Income Taxes

3 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.

The provision for income taxes is shown in the tables below:

	Three Months Ended March 31,
	2025		2024
Income tax expense	$	2,738	$	16,859

Income tax expense decreased $14.2 million to $2.7 million for the three months ended March 31, 2025 as compared to $16.9 million for the three months ended March 31, 2024. The decrease in income tax expense is primarily due to the decrease in pre-tax operating income, which resulted from the 2021 GRC decision in the first three months of 2024.

The Company’s effective tax rate was 17.2% and 19.6% before discrete items as of March 31, 2025 and March 31, 2024, respectively. The decrease in the effective tax rate was primarily due to the recognition of income related to the 2021 GRC decision in the first three months of 2024.

On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this new law temporarily disallows the use of state net operating losses for years beginning in 2024 through 2026.

The Company had unrecognized tax benefits of approximately $19.6 million and $16.6 million as of March 31, 2025 and 2024, respectively. Included in the balance of unrecognized tax benefits as of March 31, 2025 and 2024, is $5.6 million and $5.0 million, respectively, of tax benefits that, if recognized, would result in an increase to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.