Provision (Benefit) for Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Provision (Benefit) for Income Taxes [Text Block]

Note 6 – Provision (Benefit) for Income Taxes

The Provision (benefit) for income taxes includes:

	Year Ended December 31,
	2022		2021		2020
	(Millions)
Current:
Federal	$	(25)	$	(1)	$	(29)
State	19		3		—
	(6)		2		(29)
Deferred:
Federal	424		421		98
State	7		88		10
	431		509		108
Provision (benefit) for income taxes	$	425	$	511	$	79

Reconciliations from the Provision (benefit) at statutory rate to recorded Provision (benefit) for income taxes are as follows:

	Year Ended December 31,
	2022		2021		2020
	(Millions)
Provision (benefit) at statutory rate	$	534	$	435	$	58
Increases (decreases) in taxes resulting from:
State income taxes (net of federal benefit)	113		71		6
State deferred income tax rate change	(92)		—		—
Federal valuation allowance	(70)		3		1
Federal settlements	(45)		—		—
Impact of nontaxable noncontrolling interests	(14)		(9)		3
Other – net	(1)		11		11
Provision (benefit) for income taxes	$	425	$	511	$	79

Income (loss) before income taxes includes less than $1 million of foreign income in 2022, and $2 million and $1 million of foreign loss in 2021 and 2020, respectively.

The State deferred income tax rate change benefit of $92 million is related to a decrease in our estimate of the deferred state income tax rate (net of federal effect) driven primarily by the enacted decline in the Pennsylvania state income tax rate over the next several years.

During the course of audits of our business by domestic and foreign tax authorities, we frequently face challenges regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the liability associated with our various filing positions, we apply the two-step process of recognition and measurement. In association with this liability, we record an estimate of related interest and tax exposure as a component of our tax provision. The impact of this accrual is included within Other – net in our reconciliation of the Provision (benefit) at statutory rate to recorded Provision (benefit) for income taxes.

Significant components of Deferred income tax liabilities are as follows:

	December 31,
	2022		2021
	(Millions)
Gross deferred income tax liabilities:
Property, plant and equipment	$	3,171	$	2,777
Investments	1,784		1,669
Other	138		154
Total gross deferred income tax liabilities	5,093		4,600
Gross deferred income tax assets:
Accrued liabilities	1,108		872
Foreign tax credits	91		140
Federal loss carryovers	730		879
State losses and credits	356		421
Other	121		132
Total gross deferred income tax assets	2,406		2,444
Less valuation allowance	200		297
Net deferred income tax assets	2,206		2,147
Deferred income tax liabilities	$	2,887	$	2,453

The valuation allowance at December 31, 2022 and 2021 serves to reduce the available deferred income tax assets to an amount that will, more likely than not, be realized. We considered all available positive and negative evidence, which incorporates available tax planning strategies, and management’s estimate of future reversals of existing taxable temporary differences, and have determined that a portion of our deferred income tax assets related to the Foreign tax credits and State losses and credits may not be realized. In 2022, we released $70 million of valuation allowance upon determining we expect to utilize additional foreign tax credits prior to expiration between 2024 and 2025. The amounts presented in the table above are, with respect to state items, before any federal benefit. The change from prior year for the State losses and credits reflects increases in losses and credits generated in the current and prior years less losses and/or credits utilized in the current year. We have loss and credit carryovers in multiple state taxing jurisdictions. These attributes generally expire between 2023 and 2041 with some carryovers having indefinite carryforward periods.

Federal loss carryovers at the end of 2022 include deferred tax assets on net operating loss carryovers of $705 million with no expiration date. Deferred tax assets on charitable contributions of $25 million are expected to be utilized by us prior to expiring between 2023 and 2027.

Cash payments for income taxes (net of refunds) were $13 million in 2022. Cash refunds for income taxes (net of payments) were $45 million and $40 million in 2021 and 2020, respectively.

During the second quarter of 2022, we finalized settlements for 2011 through 2014 on certain contested matters with the Internal Revenue Service (IRS) that resulted in a 2022 year-to-date tax benefit of approximately $45 million. In 2022, we received cash refunds related to these settlements totaling $7 million.

We recognize related interest and penalties as a component of Provision (benefit) for income taxes. Total interest and penalties recognized as part of income tax provision were benefits of $3 million in 2022 and $1 million in each of 2021 and 2020. There are no interest or penalties relating to uncertain tax positions accrued as of December 31, 2022 and $4 million of interest was accrued as of December 31, 2021.

Consolidated U.S. Federal income tax returns are open to IRS examination for years after 2017. As of December 31, 2022, examination of 2018 is currently in process, with the statute extended to September 30, 2023. We do not expect material changes in our financial position resulting from this examination. The statute of limitations for most states expires one year after expiration of the IRS statute.