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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
Certain assets and liabilities are reported differently for income tax purposes than they are for financial statement purposes.  The tax effect of these differences is recorded as deferred taxes.  We calculate deferred taxes using currently enacted income tax rates.    

APS has recorded regulatory assets and regulatory liabilities related to income taxes on its Consolidated Balance Sheets in accordance with accounting guidance for regulated operations.  The
regulatory assets are for certain temporary differences, primarily the allowance for equity funds used during construction, investment tax credit (“ITC”) basis adjustment and tax expense of Medicare subsidy.  The regulatory liabilities primarily relate to the change in income tax rates and deferred taxes resulting from ITCs.    

APS ITCs are deferred and are amortized over the life of the related property with such amortization applied as a credit to reduce current income tax expense in the Statements of Income.

Net income associated with the Palo Verde sale leaseback VIEs is not subject to tax.  As a result, there is no income tax expense associated with the VIEs recorded on the Pinnacle West Consolidated and APS Consolidated Statements of Income. See Note 17 for additional details related to the Palo Verde sale leaseback VIEs.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, at the beginning and end of the year that are included in accrued taxes and unrecognized tax benefits (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 202320222021202320222021
Total unrecognized tax benefits, January 1$43,097 $45,086 $45,655 $43,097 $45,086 $45,655 
Additions for tax positions of the current year1,473 1,399 3,305 1,473 1,399 3,305 
Additions for tax positions of prior years419 2,069 1,449 419 2,069 1,449 
Reductions for tax positions of prior years for:      
Changes in judgment661 (3,495)(2,659)661 (3,495)(2,659)
Settlements with taxing authorities— — — — — — 
Lapses of applicable statute of limitations(1,376)(1,962)(2,664)(1,376)(1,962)(2,664)
Total unrecognized tax benefits, December 31$44,274 $43,097 $45,086 $44,274 $43,097 $45,086 

Included in the balances of unrecognized tax benefits are the following tax positions that, if recognized, would decrease our effective tax rate (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 202320222021202320222021
Tax positions, that if recognized, would decrease our effective tax rate$28,762 $28,246 $26,300 $28,762 $28,246 $26,300 

As of the balance sheet date, the tax year ended December 31, 2020, and all subsequent tax years remain subject to examination by the IRS.  With a few exceptions, we are no longer subject to state income tax examinations by tax authorities for years before 2019.
We reflect interest and penalties, if any, on unrecognized tax benefits in the Pinnacle West Consolidated and APS Consolidated Statements of Income as income tax expense.  The amount of interest expense or benefit recognized related to unrecognized tax benefits are as follows (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 202320222021202320222021
Unrecognized tax benefit interest expense/(benefit) recognized$452 $(139)$(535)$452 $(139)$(535)

Following are the total amount of accrued liabilities for interest recognized related to unrecognized benefits that could reverse and decrease our effective tax rate to the extent matters are settled favorably (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 202320222021202320222021
Unrecognized tax benefit interest accrued $1,633 $1,181 $1,320 $1,633 $1,181 $1,320 

Additionally, as of December 31, 2023, we have recognized less than $1 million of interest expense to be paid on the underpayment of income taxes for certain adjustments that we have filed, or will file, with the IRS.

