Income Taxes

12 Months Ended

Dec. 31, 2021

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

The Company's provision for income taxes has been computed on a stand-alone basis. Berkshire Hathaway includes the Company in its consolidated United States federal and Iowa state income tax returns and the majority of the Company's United States federal income tax is remitted to or received from Berkshire Hathaway. As of December 31, 2021, the Company had a current income tax receivable from Berkshire Hathaway for federal income tax of $324 million and a long-term income tax receivable from Berkshire Hathaway, reflected as a component of BHE's shareholders' equity, of $744 million for Iowa state income tax. As of December 31, 2020, the Company had a current income tax receivable from Berkshire Hathaway for federal income tax of $13 million and a long-term income tax receivable from Berkshire Hathaway, reflected as a component of BHE's shareholders' equity, of $658 million for Iowa state income tax. Additionally, for the years ended December 31, 2021 and 2020 the Company generated $100 million and $138 million, respectively, of Iowa state net operating losses which were carried forward and increased the long-term income tax receivable from Berkshire Hathaway.

The BHE GT&S acquisition on November 1, 2020 was treated as a deemed asset acquisition for federal and state income tax purposes due to Berkshire Hathaway and DEI making tax elections under Internal Revenue Code ("IRC") §338(h)(10) for all C-corporations acquired, the intent on making or having in place IRC §754 elections for any partnership interests purchased, and due to all single member LLCs acquired being treated as disregarded entities for income tax purposes. All deferred taxes at BHE GT&S were reset to reflect book and tax basis differences as of November 1, 2020. The primary deferred tax items recorded by the Company include long-term debt, pension and other postretirement liabilities, and intangible assets. Since the BHE GT&S acquisition is deemed an asset acquisition for federal and state income tax purposes, all of the approximately $0.9 billion of tax goodwill is amortizable over 15 years. At the acquisition date there is no deferred tax liability recorded for the difference between book goodwill of approximately $1.7 billion versus the tax goodwill of approximately $0.9 billion, due to the inability to record a deferred tax liability when book goodwill exceeds tax goodwill.

Income tax (benefit) expense consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current:
Federal	$	(1,701)	$	(1,537)	$	(956)
State	(177)		(121)		(13)
Foreign	100		86		81
	(1,778)		(1,572)		(888)
Deferred:
Federal	1,037		1,438		431
State	(476)		424		(127)
Foreign	89		21		(8)
	650		1,883		296
Investment tax credits	(4)		(3)		(6)
Total	$	(1,132)	$	308	$	(598)

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax (benefit) expense is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
Income tax credits	(27)		(16)		(32)
Effects of ratemaking	(4)		(3)		(6)
State income tax, net of federal income tax benefit	(10)		3		(5)
Non-controlling interest	(2)		—		—
Income tax effect of foreign income	1		—		(2)
Other, net	—		(1)		(1)
Effective income tax rate	(21)	%	4	%	(25)	%

Income tax credits relate primarily to production tax credits ("PTC") from wind-powered generating facilities owned by MidAmerican Energy, PacifiCorp and BHE Renewables. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs for the years ended December 31, 2021, 2020 and 2019 totaled $1.4 billion, $1.2 billion, and $0.8 billion, respectively.

Income tax effect on foreign income includes, among other items, deferred income tax charges of $105 million and $35 million in 2021 and 2020, respectively, related to the United Kingdom's corporate income tax rate. The United Kingdom's rate is scheduled to increase from 19% to 25%, effective April 1, 2023, through legislation enacted in June 2021. The United Kingdom's rate was scheduled to decrease from 19% to 17% effective April 1, 2020; however, the rate was maintained at 19% through amended legislation enacted in July 2020.

