Income taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The Company’s and the Utilities’ effective tax rates (combined federal and state income tax rates) for the nine months ended September 30, 2023 were 20% and 22%, respectively. These rates differed from the combined statutory rates, due primarily to higher nontaxable bank-owned life insurance, partially offset by the Utilities’ lower amortization of excess deferred income taxes related to the provision in the 2017 Tax Cuts and Jobs Act that lowered the federal income tax rate from 35% to 21%.

In August 2020, the Internal Revenue Service notified the Company that its 2017 and 2018 income tax returns would be examined. The Company was previously audited every year through 2011, at which time the IRS changed their internal policies regarding audit frequency. The audit is still in progress. The Company has not been notified of any material audit adjustments to date.

The Inflation Reduction Act of 2022 (IRA) was signed by President Biden on August 16, 2022. Key provisions under the IRA include a 15% corporate alternative minimum tax (CAMT) imposed on certain large corporations and a 1% excise tax on stock repurchases after December 31, 2022. Based on current interpretation of the law and current guidance available we do not believe HEI will be impacted by the CAMT or stock repurchase excise tax provisions.

The IRA also creates new tax credits and enhances others to stimulate investment in renewable energy sources. Certain provisions of the IRA became effective beginning tax year 2023. The Company continues to monitor guidance and assess related tax planning opportunities.