Income Taxes

9 Months Ended

Sep. 30, 2022

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

The effective income tax rate for the three-month period ended September 30, 2022, is 64% and results from a $1,213 million income tax benefit associated with a $1,895 million pre-tax loss, primarily relating to a pre-tax loss of $3,259 million on the Company's investment in BYD Company Limited. The $1,213 million income tax benefit is primarily comprised of a $398 million benefit (21%) from the application of the statutory income tax rate to the pre-tax loss and a $680 million benefit (36%) from income tax credits.

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax benefit is as follows:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
Income tax credits	36		(31)		(165)		(29)
State income tax, net of federal income tax impacts	—		(4)		(2)		—
Income tax effect of foreign income	—		(1)		(4)		2
Effects of ratemaking	5		(6)		(18)		(5)
Equity income	—		—		(4)		(1)
Noncontrolling interest	2		(1)		(9)		(2)
Other, net	—		1		3		1
Effective income tax rate	64	%	(21)	%	(178)	%	(13)	%

Income tax credits relate primarily to PTCs from wind- and solar-powered generating facilities owned by MidAmerican Energy, PacifiCorp and BHE Renewables. Federal renewable electricity PTCs are earned as energy from qualifying wind- and solar-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- and solar-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs recognized for the nine-month periods ended September 30, 2022 and 2021 totaled $1,414 million and $1,188 million, respectively.

Income tax effect on foreign income includes, among other items, a deferred income tax charge of $109 million recognized in June 2021 upon the enactment of an increase in the United Kingdom's corporate income tax rate from 19% to 25% effective April 1, 2023.

The Company's provision for income taxes has been computed on a stand-alone basis. Berkshire Hathaway includes the Company in its consolidated U.S. federal and Iowa state income tax returns and the majority of the Company's U.S. federal income tax is remitted to or received from Berkshire Hathaway. The Company received net cash payments for federal income taxes from Berkshire Hathaway for the nine-month periods ended September 30, 2022 and 2021 totaling $1,742 million and $1,259 million, respectively.

In July 2022, the Company amended its tax allocation agreement with Berkshire Hathaway, which changed how state tax attributes will be settled. As a result, the Company no longer expects to receive the cash benefits from the state of Iowa net operating loss carryforward previously recorded as a long-term income tax receivable from Berkshire Hathaway as a component of BHE's shareholders' equity, and has reclassified $744 million to retained earnings.

PAC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax benefit is as follows:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
State income tax, net of federal income tax benefit	4		4		4		4
Federal income tax credits	(22)		(20)		(22)		(20)
Effects of ratemaking(1)	(13)		(13)		(12)		(14)
Valuation allowance	—		—		1		—
Other	—		(1)		1		—
Effective income tax rate	(10)	%	(9)	%	(7)	%	(9)	%

(1)Effects of ratemaking is primarily attributable to activity associated with excess deferred income taxes.

Income tax credits relate primarily to production tax credits ("PTCs") from 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. PTCs recognized for the nine-month periods ended September 30, 2022 and 2021 totaled $127 million and $133 million, respectively.

For the nine-month period ended September 30, 2022, PacifiCorp recorded a valuation allowance related to state net operating loss carryforwards.

Berkshire Hathaway includes BHE and its subsidiaries in its U.S. federal income tax return. Consistent with established regulatory practice, PacifiCorp's provision for federal and state income tax has been computed on a stand-alone basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. For the nine-month periods ended September 30, 2022 and 2021, PacifiCorp received net cash payments for federal and state income tax from BHE totaling $194 million and $109 million, respectively.

MEC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

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:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
Income tax credits	(69)		(44)		(222)		(143)
State income tax, net of federal income tax impacts	(21)		(26)		(21)		(27)
Effects of ratemaking	(13)		(12)		(12)		(13)
Other, net	3		—		1		—
Effective income tax rate	(79)	%	(61)	%	(233)	%	(162)	%

Income tax credits relate primarily to production tax credits ("PTCs") from MidAmerican Energy's wind- and solar-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind- and solar-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. MidAmerican Energy recognizes its renewable electricity PTCs throughout the year based on when the credits are earned and excludes them from the annual effective tax rate that is the basis for the interim recognition of other income tax expense. Wind- and solar-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs recognized for the nine-month periods ended September 30, 2022 and 2021 totaled $505 million and $400 million, respectively.