The net deferred income tax liability consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Regulatory liabilities	$	1,349	$	1,420
Federal, state and foreign carryforwards	820		677
AROs	304		304
Other	686		777
Total deferred income tax assets	3,159		3,178
Valuation allowances	(164)		(204)
Total deferred income tax assets, net	2,995		2,974
Deferred income tax liabilities:
Property-related items	(11,814)		(10,816)
Investments	(2,877)		(2,821)
Regulatory assets	(764)		(785)
Other	(478)		(327)
Total deferred income tax liabilities	(15,933)		(14,749)
Net deferred income tax liability	$	(12,938)	$	(11,775)

The following table provides the Company's net operating loss and tax credit carryforwards and expiration dates as of December 31, 2021 (in millions):

	Federal		State		Foreign		Total
Net operating loss carryforwards(1)	$	297	$	9,013	$	900	$	10,210
Deferred income taxes on net operating loss carryforwards	63		506		207		776
Expiration dates	2022 - indefinite		2022 - indefinite		2028 - 2041
Tax credits	$	15	$	29	$	—	$	44
Expiration dates	2023 - 2034		2022 - indefinite

(1)The federal net operating loss carryforwards relate principally to net operating loss carryforwards of subsidiaries that are tax residents in both the United States and the United Kingdom. The federal net operating loss carryforwards were generated prior to Berkshire Hathaway Inc.'s ownership and will begin to expire in 2022.

The United States Internal Revenue Service has closed or effectively settled its examination of the Company's income tax returns through December 31, 2013. The statute of limitations for the Company's income tax returns have expired through December 31, 2011, for California, Michigan, Minnesota, Montana, Nebraska, Oregon, Utah and Wisconsin, and through December 31, 2017, except for the impact of any federal audit adjustments, for Connecticut, District of Columbia, Idaho, Illinois, Iowa, Kansas and New York. The closure of examinations, or the expiration of the statute of limitations, for state filings may not preclude the state from adjusting the state net operating loss carryforward utilized in a year for which the statute of limitations is not closed.

A reconciliation of the beginning and ending balances of the Company's net unrecognized tax benefits is as follows for the years ended December 31 (in millions):

	2021		2020
Beginning balance	$	153	$	145
Additions based on tax positions related to the current year	24		19
Additions for tax positions of prior years	13		6
Reductions based on tax positions related to the current year	(19)		(14)
Reductions for tax positions of prior years	(83)		(1)
Statute of limitations	—		(4)
Settlements	(1)		1
Interest and penalties	10		1
Ending balance	$	97	$	153

As of December 31, 2021 and 2020, the Company had unrecognized tax benefits totaling $100 million and $141 million, respectively, that if recognized, would have an impact on the effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits, other than applicable interest and penalties, would not affect the Company's effective income tax rate.

PAC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

Income tax (benefit) expense consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current:
Federal	$	(150)	$	19	$	158
State	7		30		34
Total	(143)		49		192
Deferred:
Federal	26		(124)		(132)
State	40		1		4
Total	66		(123)		(128)
Investment tax credits	(2)		(1)		(3)
Total income tax (benefit) expense	$	(79)	$	(75)	$	61

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
State income taxes, net of federal income tax benefit	3		3		3
Effects of ratemaking	(14)		(22)		(13)
Federal income tax credits	(20)		(13)		(3)
Other	—		—		(1)
Effective income tax rate	(10)	%	(11)	%	7	%

Income tax credits relate primarily to production tax credits ("PTC") earned by PacifiCorp's wind-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service.

Effects of ratemaking is primarily attributable to activity associated with excess deferred income taxes. Excess deferred income tax amortization, net of deferrals, was $112 million for 2021, including the use of $4 million to amortize certain regulatory asset balances in Wyoming and Idaho. Excess deferred income tax amortization, net of deferrals, was $132 million for 2020, including the use of $118 million to accelerate depreciation of certain retired equipment and to amortize certain regulatory balances in Idaho, Oregon and Utah. Excess deferred income taxes amortization, net of deferrals, was $93 million for 2019, including the use of $91 million to accelerate depreciation of certain retired wind equipment for Oregon.

The net deferred income tax liability consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Regulatory liabilities	$	682	$	700
Employee benefits	68		93
State carryforwards	73		73
Loss contingencies	63		63
Asset retirement obligations	73		65
Other	73		83
	1,032		1,077
Deferred income tax liabilities:
Property, plant and equipment	(3,468)		(3,311)
Regulatory assets	(332)		(343)
Other	(79)		(50)
	(3,879)		(3,704)
Net deferred income tax liability	$	(2,847)	$	(2,627)

The following table provides PacifiCorp's net operating loss and tax credit carryforwards and expiration dates as of December 31, 2021 (in millions):

	State
Net operating loss carryforwards	$	1,138
Deferred income taxes on net operating loss carryforwards	$	53
Expiration dates	2023 - 2032
Tax credit carryforwards	$	20
Expiration dates	2022 - indefinite

The United States Internal Revenue Service has closed or effectively settled its examination of PacifiCorp's income tax returns through December 31, 2013. The statute of limitations for PacifiCorp's state income tax returns have expired through December 31, 2011, with the exception of Idaho, where the statute has expired through December 31, 2017, for all adjustments other than federal audit adjustments. The statute of limitations expiring for state filings may not preclude the state from adjusting the state net operating loss carryforward utilized in a year for which the statute of limitations is not closed.

