INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

We had no current income tax expense or benefit in 2023 or 2022. We had a deferred income tax expense of $4 thousand in 2023 and deferred income tax benefit of $249 thousand in 2022.

We utilize the liability method of accounting for income taxes, which requires that deferred tax assets and liabilities be determined based on the expected future income tax consequences of events that have been recognized in the consolidated financial statements. In accordance with our regulatory accounting treatment, changes in deferred tax assets or liabilities result in the establishment of a regulatory asset or liability. A regulatory asset or liability associated with deferred income taxes generally represents the future increase or decrease in income taxes payable that will be received or settled through future rate revenues. Under this regulatory accounting approach, the income tax expense (benefit) on our consolidated statements of operations includes only the current portion.

Components of our net deferred tax liability are as follows (dollars in thousands):

	December 31, 2023		December 31, 2022
Deferred tax assets
Net operating loss carryforwards	$	192,591	$	165,636
Operating lease liabilities	94,862		105,039
Deferred revenues and membership withdrawal	4,812		16,028
Safe harbor lease receivables	9,379		8,939
Other	34,171		43,795
	335,815		339,437
Less valuation allowance	—		—
	335,815		339,437
Deferred tax liabilities
Basis differences- property, plant and equipment and other	168,948		166,568
Operating lease right-of-use assets	121,125		125,939
Capital credits from other associations	35,638		34,236
Deferred debt prepayment transaction costs	25,327		27,381
Other	—		4,588
	351,038		358,712
Net deferred tax liability	$	(15,223)	$	(19,275)

Net deferred tax liabilities decreased by $4.1 million in 2023 which is deferred and reflected as a decrease in the regulatory asset established for deferred income tax expense. The accounting for regulatory assets is discussed further in Note 2—Accounting for Rate Regulation. The regulatory asset balance associated with deferred income tax expense under the liability method is $15.2 million and $19.3 million at December 31, 2023 and 2022, respectively.

The reconciliation between the statutory federal income tax rate and the effective tax rate is as follows (dollars in thousands):

	2023		2022		2021
Pretax GAAP income at Federal statutory rate	2,118		—		5,435
Pretax GAAP income at State statutory rate, net of federal benefit	282		—		725
Patronage exclusion	(2,401)		—		(6,159)
Asset retirement and environmental reclamation obligations	(6,302)		16,655		10,917
Deferred revenues and membership withdrawal	(11,216)		(22,759)		18,673
Operating liabilities, net of right-of-use assets (1)	(5,281)		(4,919)		1,165
Valuation Allowance	—		—		—
Net operating loss carryforward	26,955		21,034		(27,539)
Other items, net	(4,690)		(9,445)		(2,531)
Impairment	—		—		—
Regulatory treatment of deferred taxes	539		(815)		(391)
Total deferred income tax expense (benefit)	$	4	$	(249)	$	295

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(1)Net deferred tax liability established as a result of adopting ASC 842. See Note 11 - Leases.

We had an estimated tax loss of $97.6 million for 2023. At December 31, 2023, we have an estimated consolidated federal net operating loss carryforward of $809.2 million of which pre-2018 tax years in the amount of $444.5 million are subject to expiration periods between 2031 and 2037 and $364.7 million have no expiration but are limited to 80 percent of taxable income in the year of utilization. We have $585.5 million of state net operating loss carryforwards, of which $552.4 million is subject to expiration periods between 2030 and 2039 and $33.1 million have no expiration. We did not establish a

valuation allowance because it is more likely than not that the benefit from the federal and state net operating losses will be realized in the future.

We file a U.S. federal consolidated income tax return and income tax returns in state jurisdictions where required. The statute of limitations remains open for federal and state returns for the years 2019 forward. We do not have any reserves recorded for uncertain tax positions.

On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted into law. The IRA enacted many provisions intended to mitigate climate change by providing various sources of funding and tax credit incentives for investments designed to reduce greenhouse gas emissions. These provisions do not impact our current consolidated financial statements but could affect future financial statements due to the impact of such investments. These provisions are subject to regulations and other guidance to be released by the U.S. Department of the Treasury, the U.S. Department of Agriculture and other governmental agencies over time. We are monitoring developments and evaluating opportunities to utilize these incentives. In September 2023, we submitted a Letter of Interest to apply for funding through the U.S. Department of Agriculture's Empowering Rural America ("New ERA") Program. The New ERA Program implements the $9.7 billion funded in the IRA.