Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesNEE's effective income tax rate for the three months ended September 30, 2022 and 2021 was approximately 17.2% and (9.7)%, respectively, and for the nine months ended September 30, 2022 and 2021 was approximately 11.5% and 4.3%, respectively. NEE's effective income tax rate is based on the composition of pretax income, and, for the nine months ended September 30, 2022, primarily reflects the impact of favorable changes in the fair value of interest rate derivative instruments, unfavorable changes in the fair value of commodity derivatives and equity securities held in NEER's nuclear decommissioning funds, as well as the first quarter of 2022 impairment charge related to the investment in Mountain Valley Pipeline (see Note 3 – Nonrecurring Fair Value Measurements). NEE's effective income tax rate reflects the impact of unfavorable changes in the fair value of commodity derivatives for the three and nine months ended September 30, 2021.

A reconciliation between the effective income tax rates and the applicable statutory rate is as follows:

	NEE				FPL				NEE				FPL
	Three Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increases (reductions) resulting from:
State income taxes – net of federal income tax benefit	1.7		5.4		4.5		2.9		1.3		1.0		4.4		3.7
Taxes attributable to noncontrolling interests	2.6		15.6		—		—		6.8		6.9		—		—
PTCs and ITCs	(4.7)		(38.9)		(1.9)		(0.7)		(9.4)		(16.4)		(1.1)		(0.7)
Amortization of deferred regulatory credit	(2.9)		(14.1)		(4.1)		(3.5)		(6.7)		(6.2)		(4.0)		(3.5)
Other – net	(0.5)		1.3		0.1		0.2		(1.5)		(2.0)		0.1		—
Effective income tax rate	17.2	%	(9.7)	%	19.6	%	19.9	%	11.5	%	4.3	%	20.4	%	20.5	%

NEE recognizes PTCs as wind and solar energy is generated and sold based on a per kWh rate prescribed in applicable federal and state statutes, which may differ significantly from amounts computed, on a quarterly basis, using an overall effective income tax rate anticipated for the full year. NEE uses this method of recognizing PTCs for specific reasons, including that PTCs are an integral part of the expected value of most wind and some solar projects and a fundamental component of such wind and solar projects' results of operations. PTCs, as well as ITCs, can significantly affect NEE's effective income tax rate depending on the amount of pretax income or loss. The amount of PTCs recognized can be significantly affected by wind and solar generation and by the roll off of PTCs after ten years of production absent a retrofitting of the wind and solar projects.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law which includes: (i) extensions for wind and solar tax credits on facilities that start construction before the later of 2034 or the end of the calendar year following the year in which greenhouse gas emissions from U.S. electric generation are reduced by 75% from 2022 levels; (ii) a new solar PTC and standalone battery ITC; (iii) the ability to transfer renewable energy tax credits to an unrelated transferee; and (iv) a 15% corporate profits minimum tax based on pre-tax income for years after 2022. This legislation does not require NEE or FPL to revalue their deferred income taxes given that there was no change to the corporate tax rate. Pursuant to FPL’s 2021 rate agreement (see Note 11 – Rate Regulation), FPL will prospectively adjust base rates after a review by the FPSC for PTCs related to new solar generation facilities recovered in base rates during the term of the 2021 rate agreement.