MEC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

MidAmerican Energy's income tax benefit consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current:
Federal	$	(736)	$	(684)	$	(478)
State	(92)		(94)		(47)
	(828)		(778)		(525)
Deferred:
Federal	189		201		166
State	(35)		8		(11)
	154		209		155
Investment tax credits	(1)		(1)		(1)
Total	$	(675)	$	(570)	$	(371)

A reconciliation of the federal statutory income tax rate to MidAmerican Energy's effective income tax rate applicable to income before income tax benefit is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
Income tax credits	(262)		(199)		(90)
State income tax, net of federal income tax benefit	(46)		(27)		(11)
Effects of ratemaking	(20)		(17)		(8)
Other, net	(1)		(1)		—
Effective income tax rate	(308)	%	(223)	%	(88)	%

Income tax credits relate primarily to production tax credits ("PTC") earned by MidAmerican Energy's wind-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service.

MidAmerican Energy's net deferred income tax liability consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Regulatory liabilities	$	240	$	288
Asset retirement obligations	220		229
State carryforwards	55		52
Employee benefits	26		42
Other	30		40
Total deferred income tax assets	571		651
Valuation allowances	(1)		(25)
Total deferred income tax assets, net	570		626
Deferred income tax liabilities:
Depreciable property	(3,843)		(3,583)
Regulatory assets	(112)		(97)
Other	(4)		—
Total deferred income tax liabilities	(3,959)		(3,680)
Net deferred income tax liability	$	(3,389)	$	(3,054)

As of December 31, 2021, MidAmerican Energy's state tax carryforwards, principally related to $823 million of net operating losses, expire at various intervals between 2022 and 2040.

The United States Internal Revenue Service has closed or effectively settled its examination of MidAmerican Energy's income tax returns through December 31, 2013. The statute of limitations for MidAmerican Energy's state income tax returns have expired through December 31, 2011, for Michigan and Nebraska, and through December 31, 2017, for Illinois, Indiana, Iowa, Kansas and Missouri, except for the impact of any federal audit adjustments. The statute of limitations expiring for state filings may not preclude the state from adjusting the state net operating loss carryforward utilized in a year for which the statute of limitations is not closed.

A reconciliation of the beginning and ending balances of MidAmerican Energy's net unrecognized tax benefits is as follows for the years ended December 31 (in millions):

	2021		2020
Beginning balance	$	8	$	8
Additions based on tax positions related to the current year	16		4
Reductions based on tax positions related to the current year	(11)		(3)
Reductions for tax positions of prior years	—		(1)
Ending balance	$	13	$	8

As of December 31, 2021, MidAmerican Energy had unrecognized tax benefits totaling $33 million that, if recognized, would have an impact on the effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits, other than applicable interest and penalties, would not affect MidAmerican Energy's effective income tax rate.

MidAmerican Funding, LLC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

MidAmerican Funding's income tax benefit consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current:
Federal	$	(739)	$	(689)	$	(480)
State	(94)		(96)		(49)
	(833)		(785)		(529)
Deferred:
Federal	189		204		164
State	(35)		8		(11)
	154		212		153
Investment tax credits	(1)		(1)		(1)
Total	$	(680)	$	(574)	$	(377)

A reconciliation of the federal statutory income tax rate to MidAmerican Funding's effective income tax rate applicable to income before income tax benefit is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
Income tax credits	(283)		(209)		(94)
State income tax, net of federal income tax benefit	(50)		(29)		(12)
Effects of ratemaking	(21)		(17)		(8)
Other, net	(2)		(1)		—
Effective income tax rate	(335)	%	(235)	%	(93)	%

Income tax credits relate primarily to production tax credits ("PTC") earned by MidAmerican Energy's wind-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. Wind-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service.

