Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Rate Reconciliation

The effective income tax rate from continuing operations varies from the U.S. federal statutory rate principally due to the following:

	Three Months Ended March 31,
	2023(a)		2022(a)
U.S. federal statutory rate	21.0	%	21.0	%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	3.3		55.2
Qualified NDT fund income and losses	33.7		(127.5)
Amortization of investment tax credit, including deferred taxes on basis differences	(0.7)		(9.2)
Production tax credits and other credits	(0.8)		(34.8)
Noncontrolling interests	—		(1.0)
Other	(1.5)		9.4
Effective income tax rate(b)	55.0	%	(86.9)	%

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(a)Positive percentages represent income tax expense. Negative percentages represent income tax benefit.

(b)The effective tax rate in 2023 is primarily due to the impacts of realized and unrealized NDT income on Income before income taxes. The effective tax rate in 2022 is primarily due to the impacts of unrealized NDT losses on Income before income taxes and one-time income tax adjustments.

Other Tax Matters

Tax Matters Agreement

In connection with the separation, we entered into a TMA with Exelon. The TMA governs the respective rights, responsibilities, and obligations between us and Exelon after the separation with respect to tax liabilities and benefits, tax attributes, tax returns, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns.

Responsibility and Indemnification for Taxes. As a former subsidiary of Exelon, we have joint and several liability with Exelon to the IRS and certain state jurisdictions relating to federal and state tax filings we were included in prior to the separation. The TMA specifies the portion of this tax liability for which we bear contractual responsibility. Specifically, we are liable for our share of certain taxes required to be paid by Exelon with respect to taxable years or periods (or portions thereof) ending on or prior to the separation to the extent that we would have been responsible for such taxes under the Exelon tax sharing agreement then existing. As of March 31, 2023 and December 31, 2022, our Consolidated Balance Sheets reflect a payable of $32 million for tax liabilities where we maintain contractual responsibility to Exelon, with $18 million in Other accounts receivable and $50 million in Noncurrent other liabilities.

Tax Refunds and Attributes. The TMA provides for the allocation of certain pre-closing tax attributes between us and Exelon, along with our share of refunds for taxes claimed by Exelon for periods prior to separation. Upon separation, certain attributes that were generated by our business were allocated to Exelon, and under the TMA, Exelon will reimburse Constellation when those attributes are utilized. As of March 31, 2023, our Consolidated Balance Sheet reflects receivables of $212 million and $319 million in Other accounts receivable and Other deferred debits and other assets, respectively. As of December 31, 2022, our Consolidated Balance Sheet reflected receivables of $168 million and $362 million in Other accounts receivable and Other deferred debits and other assets, respectively.