Income Tax

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Tax

INCOME TAX

An estimate of annual income tax expense is made each interim period using estimates for annual pre-tax income, regulatory flow-through adjustments, tax credits, and other items. The estimated annual effective tax rate is applied to year-to-date, pre-tax income to determine income tax expense for the interim period consistent with the annual estimate. Discrete events are recorded in the interim period in which they occur or become known.

The effective income tax rate varied from the federal statutory rate due to the following:

	Three Months Ended June 30,
	NW Holdings						NW Natural
In thousands	2022			2021			2022			2021
Income tax at statutory rate (federal)	$	460		$	(210)		$	744		$	184
State income tax	161			(48)			219			41
Increase (decrease):
Differences required to be flowed-through by regulatory commissions	(62)			21			(62)			21
Other, net	(89)			(40)			(91)			42
Total provision for income taxes	$	470		$	(277)		$	810		$	288
Effective income tax rate	21.5		%	27.7		%	22.9		%	32.8		%

	Six Months Ended June 30,
	NW Holdings						NW Natural
In thousands	2022			2021			2022			2021
Income tax at statutory rate (federal)	$	16,243		$	16,598		$	16,859		$	17,123
State income tax	6,674			7,260			6,803			7,366
Increase (decrease):
Differences required to be flowed-through by regulatory commissions	(3,235)			(3,584)			(3,235)			(3,584)
Other, net	(289)			(30)			(294)			(65)
Total provision for income taxes	$	19,393		$	20,244		$	20,133		$	20,840
Effective income tax rate	25.1		%	25.6		%	25.1		%	25.6		%

The NW Holdings and NW Natural effective income tax rates for the six months ended June 30, 2022 compared to the same period in 2021 changed primarily as a result of changes in pre-tax income. See Note 11 in the 2021 Form 10-K for more detail on income taxes and effective tax rates.

The IRS Compliance Assurance Process (CAP) examination of the 2020 tax year was completed during the first quarter of 2022. There were no material changes to the return as filed. The 2021 and 2022 tax years are subject to examination under CAP.