The components of income tax expense are as follows (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 Year Ended December 31,Year Ended December 31,
 202320222021202320222021
Current:   
Federal$21,272 $35,617 $(5,041)$26,405 $103,349 $1,514 
State2,854 1,950 2,458 1,027 161 (11)
Total current24,126 37,567 (2,583)27,432 103,510 1,503 
Deferred:      
Federal37,273 23,693 95,327 44,922 (31,860)101,175 
State15,513 13,567 17,342 21,830 19,150 22,875 
Total deferred52,786 37,260 112,669 66,752 (12,710)124,050 
Income tax expense/(benefit)$76,912 $74,827 $110,086 $94,184 $90,800 $125,553 
The following chart compares pretax income at the 21% statutory federal income tax rate to income tax expense (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 Year Ended December 31,Year Ended December 31,
 202320222021202320222021
Federal income tax expense at statutory rate$125,095 $120,887 $156,666 $138,337 $132,920 $162,762 
Increases (reductions) in tax expense resulting from:      
State income tax net of federal income tax benefit18,024 17,740 22,656 19,832 19,000 23,339 
State income tax credits net of federal income tax benefit(3,513)(5,482)(7,015)(1,775)(3,744)(5,277)
Net operating loss carryback tax benefit— — (5,915)— — — 
Excess deferred income taxes — Tax Cuts and Jobs Act(36,558)(36,241)(36,558)(36,558)(36,241)(36,558)
Allowance for equity funds used during construction (Note 1)
(5,964)(4,629)(4,180)(5,964)(4,629)(4,180)
Palo Verde VIE noncontrolling interest (Note 17)
(3,617)(3,617)(3,617)(3,617)(3,617)(3,617)
Investment tax credit amortization(9,495)(5,608)(7,620)(9,495)(5,608)(7,620)
   Federal production tax credit(8,441)(3,146)(3,064)(5,460)— — 
   Other federal income tax credits(3,453)(7,721)(3,912)(2,803)(7,721)(3,912)
Other4,834 2,644 2,645 1,687 440 616 
Income tax expense/(benefit)$76,912 $74,827 $110,086 $94,184 $90,800 $125,553 
     The components of the net deferred income tax liability were as follows (dollars in thousands):
Pinnacle West ConsolidatedAPS Consolidated
 December 31,December 31,
 2023202220232022
DEFERRED TAX ASSETS  
Risk management activities$31,411 $8,826 $31,411 $8,826 
Regulatory liabilities:   
Excess deferred income taxes — Tax Cuts and Jobs Act283,161 295,014 283,161 295,014 
Asset retirement obligation and removal costs113,312 107,104 113,312 107,104 
Unamortized investment tax credits68,521 48,035 68,521 48,035 
Other postretirement benefits56,070 66,893 56,070 66,893 
Other39,857 62,915 39,857 62,915 
Operating lease liabilities316,067 184,030 315,670 182,663 
Pension liabilities33,294 33,674 29,918 30,436 
Coal reclamation liabilities45,505 44,312 45,505 44,312 
Renewable energy incentives17,261 19,948 17,261 19,948 
Credit and loss carryforwards43,940 37,647 3,031 13,654 
Other77,865 72,605 77,865 72,605 
Total deferred tax assets1,126,264 981,003 1,081,582 952,405 
DEFERRED TAX LIABILITIES   
Plant-related(2,572,495)(2,518,164)(2,572,495)(2,518,164)
Risk management activities(1,682)(32,648)(1,682)(32,648)
Pension and other postretirement assets(78,853)(96,845)(78,297)(96,196)
Other special use funds(56,550)(57,572)(56,550)(57,572)
Operating lease right-of-use assets(316,067)(184,030)(315,670)(182,663)
Regulatory assets:   
Allowance for equity funds used during construction(46,754)(44,405)(46,754)(44,405)
Deferred fuel and purchased power(149,078)(114,232)(149,078)(114,232)
Pension benefits(172,239)(157,629)(172,239)(157,629)
Retired power plant costs (20,659)(24,397)(20,659)(24,397)
Other(92,260)(103,023)(92,260)(103,023)
Other(36,107)(32,479)(7,595)(7,123)
Total deferred tax liabilities(3,542,744)(3,365,424)(3,513,279)(3,338,052)
Deferred income taxes — net$(2,416,480)$(2,384,421)$(2,431,697)$(2,385,647)
As of December 31, 2023, Pinnacle West consolidated deferred tax assets for credit and loss carryforwards relate to federal and state credit carryforwards, net of federal benefit, of $56 million, which first begin to expire in 2025. Pinnacle West consolidated credit and loss carryforwards amount above has been reduced by $12 million of unrecognized tax benefits.

As of December 31, 2023, APS consolidated deferred tax assets for credit and loss carryforwards relate to federal and state credit carryforwards, net of federal benefit, of $15 million, which first begin to expire in 2028. APS consolidated credit and loss carryforwards amount above has been reduced by $12 million of unrecognized tax benefits.