Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

Income Tax Expense (Benefit)

The following table presents the components of income tax expense (benefit).

	OGE Energy						OG&E
Year Ended December 31 (In millions)	2021		2020		2019		2021		2020		2019
Provision (benefit) for current income taxes:
Federal	$	16.4	$	8.4	$	(6.4)	$	(9.0)	$	(3.8)	$	(7.9)
State	1.7		0.5		5.1		9.0		(0.6)		4.1
Total provision (benefit) for current income taxes	18.1		8.9		(1.3)		—		(4.4)		(3.8)
Provision (benefit) for deferred income taxes, net:
Federal	133.1		(105.2)		48.5		58.3		45.7		37.7
State	(10.0)		(31.1)		(17.4)		(16.5)		(6.6)		(13.8)
Total provision (benefit) for deferred income taxes, net	123.1		(136.3)		31.1		41.8		39.1		23.9
Total income tax expense (benefit)	$	141.2	$	(127.4)	$	29.8	$	41.8	$	34.7	$	20.1

OGE Energy files consolidated income tax returns in the U.S. federal jurisdiction and various state jurisdictions. OG&E is a part of the consolidated income tax return of OGE Energy. With few exceptions, the Registrants are no longer subject to U.S. federal tax or state and local examinations by tax authorities for years prior to 2018. Income taxes are generally allocated to each company in the affiliated group, including OG&E, based on its stand-alone taxable income or loss. Federal investment tax credits previously claimed on electric utility property have been deferred and will be amortized to income over the life of the related property. Additionally, OG&E earns federal tax credits associated with production from its wind facilities. Oklahoma production and investment state tax credits are also earned on investments in electric and solar generating facilities which further reduce OG&E's effective tax rate.

The following table presents a reconciliation of the statutory tax rates to the effective income tax rate.

	OGE Energy						OG&E
Year Ended December 31	2021		2020		2019		2021		2020		2019
Statutory federal tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	0.9		(1.4)		(1.2)		(1.4)		(1.6)		(1.8)
Stock-based compensation	0.1		(0.3)		(1.2)		—		—		—
Executive compensation limitation	0.1		0.2		0.2		—		—		—
Amortization of net unfunded deferred taxes	(2.1)		(4.4)		(4.5)		(4.6)		(4.8)		(5.6)
Federal renewable energy credit (A)	(2.0)		(5.0)		(6.0)		(4.4)		(5.4)		(7.6)
Remeasurement of state deferred taxes due to Energy Transfer merger (B)	(1.1)		—		—		—		—		—
Remeasurement of state deferred tax liabilities	(0.6)		0.9		(0.8)		—		—		—
401(k) dividends	(0.2)		(0.4)		(0.4)		—		—		—
Impairment of OGE Energy's investment in Enable (C)	—		31.6		—		—		—		—
Other	—		0.1		(0.7)		(0.2)		0.1		(0.6)
Effective income tax rate	16.1	%	42.3	%	6.4	%	10.4	%	9.3	%	5.4	%

(A)Represents credits primarily associated with the production from OG&E's wind farms.

(B)In connection with the Enable and Energy Transfer merger, the state income tax rates are expected to decrease, as Energy Transfer operates in significantly more states with generally lower tax rates than the historic Enable operating area.

(C)As further discussed in Note 5, OGE Energy recorded a $780.0 million impairment on its investment in Enable in March 2020, which resulted in a tax benefit being recorded that caused a significant variance to the effective tax rate. This variance has been presented in the table as a single line item in order to facilitate comparability of other components of the effective tax rate.

The deferred tax provisions are recognized as costs in the ratemaking process by the commissions having jurisdiction over the rates charged by OG&E. The following table presents the components of Deferred Income Taxes at December 31, 2021 and 2020.

