XML 86 R32.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income taxes
Note 12 · Income taxes
The components of income taxes attributable to net income for common stock were as follows:
HEI consolidatedHawaiian Electric consolidated
Years ended December 31202120202019202120202019
(in thousands)   
Federal   
Current $51,455 $23,207 $28,736 $42,794 $31,950 $21,751 
Deferred(11,689)(4,215)(4,353)(12,109)(5,408)(7,793)
Deferred tax credits, net*4,611 10,979 13,410 302 1,549 13,155 
 44,377 29,971 37,793 30,987 28,091 27,113 
State      
Current 12,119 8,430 10,472 4,861 3,768 5,579 
Deferred 6,290 2,509 (10,732)8,279 8,559 (8,491)
Deferred tax credits, net*21 — 14,104 21 — 14,104 
 18,430 10,939 13,844 13,161 12,327 11,192 
Total$62,807 $40,910 $51,637 $44,148 $40,418 $38,305 
*     In 2021 and 2020, primarily represents federal tax credits related to Mauo’s solar-plus-storage project, deferred and amortized starting in 2021 and 2020, respectively. In 2019, primarily represents federal and state credits related to Hawaiian Electric’s West Loch PV project, deferred and amortized starting in 2020.
A reconciliation of the amount of income taxes computed at the federal statutory rate to the amount provided in the consolidated statements of income was as follows:
HEI consolidatedHawaiian Electric consolidated
Years ended December 31202120202019202120202019
(in thousands)   
Amount at the federal statutory income tax rate $65,281 $50,531 $56,996 $46,995 $44,468 $41,399 
Increase (decrease) resulting from:      
State income taxes, net of federal income tax benefit
15,735 9,448 11,658 10,323 9,658 8,703 
Net deferred tax asset (liability) adjustment related to the Tax Act
(9,886)(11,267)(9,255)(9,886)(11,267)(9,255)
Other, net (8,323)(7,802)(7,762)(3,284)(2,441)(2,542)
Total$62,807 $40,910 $51,637 $44,148 $40,418 $38,305 
Effective income tax rate20.2 %17.0 %19.0 %19.7 %19.1 %19.4 %
The tax effects of book and tax basis differences that give rise to deferred tax assets and liabilities were as follows:
HEI consolidatedHawaiian Electric consolidated
December 312021202020212020
(in thousands)  
Deferred tax assets  
Regulatory liabilities, excluding amounts attributable to property, plant and equipment
$87,817 $93,684 $87,817 $93,684 
Operating lease liabilities35,449 41,582 29,661 34,586 
Revenue taxes35,040 22,726 35,040 22,726 
Allowance for bad debts26,217 31,973 7,156 4,835 
Other1
58,518 44,127 20,529 24,741 
Total deferred tax assets243,041 234,092 180,203 180,572 
Deferred tax liabilities  
Property, plant and equipment related500,659 487,209 490,713 473,734 
Operating lease right-of-use assets
35,271 41,370 29,661 34,586 
Regulatory assets, excluding amounts attributable to property, plant and equipment
23,700 25,841 23,700 25,841 
Retirement benefits6,863 18,407 8,261 20,537 
Other 61,308 56,354 36,502 23,672 
Total deferred tax liabilities627,801 629,181 588,837 578,370 
Net deferred income tax liability$384,760 $395,089 $408,634 $397,798 
1     As of December 31, 2021, HEI consolidated and Hawaiian Electric consolidated have deferred tax assets of $11.0 million and $2.5 million respectively, relating to the benefit of state tax credit carryforwards of $14.6 million and $3.4 million respectively. These state tax credit carryforwards primarily relate to the West Loch PV project and do not expire. The Company concluded that as of December 31, 2021, a valuation allowance is not required.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. Based upon historical taxable income and projections for future taxable income, management believes it is more likely than not the Company and the Utilities will realize substantially all of the benefits of the deferred tax assets. As of December 31, 2021 and 2020, valuation allowances for deferred tax benefits were nil. The Utilities are included in the consolidated federal and Hawaii income tax returns of HEI and are subject to the provisions of HEI’s tax sharing agreement, which determines each subsidiary’s (or subgroup’s) income tax return liabilities and refunds on a standalone basis as if it filed a separate return (or subgroup consolidated return).
The following is a reconciliation of the Company’s liability for unrecognized tax benefits for 2021, 2020 and 2019.
HEI consolidatedHawaiian Electric consolidated
(in millions)202120202019202120202019
Unrecognized tax benefits, January 1$12.7 $2.2 $2.1 $12.7 $1.7 $1.6 
Additions based on tax positions taken during the year2.8 0.2 0.5 0.3 0.2 0.5 
Reductions based on tax positions taken during the year(0.5)— — — — — 
Additions for tax positions of prior years7.6 11.6 0.1 0.2 11.6 0.1 
Reductions for tax positions of prior years(5.5)(0.1)(0.2)(1.6)(0.1)(0.2)
Lapses of statute of limitations— (0.2)(0.3)— (0.2)(0.3)
Settlement— (1.0)— — (0.5)— 
Unrecognized tax benefits, December 31$17.1 $12.7 $2.2 $11.6 $12.7 $1.7 
At December 31, 2021 and 2020, there were $10.2 million and $11.6 million, respectively, of unrecognized tax benefits that, if recognized, would affect the Company’s annual effective tax rate. As of December 31, 2021 and 2020, the Utilities had $10.2 million and $11.6 million, respectively, of unrecognized tax benefits that, if recognized, would affect the Utilities’ annual effective tax rate.
HEI consolidated. The Company recognizes interest accrued related to unrecognized tax benefits in “Interest expense-other than on deposit liabilities and other bank borrowings” and penalties, if any, in operating expenses. In 2021, 2020 and
2019, the Company recognized approximately $0.2 million, $(0.5) million and $0.1 million, respectively, in interest expense. The Company had $0.3 million and $0.1 million of interest accrued as of December 31, 2021 and 2020, respectively.
Hawaiian Electric consolidated. The Utilities recognize interest accrued related to unrecognized tax benefits in “Interest expense and other charges, net” and penalties, if any, in operating expenses. In 2021, 2020 and 2019, the Utilities recognized approximately $0.1 million, $(0.3) million and $0.1 million, respectively, in interest expense. The Utilities had $0.1 million and $0.1 million of interest accrued as of December 31, 2021 and 2020, respectively.
As of December 31, 2021, the disclosures above present the Company’s and the Utilities’ accruals for potential tax liabilities, which involve management’s judgment regarding the likelihood of the benefits being sustained under governmental review. While the Company and the Utilities currently do not expect material changes to occur in the next twelve months, the Company and the Utilities are generally unable to estimate the range of impacts on the balance of uncertain tax positions or the impact on the effective tax rate from the resolution of these issues until the Internal Revenue Service addresses them in the current examination process, and therefore, it is possible that the amount of unrecognized benefit with respect to the Company’s and the Utilities’ uncertain tax positions could increase or decrease within the next 12 months. The final resolution of uncertain tax positions could result in adjustments to recorded amounts.
Based on information currently available, the Company and the Utilities believe these accruals have adequately provided for potential income tax issues with federal and state tax authorities, and that the ultimate resolution of tax issues for all open tax periods will not have a material adverse effect on its results of operations, financial condition or liquidity.
The statute of limitations for IRS examinations has expired for years prior to 2017. The Company is currently under IRS examination for the tax years 2017 and 2018. In the fourth quarter of 2020, the Company and the Hawaii Department of Taxation agreed to a final assessment of tax liabilities for the years 2011 through 2018, however, the statute of limitations for Hawaii remains open for tax years 2017 and subsequent.