INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Southern Company files a consolidated federal income tax return and the Registrants file various state income tax returns, some of which are combined or unitary. Under a joint consolidated income tax allocation agreement, each Southern Company subsidiary's current and deferred tax expense is computed on a stand-alone basis, and each subsidiary is allocated an amount of tax similar to that which would be paid if it filed a separate income tax return. In accordance with IRS regulations, each company is jointly and severally liable for the federal tax liability.

Current and Deferred Income Taxes

Details of income tax provisions are as follows:

	2023
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Federal —
Current	$	54	$	242	$	205	$	49	$	(320)	$	62
Deferred	299		(257)		195		(26)		334		68
Total federal	353		(15)		400		23		14		130
State —
Current	41		82		37		1		(1)		24
Deferred	102		14		11		12		(1)		57
Total state	143		96		48		13		(2)		81
Total	$	496	$	81	$	448	$	36	$	12	$	211

	2022
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Federal —
Current	$	10	$	54	$	38	$	42	$	(43)	$	122
Deferred	455		259		152		(16)		56		(3)
Total federal	465		313		190		26		13		119
State —
Current	27		14		(21)		—		2		42
Deferred	303		96		201		11		5		19
Total state	330		110		180		11		7		61
Total	$	795	$	423	$	370	$	37	$	20	$	180

	2021
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Federal —
Current	$	50	$	104	$	311	$	25	$	(340)	$	85
Deferred	36		172		(449)		(15)		343		35
Total federal	86		276		(138)		10		3		120
State —
Current	(25)		23		71		—		(16)		(68)
Deferred	206		73		(101)		11		—		223
Total state	181		96		(30)		11		(16)		155
Total	$	267	$	372	$	(168)	$	21	$	(13)	$	275

Southern Company's and Southern Power's ITCs and PTCs generated in the current tax year and carried forward from prior tax years that cannot be utilized in the current tax year are reclassified from current to deferred taxes in federal income tax expense in the tables above. Southern Power's ITCs and PTCs reclassified in this manner include $5 million for 2023, $17 million for 2022, and $6 million for 2021. Southern Power received $332 million, $49 million, and $289 million of cash related to federal ITCs under renewable energy initiatives in 2023, 2022, and 2021, respectively. See "Deferred Tax Assets and Liabilities" herein for additional information.

In accordance with regulatory requirements, deferred federal ITCs for the traditional electric operating companies are amortized over the average life of the related property, with such amortization normally applied as a credit to reduce depreciation and amortization in the statements of income. Southern Power's and the natural gas distribution utilities' deferred federal ITCs, as well as certain state ITCs for Nicor Gas, are amortized to income tax expense over the life of the respective asset. ITCs amortized in 2023, 2022, and 2021 were immaterial for the traditional electric operating companies and Southern Company Gas and were as follows for Southern Company and Southern Power:

	Southern Company		Southern Power
	(in millions)
2023	$	84	$	58
2022	83		58
2021	84		58

When Southern Power recognizes tax credits, the tax basis of the asset is reduced by 50% of the ITCs received, resulting in a net deferred tax asset. Southern Power has elected to recognize the tax benefit of this basis difference as a reduction to income tax expense in the year in which the plant reaches commercial operation.

State ITCs and other state credits, which are recognized in the period in which the credits are generated, reduced Georgia Power's income tax expense by $49 million in 2023, $53 million in 2022, and $66 million in 2021.

Southern Power's federal and state PTCs, which are recognized in the period in which the credits are generated, reduced Southern Power's income tax expense by $26 million in 2023, $27 million in 2022, and $16 million in 2021.

During the fourth quarter 2023, Southern Power executed an agreement to transfer certain PTCs generated in 2023 and received cash of $12 million. The discount recognized was booked through income tax expense and was immaterial.

Pursuant to the Global Amendments to the Vogtle Joint Ownership Agreements (as defined in Note 2 under "Georgia Power – Nuclear Construction – Joint Owner Contracts"), Georgia Power paid $39 million to the other Vogtle Owners for advanced nuclear PTCs for Plant Vogtle Unit 3. The gain recognized in 2023 was booked through income tax benefit and was immaterial.

Effective Tax Rate

Southern Company's effective tax rate is typically lower than the statutory rate due to employee stock plans' dividend deduction, non-taxable AFUDC equity at the traditional electric operating companies, flowback of excess deferred income taxes at the regulated utilities, and federal income tax benefits from ITCs and PTCs primarily at Southern Power.