	OGE Energy				OG&E
December 31 (In millions)	2021		2020		2021		2020
Deferred income tax liabilities, net:
Accelerated depreciation and other property related differences	$	1,677.3	$	1,721.2	$	1,677.3	$	1,721.2
Investment in Enable	—		302.6		—		—
Investment in Energy Transfer's equity securities	363.5		—		—		—
Regulatory assets	52.1		52.3		52.1		52.3
Pension Plan	10.7		3.9		32.0		27.4
Other	7.4		(1.4)		(4.7)		(6.5)
Derivative instruments	2.2		1.7		—		—
Bond redemption-unamortized costs	1.8		2.0		1.8		2.0
Income taxes recoverable from customers, net	(225.8)		(221.8)		(225.8)		(221.8)
State tax credits	(221.2)		(204.4)		(205.9)		(189.0)
Federal tax credits	(208.4)		(236.6)		(209.8)		(236.6)
Regulatory liabilities	(72.0)		(81.0)		(72.0)		(81.0)
Asset retirement obligations	(19.4)		(20.3)		(19.4)		(20.3)
Postretirement medical and life insurance benefits	(19.2)		(22.4)		(13.0)		(15.3)
Accrued liabilities	(9.5)		(9.6)		(7.3)		(5.2)
Deferred federal investment tax credits	(3.1)		(2.7)		(3.1)		(2.7)
Net operating losses	(1.0)		(12.0)		—		(1.4)
Accrued vacation	(1.5)		(2.2)		(1.2)		(1.6)
Uncollectible accounts	(0.6)		(0.7)		(0.6)		(0.7)
Total deferred income tax liabilities, net	$	1,333.3	$	1,268.6	$	1,000.4	$	1,020.8

As of December 31, 2021, the Registrants have classified $18.1 million of unrecognized tax benefits as a reduction of deferred tax assets recorded. Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation from this amount.

The following table presents a reconciliation of the Registrants' total gross unrecognized tax benefits as of the years ended December 31, 2021, 2020 and 2019.

(In millions)	2021		2020		2019
Balance at January 1	$	21.9	$	20.7	$	20.7
Tax positions related to current year:
Additions	1.7		1.2		—
Reductions	(1.2)		—		—
Balance at December 31	$	22.4	$	21.9	$	20.7

As of December 31, 2021, 2020 and 2019, there were $18.1 million, $17.6 million and $16.4 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

Where applicable, the Registrants classify income tax-related interest and penalties as interest expense and other expense, respectively. During the year ended December 31, 2021, there were no income tax-related interest or penalties recorded with regard to uncertain tax positions.

The Registrants recognize tax benefits from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. The tax benefits in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized on settlement. In September 2021, the Registrants recorded an additional reserve for certain federal

research and development credits in the amount of $1.7 million. The $1.2 million reserve recorded in 2020 was reversed upon completion of the audit.

The Registrants sustained federal and state tax operating losses through 2012 caused primarily by bonus depreciation and other book versus tax temporary differences. Federal net operating losses generated during those years have been fully utilized. State operating losses are being carried forward for utilization in future years. In addition to the tax operating losses, the Registrants were unable to utilize the various tax credits that were generated during those years. These tax losses and credits are being carried as deferred tax assets and will be utilized in future periods. Under current law, the Registrants anticipate future taxable income will be sufficient to utilize remaining losses and credits before they begin to expire after 2021. The following table presents a summary of these carry forwards.

	OGE Energy				OG&E
(In millions)	Carry Forward Amount		Deferred Tax Asset		Carry Forward Amount		Deferred Tax Asset		Earliest Expiration Date
State operating loss	$	33.4	$	1.0	$	—	$	—	2032
Federal tax credits	$	208.4	$	208.4	$	209.8	$	209.8	2032
State tax credits:
Oklahoma investment tax credits	$	227.1	$	179.4	$	207.8	$	164.2	N/A
Oklahoma capital investment board credits	$	12.8	$	12.8	$	12.8	$	12.8	N/A
Oklahoma zero emission tax credits	$	37.5	$	28.9	$	37.5	$	28.9	2021
Louisiana inventory credits	$	0.1	$	0.1	$	—	$	—	2032

N/A - not applicable

Oklahoma Corporate Tax Rate Change

In May 2021, Oklahoma enacted a reduction of the corporate income tax rate to four percent from the previous six percent. This rate reduction took effect on January 1, 2022. ASC 740, "Income Taxes," requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Therefore, during the second quarter of 2021, the Registrants revalued state deferred tax liabilities to reflect this change in tax rate. For entities subject to ASC 980, "Accounting for Regulated Entities," such as OG&E, those entities are required to recognize a regulatory liability for the decrease in taxes payable for the change in tax rates that are expected to be returned to customers through future rates and to recognize a regulatory asset for the increase in taxes receivable for the change in tax rates that are expected to be recovered from customers through future rates. The revaluation resulted in a regulatory liability of $97.7 million recorded for OG&E and an income tax benefit of $6.6 million for OGE Energy related to Enable and other operations (holding company) for the year ended December 31, 2021.