Income Tax

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

Con Edison’s income tax expense increased to $153 million for the three months ended March 31, 2022 from $78 million for the three months ended March 31, 2021. The increase in income tax expense is primarily due to higher income before income tax expense, higher state income taxes, and lower income attributable to non-controlling interests.

CECONY’s income tax expense increased to $117 million for the three months ended March 31, 2022 from $114 million for the three months ended March 31, 2021. The increase in income tax expense is primarily due to higher income before income tax expense and lower flow-through tax benefits in 2022 for plant-related items, offset in part by a higher general business tax credit.

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 for the three months ended March 31, 2022 and 2021 is as follows:

	Con Edison				CECONY
(% of Pre-tax income)	2022		2021		2022		2021
STATUTORY TAX RATE
Federal	21	%	21	%	21	%	21	%
Changes in computed taxes resulting from:
State income tax, net of federal income tax benefit	5		4		5		5
Amortization of excess deferred federal income taxes	(6)		(9)		(7)		(7)
Taxes attributable to non-controlling interests	2		—		—		—
Cost of removal	1		2		1		1
Other plant-related items	—		(1)		—		—
Renewable energy credits	(1)		(1)		—		—
Effective tax rate	22	%	16	%	20	%	20	%

In April 2021, New York 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. New York 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

At March 31, 2022, the estimated liability for uncertain tax positions for Con Edison was $16 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 $16 million ($15 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 three months ended March 31, 2022 and 2021, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At March 31, 2022 and December 31, 2021, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.