In July 2021, Southern Company Gas affiliates completed the sale of Sequent. As a result of the sale, changes in state apportionment rates resulted in $85 million of additional net state tax expense. See Note 15 under "Southern Company Gas" for additional information.

A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:

	2023
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
State income tax, net of federal deduction	2.6		5.2		1.5		4.9		(0.7)		7.8
Employee stock plans' dividend deduction	(0.5)		—		—		—		—		—
Non-deductible book depreciation	0.7		0.7		0.8		0.4		—		—
Flowback of excess deferred income taxes	(9.2)		(19.8)		(2.6)		(10.2)		—		(2.6)
AFUDC-Equity	(1.1)		(1.2)		(1.2)		—		—		—
Federal PTCs	(1.2)		—		(1.4)		—		(7.4)		—
ITC amortization	(1.3)		(0.1)		(0.1)		—		(19.0)		—
Noncontrolling interests	0.6		—		—		—		11.1		—
Other	(0.2)		(0.2)		(0.3)		0.1		0.1		(0.6)
Effective income tax (benefit) rate	11.4	%	5.6	%	17.7	%	16.2	%	5.1	%	25.6	%

	2022
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
State income tax, net of federal deduction	6.2		4.8		6.5		4.4		1.9		6.4
Employee stock plans' dividend deduction	(0.5)		—		—		—		—		—
Non-deductible book depreciation	0.6		0.5		0.6		0.3		—		—
Flowback of excess deferred income taxes	(6.6)		(1.9)		(9.6)		(7.8)		—		(2.5)
AFUDC-Equity	(1.1)		(0.8)		(1.5)		—		—		—
Federal PTCs	—		—		—		—		(6.6)		—
ITC amortization	(1.3)		(0.1)		(0.1)		—		(17.2)		(0.1)
Noncontrolling interests	0.5		—		—		—		8.4		—
Other	—		0.3		—		0.3		(0.1)		(0.9)
Effective income tax (benefit) rate	18.8	%	23.8	%	16.9	%	18.2	%	7.4	%	23.9	%

	2021
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
State income tax, net of federal deduction	5.5		4.6		(5.7)		4.9		(8.0)		15.1
Employee stock plans' dividend deduction	(0.9)		—		—		—		—		—
Non-deductible book depreciation	0.9		0.5		3.1		0.4		—		—
Flowback of excess deferred income taxes	(11.7)		(2.6)		(49.9)		(15.2)		—		(2.8)
AFUDC-Equity	(1.5)		(0.7)		(6.4)		—		—		—
Federal PTCs	—		—		—		—		(4.6)		—
ITC amortization	(2.2)		(0.1)		(0.4)		—		(29.7)		(0.1)
Noncontrolling interests	0.8		—		—		—		13.4		—
Leveraged lease impairments and dispositions	(1.4)		—		—		—		—		—
Other	(0.1)		0.2		(1.9)		0.6		(0.4)		0.6
Effective income tax (benefit) rate	10.4	%	22.9	%	(40.2)	%	11.7	%	(8.3)	%	33.8	%

Deferred Tax Assets and Liabilities

The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements of the Registrants and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows:

	December 31, 2023
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Deferred tax liabilities —
Accelerated depreciation	$	9,683	$	2,566	$	3,628	$	339	$	1,346	$	1,576
Property basis differences	2,647		1,444		812		188		—		189
Employee benefit obligations	979		321		446		49		12		74
AROs	833		476		314		—		—		—
Under recovered fuel and natural gas costs	601		80		508		13		—		—
Regulatory assets –
AROs	1,902		667		1,196		39		—		—
Employee benefit obligations	797		213		260		37		—		11
Remaining book value of retired assets	369		143		221		5		—		—
Premium on reacquired debt	63		9		53		1		—		—
Other	700		182		223		43		2		191
Total deferred income tax liabilities	18,574		6,101		7,661		714		1,360		2,041
Deferred tax assets —
AROs	2,735		1,143		1,510		39		—		—
ITC and PTC carryforwards	1,387		12		691		—		481		—
Employee benefit obligations	985		224		316		52		10		89
Estimated loss on plants under construction	857		—		857		—		—		—
Estimated loss on regulatory disallowance	26		—		—		—		—		26
Other state deferred tax attributes	363		—		13		231		49		8
Federal effect of net state deferred tax liabilities	418		215		92		—		27		101
Other property basis differences	197		—		83		—		97		—
State effect of federal deferred taxes	115		115		—		—		—		—
Other partnership basis differences	85		—		—		—		85		—
Regulatory liability associated with the Tax Reform Legislation (not subject to normalization)	34		30		—		3		—		—
Long-term debt fair value adjustment	79		—		—		—		—		79
Other comprehensive losses	67		4		4		—		6		—
Other	538		188		152		57		18		74
Total deferred income tax assets	7,886		1,931		3,718		382		773		377
Valuation allowance	(206)		—		(75)		(41)		(27)		(7)
Net deferred income tax assets	7,680		1,931		3,643		341		746		370
Net deferred income taxes (assets)/liabilities	$	10,894	$	4,170	$	4,018	$	373	$	614	$	1,671
Recognized in the balance sheets:
Accumulated deferred income taxes – assets	$	(96)	$	—	$	—	$	(96)	$	—	$	—
Accumulated deferred income taxes – liabilities	$	10,990	$	4,170	$	4,018	$	469	$	614	$	1,671