Berkshire Hathaway includes BHE and subsidiaries in its U.S. federal and Iowa state income tax returns. Consistent with established regulatory practice, MidAmerican Energy's provision for income tax has been computed on a stand-alone basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. MidAmerican Energy received net cash payments for income tax from BHE totaling $757 million and $677 million for the nine-month periods ended September 30, 2022 and 2021, respectively.

MidAmerican Funding, LLC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

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:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
Income tax credits	(72)		(45)		(238)		(150)
State income tax, net of federal income tax impacts	(22)		(27)		(24)		(29)
Effects of ratemaking	(13)		(12)		(13)		(14)
Other, net	2		—		3		—
Effective income tax rate	(84)	%	(63)	%	(251)	%	(172)	%

Income tax credits relate primarily to production tax credits ("PTCs") from MidAmerican Energy's wind- and solar-powered generating facilities. Federal renewable electricity PTCs are earned as energy from qualifying wind- and solar-powered generating facilities is produced and sold and are based on a per-kilowatt hour rate pursuant to the applicable federal income tax law. MidAmerican Funding recognizes its renewable electricity PTCs throughout the year based on when the credits are earned and excludes them from the annual effective tax rate that is the basis for the interim recognition of other income tax expense. Wind- and solar-powered generating facilities are eligible for the credits for 10 years from the date the qualifying generating facilities are placed in-service. PTCs recognized for the nine-month periods ended September 30, 2022 and 2021 totaled $505 million and $400 million, respectively.

Berkshire Hathaway includes BHE and subsidiaries in its U.S. federal and Iowa state income tax returns. Consistent with established regulatory practice, MidAmerican Funding's and MidAmerican Energy's provisions for income tax have been computed on a stand-alone basis, and substantially all of their currently payable or receivable income tax is remitted to or received from BHE. MidAmerican Funding received net cash payments for income tax from BHE totaling $761 million and $681 million for the nine-month periods ended September 30, 2022 and 2021, respectively.

NPC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

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:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
Effects of ratemaking	(10)		(10)		(10)		(10)
Effective income tax rate	11	%	11	%	11	%	11	%

Effects of ratemaking is primarily attributable to the recognition of excess deferred income taxes related to the 2017 Tax Cuts

and Jobs Act pursuant to an order issued by the PUCN effective January 1, 2021.

Berkshire Hathaway includes BHE and its subsidiaries in its U.S. federal income tax return. Consistent with established regulatory practice, Nevada Power's provision for federal income tax has been computed on a separate return basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. For the nine-month period ended September 30, 2022, Nevada Power received net cash payments for federal income tax from BHE totaling $20 million. For the nine-month period ended September 30, 2021, Nevada Power made net cash payments for federal income tax to BHE totaling $38 million.

SPPC

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

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:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
Effects of ratemaking	(8)		(10)		(8)		(10)
Other	(1)		—		—		—
Effective income tax rate	12	%	11	%	13	%	11	%

Effects of ratemaking is primarily attributable to the recognition of excess deferred income taxes related to the 2017 Tax Cuts and Jobs Act pursuant to an order issued by the PUCN effective January 1, 2020.

Berkshire Hathaway includes BHE and its subsidiaries in its U.S. federal income tax return. Consistent with established regulatory practice, Sierra Pacific's provision for federal income tax has been computed on a separate return basis, and substantially all of its currently payable or receivable income tax is remitted to or received from BHE. For the nine-month periods ended September 30, 2022 and 2021, Sierra Pacific made no net cash payments for federal income tax to BHE.

EEGH

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

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:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
State income tax, net of federal income tax benefit	6		2		5		2
Equity interest	4		1		2		1
Effects of ratemaking	—		(1)		(1)		(1)
Noncontrolling interest	(10)		(11)		(10)		(11)
Other, net	—		—		—		1
Effective income tax rate	21	%	12	%	17	%	13	%

For the period ended September 30, 2022, Eastern Energy Gas' reconciliation of the federal statutory income tax rate to the effective income tax rate is driven primarily by an absence of tax on income attributable to Cove Point's 75% noncontrolling interest.

EGTS

Schedule of Effective Income Tax Rate Reconciliation [Line Items]

Income Taxes

Income Taxes

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:

	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Federal statutory income tax rate	21	%	21	%	21	%	21	%
State income tax, net of federal income tax benefit	11		6		8		7
Effects of ratemaking	—		(4)		—		(3)
Debt exchange	—		—		—		2
Other, net	1		1		—		(1)
Effective income tax rate	33	%	24	%	29	%	26	%