Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:

	Dominion Energy						Virginia Power
Nine Months Ended September 30,	2022			2021			2022			2021
U.S. statutory rate		21.0	%		21.0	%		21.0	%		21.0	%
Increases (reductions) resulting from:
Recognition of taxes - sale of    subsidiary stock		7.3			—			—			—
State taxes, net of federal benefit		4.7			2.0			4.4			4.5
Investment tax credits		(6.4	)		(5.6	)		(8.9	)		(5.8	)
Production tax credits		(0.7	)		(0.5	)		(1.0	)		(0.6	)
Reversal of excess deferred income    taxes		(6.1	)		(3.8	)		(3.7	)		(2.2	)
State legislative change		—			(1.0	)		—			(1.0	)
Changes in state deferred taxes associated    with assets held for sale		0.4			(0.5	)		—			—
AFUDC - equity		(0.6	)		(0.5	)		(0.8	)		(0.5	)
Absence of tax on noncontrolling interest		—			(0.2	)		—			—
Other, net		(0.4	)		(1.1	)		0.5			—
Effective tax rate		19.2	%		9.8	%		11.5	%		15.4	%

As described in Note 3, Dominion Energy sold 100% of the equity interests in Hope in a stock sale for income tax purposes. Dominion Energy’s 2022 effective tax rate reflects the current income tax expense on the sale of Hope’s stock.    

As of September 30, 2022, there have been no material changes in the Companies’ unrecognized tax benefits.  It is reasonably possible that recent case law and interactions with the taxing authority could result in a decrease in unrecognized tax benefits by up to $26 million during the next twelve months. If such changes were to occur, other than revisions of the accrual for interest on tax underpayments and overpayments, earnings could increase by up to $26 million for Dominion Energy.  See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of these unrecognized tax benefits.

The Companies’ 2021 effective tax rates reflect the benefit of a state legislative change enacted in April 2021 for tax years beginning January 1, 2022. Dominion Energy’s effective tax rate reflects a $21 million deferred tax benefit, inclusive of a $16 million deferred tax benefit at Virginia Power.

Discontinued operations

Income tax expense reflected in discontinued operations is $4 million and $5 million for the nine months ended September 30, 2022 and 2021, respectively. 2021 income taxes include a $15 million benefit related to finalizing income tax returns on the GT&S Transaction.