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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax provision consisted of the following amounts:
 Year Ended December 31,
(In millions, except effective income tax rate)202220212020
Current   
U.S. Federal$3 $— $— 
State65 48 22 
Foreign3 3 4 
Total — current71 51 26 
Deferred 
U.S. Federal258 569 168 
State59 36 60 
Foreign54 16 (3)
Total — deferred371 621 225 
Total income tax expense$442 $672 $251 
Effective income tax rate26.6 %23.5 %33.0 %
The IRA enacted on August 16, 2022, introduced new provisions including a 15% corporate book minimum tax and a 1% excise tax on net share repurchases with both taxes effective beginning in fiscal year 2023 for NRG. The Company will continue to evaluate the impact of the corporate book minimum tax when the U.S. Treasury and the IRS release further guidance. Additionally, the IRA establishes a production tax credit associated with existing nuclear facilities which begins in 2024 and terminates at the end of 2031. The production tax credit will fully apply when gross revenues are at or below $25 per MWh and phases out completely at $43.75 per MWh. The U.S. Treasury is in the process of defining the methods by which gross revenues may be calculated pursuant to the IRA.
On March 27, 2020, the Senate passed the CARES Act to provide emergency relief related to the COVID-19 pandemic. The CARES Act contains federal income tax provisions which, among other things: (i) increases the amount of interest expense that businesses are allowed to deduct by increasing the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 and 2020; (ii) permits businesses to carry back to each of the five tax years NOLs arising from tax years beginning after December 31, 2017 and before January 1, 2020; and (iii) temporarily removes the 80% limitation on NOLs until tax years beginning after 2020. The CARES Act provisions did not have a material impact on the tax positions of the Company.
The following represented the domestic and foreign components of income before income taxes:
 Year Ended December 31,
(In millions)202220212020
U.S. $1,436 $2,759 $749 
Foreign227 100 12 
Total$1,663 $2,859 $761 
Reconciliations of the U.S. federal statutory tax rate to NRG's effective tax rate were as follows:
 Year Ended December 31,
(In millions, except effective income tax rate)202220212020
Income before income taxes$1,663 $2,859 $761 
Tax at federal statutory tax rate349 600 160 
Foreign rate differential 7 (3)— 
State taxes69 111 18 
Permanent differences17 8 8 
Changes in valuation allowance(3)(29)24 
Deferred impact of state tax rate changes14 (10)2 
Recognition of uncertain tax benefits8 (10)3 
Carbon capture tax credits(19)— — 
Return to provision adjustments— 5 36 
Income tax expense$442 $672 $251 
Effective income tax rate26.6 %23.5 %33.0 %
For the year ended December 31, 2022, NRG's effective income tax rate was higher than the federal statutory tax rate of 21% primarily due to state tax expense partially offset by the recognition of carbon capture tax credits.
For the year ended December 31, 2021, NRG's effective income tax rate was higher than the federal statutory tax rate of 21% primarily due to state tax expense partially offset by tax benefits from the revaluation of state deferred tax assets, valuation allowance, and settlements of uncertain tax positions.
For the year ended December 31, 2020, NRG's effective income tax rate was higher than the federal statutory tax rate of 21% primarily due to state tax expense, the recognition of state valuation allowance on NOLs, and return to provision adjustments.
The temporary differences, which gave rise to the Company's deferred tax assets and liabilities consisted of the following:
 As of December 31,
(In millions)20222021
Deferred tax assets:  
Deferred compensation, accrued vacation and other reserves$93 $114 
Difference between book and tax basis of property399 436 
Pension and other postretirement benefits62 65 
Equity compensation8 7 
Allowance for credit losses33 168 
U.S. Federal net operating loss carryforwards1,717 1,773 
Foreign net operating loss carryforwards104 112 
State net operating loss carryforwards315 328 
Federal and state tax credit carryforwards393 384 
Federal benefit on state uncertain tax positions5 3 
Interest disallowance carryforward per §163(j) of the Tax Act65 6 
Inventory obsolescence10 9 
U.S. capital loss15 — 
Other22 15 
Total deferred tax assets3,241 3,420 
Deferred tax liabilities:
Emissions allowances19 20 
Derivatives874 591 
Goodwill26 40 
Intangibles amortization (excluding goodwill)269 363 
Equity method investments82 62 
Convertible Debt— 14 
Total deferred tax liabilities1,270 1,090 
Total deferred tax assets less deferred tax liabilities 1,971 2,330 
Valuation allowance(224)(248)
Total net deferred tax assets, net of valuation allowance$1,747 $2,082 
The following table summarizes NRG's net deferred tax position as presented in the consolidated balance sheets:
 As of December 31,
(In millions)20222021
Deferred tax asset $1,881 $2,155 
Deferred tax liability(134)(73)
Net deferred tax asset$1,747 $2,082 
The primary drivers for the decrease in the net deferred tax asset from $2.1 billion as of December 31, 2021 to $1.7 billion as of December 31, 2022 is an increase in unrealized mark-to-market book gains on derivative instruments.
Deferred tax assets and valuation allowance
Net deferred tax balance — As of December 31, 2022 and 2021, NRG recorded a net deferred tax asset, excluding valuation allowance, of $2.0 billion and $2.3 billion, respectively. The Company believes certain state net operating losses may not be realizable under the more-likely-than-not measurement and as such, a valuation allowance was recorded as of December 31, 2022 as discussed below.
NOL carryforwards — As of December 31, 2022, the Company had tax-effected cumulative U.S. NOLs consisting of carryforwards for federal and state income tax purposes of $1.7 billion and $315 million, respectively. In addition, NRG has tax-effected cumulative foreign NOL carryforwards of $104 million. The majority of NRG's NOL carryforwards have no expiration date.
 Valuation allowance — As of December 31, 2022, the Company's tax-effected valuation allowance was $224 million, consisting of state NOL carryforwards and foreign NOL carryforwards. The valuation allowance was recorded based on the assessment of cumulative and forecasted pre-tax book earnings and the future reversal of existing taxable temporary differences.
Taxes Receivable and Payable
As of December 31, 2022, NRG recorded a current net federal receivable of $5 million and a current net foreign receivable of $13 million due to filings of Canadian amended returns as well as prepayments of estimated taxes.
Uncertain tax benefits
NRG has identified uncertain tax benefits with after-tax value of $22 million and $13 million as of December 31, 2022 and 2021, for which NRG has recorded a non-current tax liability of $24 million and $14 million, respectively. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense. The Company recognized $1 million of interest expense for the year ended December 31, 2022, an immaterial amount for the year ended 2021 and $1 million for the year ended 2020. As of December 31, 2022 and 2021, NRG had cumulative interest and penalties related to these uncertain tax benefits of $2 million and $1 million, respectively.
Tax jurisdictions — NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia and Canada.
The Company is no longer subject to U.S. federal income tax examinations for years prior to 2019. With few exceptions, state and Canadian income tax examinations are no longer open for years before 2014.
The following table summarizes uncertain tax benefits activity:
 As of December 31,
(In millions)20222021
Balance as of January 1$13 $15 
Increase due to current year positions9 4 
Increase due to acquired balance from Direct Energy— 9 
Settlements, payments and statute closure— (15)
Uncertain tax benefits as of December 31$22 $13