	December 31, 2022
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Deferred tax liabilities —
Accelerated depreciation	$	9,443	$	2,564	$	3,447	$	338	$	1,351	$	1,505
Property basis differences	2,350		1,303		693		179		—		150
Employee benefit obligations	888		284		412		43		11		68
AROs	876		499		324		—		—		—
Under recovered fuel and natural gas costs	805		185		548		40		—		32
Regulatory assets –
AROs	2,006		679		1,285		42		—		—
Employee benefit obligations	677		180		226		30		—		15
Remaining book value of retired assets	400		142		253		5		—		—
Premium on reacquired debt	66		9		57		—		—		—
Other	555		179		181		40		14		82
Total deferred income tax liabilities	18,066		6,024		7,426		717		1,376		1,852
Deferred tax assets —
AROs	2,882		1,178		1,609		42		—		—
ITC and PTC carryforwards	1,685		12		673		—		794		—
Employee benefit obligations	890		198		304		47		9		89
Estimated loss on plants under construction	888		—		888		—		—		—
Other state deferred tax attributes	388		—		12		239		51		7
Federal effect of net state deferred tax liabilities	365		175		88		—		28		92
Other property basis differences	207		—		79		—		109		—
State effect of federal deferred taxes	136		136		—		—		—		—
Other partnership basis differences	111		—		—		—		111		—
Regulatory liability associated with the Tax Reform Legislation (not subject to normalization)	137		127		—		9		—		—
Long-term debt fair value adjustment	85		—		—		—		—		85
Other comprehensive losses	72		4		5		—		5		—
Other	552		213		186		62		17		28
Total deferred income tax assets	8,398		2,043		3,844		399		1,124		301
Valuation allowance	(257)		—		(125)		(41)		(27)		(9)
Net deferred income tax assets	8,141		2,043		3,719		358		1,097		292
Net deferred income taxes (assets)/liabilities	$	9,925	$	3,981	$	3,707	$	359	$	279	$	1,560
Recognized in the balance sheets:
Accumulated deferred income taxes – assets	$	(111)	$	—	$	—	$	(107)	$	—	$	—
Accumulated deferred income taxes – liabilities	$	10,036	$	3,981	$	3,707	$	466	$	279	$	1,560

The traditional electric operating companies and the natural gas distribution utilities have tax-related regulatory assets (deferred income tax charges) and regulatory liabilities (deferred income tax credits). The regulatory assets are primarily attributable to tax benefits flowed through to customers in prior years, deferred taxes previously recognized at rates lower than the current enacted tax law, and taxes applicable to capitalized interest. The regulatory liabilities are primarily attributable to deferred taxes previously recognized at rates higher than the current enacted tax law and to unamortized ITCs. See Note 2 for each Registrant's related balances at December 31, 2023 and 2022.

Tax Credit Carryforwards

Federal ITC/PTC carryforwards at December 31, 2023 were as follows:

	Southern Company		Alabama Power		Georgia Power		Southern Power
	(in millions)
Federal ITC/PTC carryforwards	$	829	$	12	$	131	$	481
Tax year in which federal ITC/PTC carryforwards begin expiring	2031		2032		2031		2035
Year by which federal ITC/PTC carryforwards are expected to be utilized	2029		2028		2028		2029

The estimated tax credit utilization reflects the various transactions described in Note 15 and could be impacted by numerous factors, including the acquisition of additional renewable projects, changes in taxable income projections, transfer of eligible credits, potential income tax rate changes, and the ultimate implementation of the natural gas safe harbor method for repairs. In the third quarter 2023, Georgia Power started generating advanced nuclear PTCs for Plant Vogtle Unit 3 beginning on the in-service date of July 31, 2023. In addition, pursuant to the Global Amendments to the Vogtle Joint Ownership Agreements (as defined in Note 2 under "Georgia Power – Nuclear Construction – Joint Owner Contracts"), Georgia Power is purchasing advanced nuclear PTCs for Plant Vogtle Unit 3 from the other Vogtle Owners. See Note 2 under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.