MidAmerican Funding's net deferred income tax liability consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Regulatory liabilities	$	240	$	288
Asset retirement obligations	220		229
State carryforwards	55		52
Employee benefits	26		43
Other	30		40
Total deferred income tax assets	571		652
Valuation allowances	(1)		(25)
Total deferred income tax assets, net	570		627
Deferred income tax liabilities:
Depreciable property	(3,843)		(3,583)
Regulatory assets	(112)		(97)
Other	(2)		1
Total deferred income tax liabilities	(3,957)		(3,679)
Net deferred income tax liability	$	(3,387)	$	(3,052)

As of December 31, 2021, MidAmerican Funding's state tax carryforwards, principally related to $823 million of net operating losses, expire at various intervals between 2022 and 2040.

The United States Internal Revenue Service has closed or effectively settled its examination MidAmerican Funding's income tax returns through December 31, 2013. The statute of limitations for MidAmerican Funding's state income tax returns have expired through December 31, 2011, for Michigan and Nebraska, and through December 31, 2017, for Illinois, Indiana, Iowa, Kansas and Missouri, except for the impact of any federal audit adjustments. The statute of limitations expiring for state filings may not preclude the state from adjusting the state net operating loss carryforward utilized in a year for which the statute of limitations is not closed.

A reconciliation of the beginning and ending balances of MidAmerican Funding's net unrecognized tax benefits is as follows for the years ended December 31 (in millions):

	2021		2020
Beginning balance	$	8	$	8
Additions based on tax positions related to the current year	16		4
Reductions based on tax positions related to the current year	(11)		(3)
Reductions for tax positions of prior years	—		(1)
Ending balance	$	13	$	8

As of December 31, 2021, MidAmerican Funding had unrecognized tax benefits totaling $33 million that, if recognized, would have an impact on the effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits, other than applicable interest and penalties, would not affect MidAmerican Funding's effective income tax rate.

NPC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

Income tax expense consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current – Federal	$	37	$	57	$	105
Deferred – Federal	—		(10)		(31)
Investment tax credits	—		—		(1)
Total income tax expense	$	37	$	47	$	73

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
Effects of ratemaking	(11)		(8)		—
Other	1		1		1
Effective income tax rate	11	%	14	%	22	%

The net deferred income tax liability consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Regulatory liabilities	$	195	$	206
Operating and finance leases	73		79
Customer advances	25		19
Unamortized contract value	25		8
Other	8		15
Total deferred income tax assets	326		327
Deferred income tax liabilities:
Property related items	(800)		(800)
Regulatory assets	(204)		(176)
Operating and finance leases	(70)		(76)
Other	(34)		(13)
Total deferred income tax liabilities	(1,108)		(1,065)
Net deferred income tax liability	$	(782)	$	(738)

The United States Internal Revenue Service has closed its examination of NV Energy's consolidated income tax returns through December 31, 2008, and effectively settled its examination of Nevada Power's income tax return for the short year ended December 31, 2013, and the statute of limitations has expired for NV Energy's consolidated income tax returns through the short year ended December 19, 2013. The closure or effective settlement of examinations, or the expiration of the statute of limitations may not preclude the Internal Revenue Service from adjusting the federal net operating loss carryforward utilized in a year for which the examination is not closed.

SPPC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

Income tax expense consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current – Federal	$	5	$	3	$	19
Deferred – Federal	13		12		10
Investment tax credits	—		—		(1)
Total income tax expense	$	18	$	15	$	28

A reconciliation of the federal statutory income rate to the effective income tax rate applicable to income before income tax expense is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
Effects of ratemaking	(8)		(9)		—
Effective income tax rate	13	%	12	%	21	%

The net deferred income tax liability consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Regulatory liabilities	$	64	$	67
Operating and finance leases	27		30
Customer advances	14		10
Unamortized contract value	8		2
Other	6		8
Total deferred income tax assets	119		117
Deferred income tax liabilities:
Property related items	(379)		(380)
Regulatory assets	(94)		(74)
Operating and finance leases	(27)		(30)
Other	(21)		(7)
Total deferred income tax liabilities	(521)		(491)
Net deferred income tax liability	$	(402)	$	(374)

The United States Internal Revenue Service has closed its examination of NV Energy's consolidated income tax returns through December 31, 2008, and effectively settled its examination of Sierra Pacific's income tax return for the short year ended December 31, 2013, and the statute of limitations has expired for NV Energy's consolidated income tax returns through the short year ended December 19, 2013. The closure or effective settlement of examinations, or the expiration of the statute of limitations may not preclude the Internal Revenue Service from adjusting the federal net operating loss carryforward utilized in a year for which the examination is not closed.

