization adjustments	—		—		(138)		—		—		(138)
Other	—		—		(1)		—		—		(1)
Income tax benefit (expense)	$	(112)	$	(19)	$	(198)	$	(181)	$	(19)	$	(212)

Valuation Allowance

Management assesses the available positive and negative evidence to estimate whether it is more likely than not that sufficient future taxable income will be generated to permit use of existing deferred tax assets. The assessment of future taxable income includes the scheduled reversal of taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations. For the six months ended June 30, 2024 (Successor), Talen recognized a $34 million tax benefit for the reduction in federal and state valuation allowances, primarily related to year-to-date divestitures which increase the amount of tax attributes that can be utilized. See Note 17 for information on the sale transactions. At each period, management will continue to assess the available positive and negative evidence to determine the need for a valuation allowance.