At December 31, 2023, Georgia Power also had approximately $452 million in net state investment and other net state tax credit carryforwards for the State of Georgia that will expire between tax years 2023 and 2032 and are not expected to be fully utilized. Georgia Power has a net state valuation allowance of $60 million associated with these carryforwards.

The ultimate outcome of these matters cannot be determined at this time.

Net Operating Loss Carryforwards

At December 31, 2023, the net state income tax benefit of state and local NOL carryforwards for Southern Company's subsidiaries were as follows:

Company/Jurisdiction	Approximate Net State Income Tax Benefit of NOL Carryforwards		Tax Year NOL Begins Expiring
	(in millions)
Mississippi Power
Mississippi	$	183	2032
Southern Power
Oklahoma	26		2035
Florida	10		2034
Other states	2		Various
Southern Power Total	$	38
Other(*)
New York	11		2036
New York City	14		2036
Other states	30		Various
Southern Company Total	$	276

(*)Represents other non-registrant Southern Company subsidiaries. Alabama Power, Georgia Power, and Southern Company Gas did not have material state or local NOL carryforwards at December 31, 2023.

State NOLs for Mississippi, Oklahoma, and Florida are not expected to be fully utilized prior to expiration. At December 31, 2023, Mississippi Power had a net state valuation allowance of $32 million for the Mississippi NOL, Southern Power had net state valuation allowances of $11 million for the Oklahoma NOL and $10 million for the Florida NOL, and Southern Company had a net valuation allowance of $25 million for the New York and New York City NOLs.

The ultimate outcome of these matters cannot be determined at this time.

Unrecognized Tax Benefits

Changes in unrecognized tax benefits for the periods presented were as follows:

	Southern Company		Georgia Power		Southern Company Gas
	(in millions)
Unrecognized tax benefits at December 31, 2020	$	44	$	—	$	—
Tax positions changes –
Increase from prior periods	3		—		—
Unrecognized tax benefits at December 31, 2021	47		—		—
Tax positions changes –
Increase from prior periods	33		—		32
Unrecognized tax benefits at December 31, 2022	80		—		32
Tax positions changes –
Increase from prior periods	88		86		2
Statute of limitations expiration	(52)		(9)		—
Unrecognized tax benefits at December 31, 2023	$	116	$	77	$	34

The unrecognized tax positions increase from prior periods for 2022 is primarily related to the amendment of certain 2018 state tax filing positions related to Southern Company Gas dispositions. If accepted by the states, these positions would decrease Southern Company's and Southern Company Gas' annual effective tax rates. The ultimate outcome of these unrecognized tax benefits is dependent on acceptance by each state and is not expected to be resolved within the next 12 months.

The unrecognized tax positions increase from prior periods for 2023 are primarily related to the amendment of certain 2019 through 2021 state tax filing positions related to tax credit utilization, a portion of which decreased in the fourth quarter 2023 due to a statute of limitations expiration. If effective settlement of the positions is favorable, these positions would decrease Southern Company's and Georgia Power's annual effective tax rates. The ultimate outcome of this unrecognized tax benefit, of which a portion is expected to be resolved within the next 12 months, is dependent on acceptance by the state or expiration of related statute of limitations.

The unrecognized tax positions reductions due to statute of limitations expiration for 2023 primarily relates to a 2019 state tax filing position to exclude certain gains from 2019 dispositions from taxation in a certain unitary state. This tax position and related interest was recognized in the fourth quarter 2023 and decreased Southern Company's annual effective tax rate.

All of the Registrants classify interest on tax uncertainties as interest expense. Accrued interest for all tax positions was immaterial for all years presented. None of the Registrants accrued any penalties on uncertain tax positions.

The IRS has finalized its audits of Southern Company's consolidated federal income tax returns through 2022. Southern Company is a participant in the Compliance Assurance Process of the IRS. The IRS has selected six Southern Power partnership returns for exam for the 2020 and 2021 tax years. The ultimate outcome of this matter cannot be determined at this time. The audits for the Registrants' state income tax returns have either been concluded, or the statute of limitations has expired, for years prior to 2015.