EEGH

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

Income tax expense (benefit) consists of the following for the years ended December 31 (in millions):

	2021		2020		2019
Current:
Federal	$	(47)	$	(20)	$	130
State	(21)		1		17
	(68)		(19)		147
Deferred:
Federal	129		23		(36)
State	56		(28)		(10)
	185		(5)		(46)
Total	$	117	$	(24)	$	101

Income tax expense reported in discontinued operations for the year ended December 31, 2019 was $33 million.

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense (benefit) is as follows for the years ended December 31:

	2021		2020		2019
Federal statutory income tax rate	21	%	21	%	21	%
State income tax, net of federal income tax benefit	3		(13)		1
Equity interest	1		4		1
Effects of ratemaking	1		(2)		(1)
Change in tax status	—		(9)		(4)
AFUDC-equity	—		(1)		(1)
Noncontrolling interest	(11)		(16)		(3)
Write-off of regulatory assets	—		3		—
Other, net	1		1		(1)
Effective income tax rate	16	%	(12)	%	13	%

For the year ended December 31, 2021, Eastern Energy Gas' reconciliation of the federal statutory income tax rate to the effective income tax rate is driven primarily by the absence of tax on noncontrolling interest. The GT&S Transaction resulted in a change of Cove Point's noncontrolling interest from 25% to 75% as of November 1, 2020.

The net deferred income tax (liability) asset consists of the following as of December 31 (in millions):

	2021		2020
Deferred income tax assets:
Federal and state carryforwards	$	7	$	—
Employee benefits	33		30
Intangibles	150		148
Derivatives and hedges	16		18
Other	9		4
Total deferred income tax assets	215		200
Deferred income tax liabilities:
Property related items	(129)		(52)
Partnership investments	(49)		(19)
Debt exchange	(60)		—
Deferred state income taxes	(16)		—
Debt issuance discount	(7)		(8)
Other	(9)		(2)
Total deferred income tax liabilities	(270)		(81)
Net deferred income tax (liability) asset (1)	$	(55)	$	119

(1)Net deferred income tax liability as of December 31, 2021 is presented in other assets and other long-term liabilities in the Consolidated Balance Sheet. Net deferred income tax asset as of December 31, 2020 is presented in other assets in the Consolidated Balance Sheet.

The significant change in net deferred taxes is due to higher tax depreciation due to the GT&S Transaction being treated as a deemed asset sale for federal and state income tax purposes, the debt exchange at EGTS and partnership income from Cove Point.

As of December 31, 2021, Eastern Energy Gas' $7 million of state net operating losses, entirely related to West Virginia, can be carried forward indefinitely.

Through October 31, 2020, Eastern Energy Gas was included in DEI's consolidated federal income tax return and, where applicable, combined state income tax returns. As a result of the GT&S Transaction, DEI retained the rights and obligations of Eastern Energy Gas' federal and state income tax returns through October 31, 2020. The statute of limitations for Eastern Energy Gas' income tax returns filed for periods after November 1, 2020 remain open for examination for federal and Connecticut, Maryland, North Carolina, Pennsylvania, South Carolina, Virginia, and West Virginia.

A reconciliation of the beginning and ending balances of Eastern Energy Gas' net unrecognized tax benefits is as follows for the years ended December 31 (in millions):

	2021		2020
Beginning balance	$	—	$	2
Additions for tax positions of prior years	—		5
Reductions for unrecognized tax benefits retained by DEI	—		(7)
Ending balance	$	—	$	—

As of December 31, 2021, Eastern Energy Gas has no unrecognized tax benefits that would have an impact on the effective tax rate. As part of the GT&S Transaction, DEI has retained all pre-close unrecognized tax benefits.