Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

(11)Income Taxes

Transfers of Production Tax Credits

In August 2022, President Biden signed H.R. 5376 into law, commonly known as the Inflation Reduction Act of 2022, or IRA. The IRA contains a tax credit transferability provision that allows us to transfer (e.g. sell) PTCs produced after December 31, 2022, to third parties. In June 2024, under this transferability provision, we entered into an agreement with a third party to sell $16.9 million of our 2023 generated PTCs. We elected to account for the net proceeds from the transfer of PTCs as a reduction to income taxes payable under the scope of ASC 740 Income Taxes. We included the discount from the sale of our tax credits as a component of income tax expense. This sale of tax credits is presented within operating activities in the Consolidated Statement of Cash Flows consistent with the presentation of cash taxes paid.

We expect to continue to explore the ability to efficiently monetize our tax credits through third party transferability agreements. We will also include any expected proceeds from the sale of tax credits in the evaluation of the realizability of deferred tax assets related to PTCs.

IRS Revenue Procedure 2023-15

On April 14, 2023, the IRS released Revenue Procedure 2023-15 Amounts paid to improve tangible property. The Revenue Procedure provides a safe harbor method of accounting that taxpayers may use to determine whether costs to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized. The Revenue Procedure may be adopted in tax years ending after May 1, 2023. We intend to elect the safe harbor for tax year 2024. We do not expect the Revenue Procedure to have a material impact on our tax repairs deduction.

Income Tax Benefit (Expense) and Effective Tax Rates

Three Months Ended June 30, 2024, Compared to the Three Months Ended June 30, 2023

Income tax benefit (expense) for the three months ended June 30, 2024, was $(3.7) million compared to $6.1 million reported for the same period in 2023. For the three months ended June 30, 2024, the effective tax rate was 13.0% compared to (29.8)% for the same period in 2023. The higher effective tax rate was primarily driven by a prior year $8.2 million tax benefit from a Nebraska income tax rate decrease.

Six Months Ended June 30, 2024, Compared to the Six Months Ended June 30, 2023

Income tax (expense) for the six months ended June 30, 2024, was $(20.6) million compared to $(8.6) million reported for the same period in 2023. For the six months ended June 30, 2024, the effective tax rate was 11.7% which compared to 5.6% for the same period in 2023. The higher effective tax rate was primarily driven by a prior year $8.2 million tax benefit from a Nebraska income tax rate decrease.