Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

Effective Tax Rate Reconciliations

The reconciliations of the effective tax rate for the periods were:

	Successor												Predecessor
	Three Months Ended September 30, 2024			Three Months Ended September 30, 2023			Nine Months Ended September 30, 2024			May 18 through September 30, 2023			January 1 through May 17, 2023
Income (loss) before income taxes	$	179		$	(92)		$	1,137		$	(42)		$	677
Income tax benefit (expense)	(11)			16			(192)			(3)			(212)
Effective tax rate	6.1		%	17.4		%	16.9		%	(7.1		%)	31.3		%
Federal income tax statutory tax rate	21		%	21		%	21		%	21		%	21		%
Income tax benefit (expense) computed at the federal income tax statutory tax rate	(38)			19			(239)			9			(143)
Income tax increase (decrease) due to:
State income taxes, net of federal benefit	(5)			3			(34)			1			(34)
Change in valuation allowance	29			(12)			63			(10)			129
Production tax credits	16			—			34			—			—
Other permanent differences	(3)			3			10			—			(16)
Nuclear decommissioning trust taxes	(10)			3			(26)			(3)			(9)
Reorganization adjustments	—			—			—			—			(138)
Other	—			—			—			—			(1)
Income tax benefit (expense)	$	(11)		$	16		$	(192)		$	(3)		$	(212)

Valuation Allowance

Management assesses the available positive and negative evidence to estimate whether it is more likely than not that sufficient future taxable income will be generated to permit use of existing deferred tax assets. The assessment of future taxable income includes the scheduled reversal of taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. For the nine months ended September 30, 2024 (Successor), Talen recognized a $63 million tax benefit for the reduction in federal and state valuation allowances, primarily related to year-to-date divestitures and year-to-date income which increase the amount of tax attributes that can be utilized. See Note 17 for information on divestitures. At each period, management will continue to assess the available positive and negative evidence to determine the need for a valuation allowance. We believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance may no longer be needed.