Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9 — Income Taxes

Effective Tax Rates

The following tables summarize the effective income tax rates for Cleco and Cleco Power for the three and nine months ended September 30, 2022, and 2021:

Cleco
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
	2022		2021		2022		2021
Effective tax rate	7.6	%	20.3	%	11.6	%	12.4	%

Cleco Power
	FOR THE THREE MONTHS ENDED SEPT. 30,				FOR THE NINE MONTHS ENDED SEPT. 30,
	2022		2021		2022		2021
Effective tax rate	4.4	%	1.0	%	4.1	%	(0.2)	%

For Cleco, the effective income tax rates for the three and nine months ended September 30, 2022, were different than the federal statutory rate primarily due to an adjustment to record tax expense at the projected annual effective tax rate largely caused by mark-to-market gains on Cleco Cajun’s gas-related derivatives, the amortization of excess ADIT, the flow through of state tax benefits, adjustments for tax returns as filed, permanent deductions, and state tax expense.

For Cleco Power, the effective income tax rates for the three and nine months ended September 30, 2022, were different than the federal statutory rate primarily due to the adjustment to record tax expense at the projected annual effective tax rate, the amortization of excess ADIT, the flow through of state tax benefits, adjustments for tax returns as filed, and state tax expense.

For Cleco and Cleco Power, the effective income tax rates for the three and nine months ended September 30, 2021, were different than the federal statutory rate primarily due to the flow through of tax benefits, including AFUDC; the amortization of excess ADIT; adjustment to record tax expense at the projected annual effective tax rate; adjustments for tax returns as filed; and state tax expense.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. For the three and nine months ended September 30, 2022, and 2021, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At September 30, 2022, and December 31, 2021, Cleco and Cleco Power had no liability for uncertain tax positions or interest payable related to uncertain tax positions.

Income Tax Audits

Cleco participates in the IRS’s Compliance Assurance Process in which tax positions are examined and agreed upon prior to filing the federal tax return. While the statute of limitations remains open for tax years 2019, 2020, and 2021, the IRS has completed its review of tax year 2019, and this tax return was filed consistent with the IRS’s review. The IRS has placed Cleco in the Bridge phase of the Compliance Assurance Process for the 2020 and 2021 tax years. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances. The IRS has accepted Cleco’s application for the Compliance Assurance Process for the 2022 tax year.

The state income tax years 2019, 2020, and 2021 remain subject to examination by the Louisiana Department of Revenue.

Cleco classifies income tax penalties as a component of other expense. For the three and nine months ended September 30, 2022, and 2021, no penalties were recognized.

CARES Act

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions such as an alternative minimum tax credit refund, a five-year net operating loss carryback from years 2018 through 2020, and deferred payments of employer payroll taxes.

At September 30, 2022, Cleco and Cleco Power had $3.0 million and $1.8 million, respectively, deferred in employer payroll tax payments for the period March 27, 2020, through December 31, 2020, which will be paid by December 31, 2022.