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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Vistra files a U.S. federal income tax return that includes the results of its consolidated subsidiaries. Vistra serves as the corporate parent of the Vistra consolidated group. Pursuant to applicable U.S. Department of the Treasury regulations and published guidance of the IRS, corporations that are members of a consolidated group have joint and several liability for the taxes of such group.

Income Tax Expense (Benefit)

The components of our income tax expense (benefit) are as follows:
Year Ended December 31,
202420232022
(in millions)
Current:
U.S. Federal$2 $(1)$2 
State46 52 7 
Total current48 51 9 
Deferred:
U.S. Federal561 421 (304)
State46 36 (55)
Total deferred607 457 (359)
Total$655 $508 $(350)
Reconciliation of income taxes computed at the U.S. federal statutory rate to income tax expense (benefit) recorded:
Year Ended December 31,
202420232022
(in millions)
Income (loss) before income taxes$3,467 $2,000 $(1,560)
U.S. federal statutory rate21 %21 %21 %
Income taxes at the U.S. federal statutory rate728 420 (328)
State tax, net of federal benefit80 86 (19)
Nondeductible TRA accretion2 41 18 
Transferable PTC revenues(115)(2)— 
Equity awards(53)(3)(3)
Valuation allowance(2)(20)(8)
Release of Uncertain Tax Positions— (35)— 
Other15 21 (10)
Income tax expense (benefit)$655 $508 $(350)
Effective tax rate18.9 %25.4 %22.4 %

Deferred Income Tax Balances

Deferred income taxes provided for temporary differences based on tax laws in effect at December 31, 2024 and 2023 are as follows:
December 31,
20242023
(in millions)
Noncurrent Deferred Income Tax Assets
Tax credit carryforwards$86 $84 
Loss carryforwards949 1,081 
Identifiable intangible assets340 380 
Long-term debt225 173 
Employee benefit obligations133 117 
Commodity contracts and interest rate swaps383 664 
Other36 33 
Total deferred tax assets$2,152 $2,532 
Noncurrent Deferred Income Tax Liabilities
Property, plant, and equipment2,765 1,264 
Total deferred tax liabilities2,765 1,264 
Valuation allowance75 46 
Net Deferred Income Tax Asset (Liability)$(688)$1,222 

As of December 31, 2024, we had total net deferred tax liabilities of approximately $688 million that were substantially comprised of book and tax basis differences related to our generation and mining property, plant, and equipment, partially offset by federal and state net operating loss (NOL) carryforwards. Our net deferred tax liabilities were significantly impacted by the Energy Harbor Merger. For the years ended December 31, 2024 and 2023, we recognized tax benefits of $2 million and $20 million primarily related to the release of the federal valuation allowance on charitable contributions and state valuation allowances, respectively. As of December 31, 2024, we assessed the need for a valuation allowance related to our deferred tax asset and considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. We have identified positive evidence in the form of cumulative income on an unadjusted basis over the preceding 12 quarters. We evaluated historical earnings, performed scheduling of the reversal of temporary differences, and considered other positive and negative evidence. In connection with our analysis, we concluded that it is more likely than not that the federal deferred tax assets will be fully utilized by future taxable income, and thus no valuation allowance was required. A valuation allowance of approximately $30 million was recorded as part of Energy Harbor purchase accounting on state NOL carryforwards.
As of December 31, 2024, we had $3.2 billion pre-tax net operating loss (NOL) carryforwards for federal income tax purposes that will begin to expire in 2031.

The income tax effects of the components included in accumulated other comprehensive income totaled net deferred tax liabilities of $4 million and zero at December 31, 2024 and 2023, respectively.

IRA

In August 2022, the U.S. enacted the IRA, which, among other things, implements substantial new and modified energy tax credits, a 15% corporate alternative minimum tax (CAMT) on book income of certain large corporations, and a 1% excise tax on net stock repurchases. We do not expect Vistra to be subject to the CAMT in the 2024 tax year as it applies only to corporations with a three-year average annual adjusted financial statement income in excess of $1 billion. We have taken the CAMT and relevant extensions or expansions of existing tax credits applicable to projects in our immediate development pipeline into account when forecasting cash taxes. See Notes 1 and 4 for additional information.

