Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 20 – Income Taxes

Components of the federal and state income tax provisions are as follows:

	2023		2022		2021
Current expense (benefit)	$	13.6	$	6.7	$	2.7
Deferred expense (benefit)		349.6		125.1		12.1
Total income tax expense (benefit)	$	363.2	$	131.8	$	14.8

Our deferred income tax assets and liabilities as of December 31, 2023 and 2022 consist of recognition differences related to certain types of costs as follows:

	2023			2022
Deferred tax assets:
Net operating loss	$	1,282.9		$	1,568.5
Disallowed business interest expense carryforward		79.3			10.3
Deferred tax assets before valuation allowance		1,362.2			1,578.8
Valuation allowance		(7.1	)		(36.9	)
Deferred tax assets		1,355.1			1,541.9
Deferred tax liabilities:
Investments (1)		(1,867.9	)		(1,842.0	)
Property, plant, and equipment		(3.0	)		(4.2	)
Other		(20.0	)		(23.4	)
Deferred tax liabilities		(1,890.9	)		(1,869.6	)
Net deferred tax asset (liability)	$	(535.8	)	$	(327.7	)
Net deferred tax asset (liability)
Federal	$	(507.0	)	$	(290.5	)
State		(28.8	)		(37.2	)
Long-term deferred tax liability, net	$	(535.8	)	$	(327.7	)

(1)Our deferred tax liability attributable to investments reflects the differences between the book and tax carrying values of our investment in the Partnership.

We are subject to tax in the U.S. and various state jurisdictions and we are subject to periodic audits and reviews by taxing authorities. As of December 31, 2023, IRS examinations are currently in process for the 2019, 2020 and 2021 taxable years of certain wholly-owned and consolidated subsidiaries that are treated as partnerships for U.S. federal income tax purposes. We are responding to information requests from the IRS with respect to these audits. We are not aware of any potential audit findings that would give rise to adjustments to taxable income and do not anticipate material changes related to these audits.

Federal statutes of limitations for returns filed in 2020 (for calendar year 2019) have expired, except for the 2019 returns under examination that have a statute extension to April 2025. For Texas, the statute of limitations has expired for 2019 returns (for calendar year 2018). Similarly, the statute of limitations expired on substantially all 2019 state income tax returns that were filed prior to October 15, 2020. However, tax authorities could review and adjust carryover attributes (e.g., NOLs) generated in a closed tax year if utilized in an open tax year.

During the preparation of the Company’s 2021 consolidated financial statements, the Company identified errors related to its 2020 state tax provision. The Company does not believe these errors are material to its previously issued historical consolidated financial statements for any of the periods impacted and accordingly, has not adjusted the historical financial statements. In 2021, the Company recorded an additional $23.3 million of income tax expense in the Consolidated Statements of Operations and corresponding increase to its deferred tax liabilities in the Consolidated Balance Sheets.

As of December 31, 2023, we have total U.S. federal NOL carryforwards of $5.5 billion, $857.4 million of which will expire in 2037. The remaining $4.7 billion NOL will not expire, but is limited to offsetting 80% of taxable income per year. As of December 31, 2023, our tax effected valuation allowance was $7.1 million, a decrease of $29.8 million from December 31, 2022. Of this valuation allowance, $6.4 million is federal and the remaining $0.7 million is state.

Set forth below is the reconciliation between our Income tax provision (benefit) computed at the United States statutory rate on income before income taxes and the income tax provision in our Consolidated Statements of Operations for the periods indicated:

Income tax reconciliation:	2023			2022			2021
Income (loss) before income taxes	$	1,942.5		$	1,663.2		$	436.9
Less: Net income attributable to noncontrolling interest		(233.4	)		(335.9	)		(350.9	)
Income attributable to Targa Resources Corp. before income taxes		1,709.1			1,327.3			86.0
Federal statutory income tax rate		21	%		21	%		21	%
Provision for federal income taxes		358.9			278.7			18.1
Valuation allowance		(29.8	)		(177.5	)		(46.2	)
State income taxes, net of federal tax benefit		37.8			33.6			(5.4	)
State tax provision error correction		—			—			23.3
Return-to-provision		(5.7	)		(0.6	)		(1.3	)
Change in income tax rate		11.5			(1.7	)		21.0
Permanent adjustments		6.2			5.6			4.1
Stock compensation shortfall/(windfall)		(15.8	)		(6.3	)		1.4
Other, net		0.1			—			(0.2	)
Income tax provision (benefit)	$	363.2		$	131.8		$	14.8

We have not identified any uncertain tax positions. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material adverse effect on our financial condition, results of operations or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”) which, among other things, introduced a corporate alternative minimum tax (the “CAMT”), imposed a 1% excise tax on stock buybacks and tax incentives to promote clean energy. Under the CAMT, a 15% minimum tax will be imposed on certain financial statement income of “applicable corporations.” The IRA treats a corporation as an applicable corporation in any taxable year in which the “average annual adjusted financial statement income” of such corporation for the three taxable year period ending prior to such taxable year exceeds $1 billion.

The U.S. Department of the Treasury and the IRS have issued guidance on the application of the CAMT which may be relied upon until final regulations are released. Based on our interpretation of the IRA, the CAMT and related guidance and several operational, economic, accounting and regulatory assumptions, we do not anticipate qualifying as an “applicable corporation” in the near term, but we are likely to become an applicable corporation in a subsequent tax year. If we become an applicable corporation and our CAMT liability is greater than our regular U.S. federal income tax liability for any particular tax year, the CAMT liability would effectively accelerate our future U.S. federal income tax obligations, reducing our cash available for distribution in that year, but provide an offsetting credit against our regular U.S. federal income tax liability for the future. As a result, our current expectation is that the impact of the CAMT is limited to timing differences in future tax years. Given the complexities of the IRA and the CAMT, we will continue to monitor and evaluate the potential future impact to our financial statements.