XML 56 R27.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Tax
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
In response to the economic impacts of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. The CARES Act provided relief to corporate taxpayers by permitting a five-year carryback of net operating losses (NOLs) for tax years 2018, 2019 and 2020, temporarily removing the 80 percent limitation when applying the NOLs to carryback years, increased the 30 percent limitation on interest deductibility to 50 percent of adjusted taxable income for tax years 2019 and 2020, and provided for certain employee retention tax credits and refunds for eligible employers.

Under the CARES Act, Con Edison carried back its $29 million NOL from tax year 2018 to tax year 2013 generating a $2.5 million net tax refund for which a tax receivable was established in 2020. In addition, Con Edison recognized a discrete income tax benefit of $4 million in 2020, due to the higher federal statutory tax rate in 2013. The 2018 federal NOL was recorded at 21 percent and was carried back to tax year 2013, which had a 35 percent federal statutory tax rate. This income tax benefit was primarily recognized at the Clean Energy Businesses.

The components of income tax are as follows:
  Con EdisonCECONY
(Millions of Dollars)202120202019202120202019
State
Current$14$7$(12)$1$6$22
Deferred7950961069768
Federal
Current43(2)—12141185
Deferred6142219217363
Amortization of investment tax credits(7)(7)(7)(3)(2)(3)
Total income tax expense$190$90$296$246$215$335
The tax effects of temporary differences, which gave rise to deferred tax assets and liabilities, are as follows:
                  Con Edison                CECONY
(Millions of Dollars)20212020202120200
Deferred tax liabilities:
Property basis differences$8,298$7,985$7,213$6,901
Regulatory assets:
   Unrecognized pension and other postretirement costs3691031861
   Environmental remediation costs264243241222
   Deferred storm costs3331— — 
   Other regulatory assets640536609508
Operating lease right-of-use asset204220155165
Pension Asset Reserve478— 471— 
   Equity investments— 46— — 
Other30— — — 
Total deferred tax liabilities$9,983$9,971$8,720$8,657
Deferred tax assets:
   Accrued pension and other postretirement costs$218$504$188$427
   Regulatory liabilities:
      Future income tax554617517579
      Other regulatory liabilities727656620570
Superfund and other environmental costs264241238219
Asset retirement obligations177178141143
Operating lease liabilities195211155165
Loss carryforwards1441643834 
Tax credits carryforward9461,022— — 
Valuation allowance(22)(22)— — 
Equity investments34— — — 
Other— 5942127
Total deferred tax assets3,2373,6301,9392,264
Net deferred tax liabilities$6,746$6,341$6,781$6,393
Unamortized investment tax credits1271341518
Net deferred tax liabilities and unamortized investment tax credits$6,873$6,475$6,796$6,411

Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes is as follows:
  Con EdisonCECONY
(% of Pre-tax income)202120202019202120202019
STATUTORY TAX RATE
Federal21 %21 %21 %21 %21 %21 %
Changes in computed taxes resulting from:
State income taxes, net of federal income tax benefit4 4 4 5 5 5 
Taxes attributable to noncontrolling interests3 (1)(1)— — — 
Cost of removal2 2 1 1 1 1 
Other plant-related items(1)(1)(1)(1)(1)(1)
Amortization of excess deferred federal income taxes(12)(14)(4)(11)(12)(4)
Renewable energy credits(2)(3)(2)— — — 
Research and development credits(1)— (1)— — (1)
Other— (1)— — 1 — 
Effective tax rate14 %7 %17 %15 %15 %21 %
At December 31, 2021, Con Edison had $946 million in general business tax credit carryovers (primarily renewable energy tax credits). If unused, these general business tax credit carryovers will begin to expire in 2034. A deferred tax asset for these tax attribute carryforwards was recorded, and no valuation allowance was provided, as it is more likely than not that the deferred tax asset will be realized.

At December 31, 2021, Con Edison had a New York State NOL of approximately $1.13 billion, primarily as a result of higher accelerated state tax depreciation. A deferred tax asset has been recognized for these New York State NOL carryforwards that will begin to expire, if unused, in 2038 and no valuation allowance was provided; as it is more likely than not that the deferred tax asset will be realized. In addition, Con Edison has a $5 million valuation allowance against the New York City NOL deferred tax asset of approximately $17 million. Con Edison also has a $21.5 million valuation allowance for other state NOL carryforwards; as it is not more likely than not that the deferred tax asset will be realized.