Final Section 163(j) Regulations

The final Section 163(j) regulations, which limits qualified deductions for business interest expense, were issued in July 2020 and provided a critical correction to the proposed regulations regarding the computation of adjusted taxable income. As of January 1, 2022, certain provisions in the final Section 163(j) regulations have sunset, including the add-back of depreciation and amortization to adjusted taxable income. As a result, under the law as currently enacted, Vistra's deductible business interest expense was significantly limited for the 2024 tax year and will continue to be so limited under current law going forward. Vistra remains active in legislative monitoring and advocacy efforts to support a legislative solution to reinstate and make permanent the add-back of depreciation and amortization to adjusted taxable income.

Liability for Uncertain Tax Positions

Accounting guidance related to uncertain tax positions requires that all tax positions subject to uncertainty be reviewed and assessed with recognition and measurement of the tax benefit based on a "more-likely-than-not" standard with respect to the ultimate outcome, regardless of whether this assessment is favorable or unfavorable.

We classify interest and penalties related to uncertain tax positions as current income tax expense. The amounts were immaterial for the years ended December 31, 2024, 2023, and 2022. The following table summarizes the changes to the uncertain tax positions, reported in accumulated deferred income taxes and other current liabilities in the consolidated balance sheets for the years ended December 31, 2024, 2023, and 2022.
Year Ended December 31,
202420232022
(in millions)
Balance at beginning of period, excluding interest and penalties$— $36 $38 
Additions based on tax positions related to prior years4 — — 
Reductions based on tax positions related to prior years— — (1)
Reductions related to the lapse of the tax statute of limitations— (35)— 
Settlements with taxing authorities— (1)(1)
Balance at end of period, excluding interest and penalties$4 $— $36 

Vistra and its subsidiaries file income tax returns in U.S. federal, state and foreign jurisdictions and are, at times, subject to examinations by the IRS and other taxing authorities. In February 2021, Vistra was notified that the IRS had opened a federal income tax audit for tax years 2018 and 2019. The federal income tax audit was closed in June 2023 with immaterial changes. Uncertain tax positions totaled $4 million and zero as of December 31, 2024 and 2023, respectively. Of the amounts recorded as unrecognized tax benefits, an insignificant portion would impact our effective tax rate if recognized.

Tax Matters Agreement

On the Effective Date, we entered into the Tax Matters Agreement with EFH Corp. whereby the parties have agreed to take certain actions and refrain from taking certain actions in order to preserve the intended tax treatment of the Spin-Off and to indemnify the other parties to the extent a breach of such agreement results in additional taxes to the other parties.
Among other things, the Tax Matters Agreement allocates the responsibility for taxes for periods prior to the Spin-Off between EFH Corp. and us. For periods prior to the Spin-Off: (a) Vistra is generally required to reimburse EFH Corp. with respect to any taxes paid by EFH Corp. that are attributable to us and (b) EFH Corp. is generally required to reimburse us with respect to any taxes paid by us that are attributable to EFH Corp.

We are also required to indemnify EFH Corp. against taxes, under certain circumstance, if the IRS or another taxing authority successfully challenges the amount of gain relating to the PrefCo Preferred Stock Sale or the amount or allowance of EFH Corp.'s net operating loss deductions.

Subject to certain exceptions, the Tax Matters Agreement prohibits us from taking certain actions that could reasonably be expected to undermine the intended tax treatment of the Spin-Off or to jeopardize the conclusions of the private letter ruling we obtained from the IRS or opinions of counsel received by us or EFH Corp., in each case, in connection with the Spin-Off. Certain of these restrictions apply for two years after the Spin-Off.

Under the Tax Matters Agreement, we may engage in an otherwise restricted action if (a) we obtain written consent from EFH Corp., (b) such action or transaction is described in or otherwise consistent with the facts in the private letter ruling we obtained from the IRS in connection with the Spin-Off, (c) we obtain a supplemental private letter ruling from the IRS, or (d) we obtain an unqualified opinion of a nationally recognized law or accounting firm that is reasonably acceptable to EFH Corp. that the action will not affect the intended tax treatment of the Spin-Off.