In December 2019, the Federal government issued final regulations providing guidance on provisions in the TCJA allowing for full expensing of qualified plant additions. These provisions, which Con Edison adopted under the proposed regulations of August 2018, allowed the Utilities a full expense tax deduction for plant additions in the fourth quarter of 2017, and the Utilities continue additional first year depreciation transition rules for plant additions placed in service in tax years beginning in 2018, under long-term construction contracts entered into before September 28, 2017. The impact on the Utilities of these regulations is discussed above.

In November 2018, the Federal government issued, and Con Edison adopted, proposed regulations providing guidance on the tax deductibility of interest expense under the TCJA. The TCJA generally provides for the continued deductibility of interest expense by regulated public utilities and may limit the deduction for interest expense by most non-utility businesses to 30 percent of adjusted taxable income (which resembles earnings before interest, taxes, depreciation and amortization).The regulations provide an annual safe harbor test that if at least 90 percent of consolidated plant assets consist of utility property, the entire consolidated group will be treated as a regulated public utility, and all of the consolidated group’s interest expense will be currently tax deductible. For 2018, Con Edison met the 90 percent safe harbor test and its deduction for interest expense was not limited. For 2019, Con Edison did not meet the 90 percent safe harbor test, however, its deduction for interest expense was not limited as a percentage of adjusted taxable income. In 2020, the federal government issued final regulations under the TCJA. Under the CARES Act, the limit of the deductible interest expense as a percentage of adjusted taxable income increased from 30 percent to 50 percent and accordingly, all of Con Edison’s interest expense in 2020 will be tax deductible. In 2021, the limit of the deductible interest expense as a percentage of adjustable taxable income returned to 30 percent; however, Con Edison’s deduction for interest expense was not limited. Qualifying consolidated groups would not be entitled to the full expensing provisions in the TCJA noted above. The safe harbor rules do not apply to partnerships in which Con Edison and its subsidiaries are a partner.

In April 2021, NY State passed a law that increased the corporate franchise tax rate on business income from 6.5% to 7.25%, retroactive to January 1, 2021, for taxpayers with taxable income greater than $5 million. The law also reinstated the business capital tax at 0.1875%, not to exceed an annual maximum tax liability of $5 million per taxpayer. NY State requires a corporate franchise taxpayer to calculate and pay the highest amount of tax under the three alternative methods: a tax on business income; a tax on business capital; or a fixed dollar minimum. The provisions to increase the corporate franchise tax rate and reinstate a business capital tax are scheduled to expire after 2023 and are not expected to have a material impact on the Companies’ financial position, results of operations or liquidity.
Uncertain Tax Positions
Under the accounting rules for income taxes, the Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, including resolution of any related appeals and litigation processes, based solely on the technical merits of the position.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for Con Edison and CECONY follows:
Con EdisonCECONY
(Millions of Dollars)202120202019202120202019
Balance at January 1,$14$13$6$3$2$4
Additions based on tax positions related to the current year3—12—1
Additions based on tax positions of prior years21101 1 —
Reductions for tax positions of prior years(2)—(2)(1)— (1)
Reductions from expiration of statute of limitations— — —— — — 
Settlements——(2)——(2)
Balance at December 31,$17$14$13$5$3$2

At December 31, 2021, the estimated liability for uncertain tax positions for Con Edison was $17 million ($5 million for CECONY). Con Edison reasonably expects to resolve within the next twelve months approximately $12 million of various federal and state uncertainties due to the expected completion of ongoing tax examinations, of which the entire amount, if recognized, would reduce Con Edison's effective tax rate. The amount related to CECONY is $3 million, which, if recognized, would reduce CECONY’s effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $17 million ($16 million, net of federal taxes) with $5 million attributable to CECONY.

The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. For the year ended December 31, 2021, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At December 31, 2021 and 2020, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.

Con Edison's federal tax return for 2020 remains under examination. State and local income tax returns remain open for examination in NY State for tax years 2010 through 2020, in NJ for tax years 2017 through 2020 and in New York City for tax years 2017 through 2020.