Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 — Income Taxes

Cleco

The following table presents a reconciliation of income tax (benefit) expense at the statutory rate and income tax expense (benefit) on income (loss) from continuing operations reported on Cleco’s Consolidated Statement of Income:

				FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)	2024			2023			2022
Income (loss) from continuing operations before income taxes	$	78,957		$	(94,942)		$	253,183
Statutory rate	21.0		%	21.0		%	21.0		%
Tax expense (benefit) at federal statutory rate	$	16,581		$	(19,938)		$	53,168
Increase (decrease)
Flowthrough of tax benefits	(8,671)			(7,847)			(12,272)
State income taxes, net of federal benefit	5,907			(2,256)			16,519
Permanent adjustments	17,596			(388)			(4,621)
Amortization of excess ADIT	(15,977)			(33,518)			(32,639)
Other, net	(1,380)			(1,126)			(120)
Total tax expense (benefit)	$	14,056		$	(65,073)		$	20,035
Effective rate	17.8		%	68.5		%	7.9		%

Information about current and deferred income tax expense from continuing operations is as follows:

			FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2024		2023		2022
Current federal income tax (benefit) expense	$	(46,955)	$	(45,429)	$	25,478
Deferred federal income tax expense (benefit)	42,380		(7,137)		(9,835)
Amortization of accumulated deferred investment tax credits	(115)		(127)		(134)
Total federal income tax (benefit) expense	$	(4,690)	$	(52,693)	$	15,509
Current state income tax expense (benefit)	18,833		(9,787)		10,326
Deferred state income tax benefit	(87)		(2,593)		(5,800)
Total state income tax expense (benefit)	$	18,746	$	(12,380)	$	4,526
Total federal and state income tax expense (benefit)	$	14,056	$	(65,073)	$	20,035
Items charged or credited directly to member’s equity
Federal deferred income tax	646		(1,374)		6,297
State deferred income tax	327		(531)		2,431
Total tax expense (benefit) from items charged directly to member’s equity	$	973	$	(1,905)	$	8,728
Total federal and state income tax expense (benefit)	$	15,029	$	(66,978)	$	28,763

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2024, and 2023 was comprised of the following:

	AT DEC. 31,
(THOUSANDS)	2024		2023
Depreciation and property basis differences	$	(663,346)	$	(764,958)
Fuel costs	(2,161)		232
Merger fair value adjustments	(41,583)		(46,052)
Net operating loss carryforward	11,761		57,464
NMTC	68,655		78,955
Other	(4,925)		(9,820)
Other comprehensive income	4,717		5,927
Postretirement benefits	28,774		38,282
Regulated operations regulatory liability, net	(150,138)		(161,427)
Accumulated deferred federal and state income taxes, net	$	(748,246)	$	(801,397)

Cleco Power

The following table presents a reconciliation of income tax expense at the statutory rate and income tax expense (benefit) on income (loss) reported on Cleco Power’s Consolidated Statement of Income:

	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)	2024			2023			2022
Income before tax	$	157,424		$	132,715		$	172,560
Statutory rate	21.0		%	21.0		%	21.0		%
Tax expense at federal statutory rate	$	33,059		$	27,870		$	36,238
Increase (decrease)
Flowthrough of tax benefits	(8,671)			(7,847)			(12,272)
State income taxes, net of federal benefit	11,321			12,296			12,109
Amortization of excess ADIT	(15,977)			(33,518)			(32,639)
Other, net	(1,226)			(3,235)			(933)
Total tax expense (benefit)	$	18,506		$	(4,434)		$	2,503
Effective rate	11.8		%	(3.3)		%	1.5		%

Information about current and deferred income tax expense is as follows:

	FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)	2024		2023		2022
Current federal income tax expense	$	4,189	$	11,188	$	4,921
Deferred federal income tax expense (benefit)	12,736		(20,029)		(1,926)
Amortization of accumulated deferred investment tax credits	(114)		(127)		(134)
Total federal income tax expense (benefit)	$	16,811	$	(8,968)	$	2,861
Current state income tax expense	2,052		5,617		2,406
Deferred state income tax benefit	(357)		(1,083)		(2,764)
Total state income tax expense (benefit)	$	1,695	$	4,534	$	(358)
Total federal and state income tax expense (benefit)	$	18,506	$	(4,434)	$	2,503
Items charged or credited directly to members’ equity
Federal deferred income tax	67		(528)		2,610
State deferred income tax	281		(208)		1,008
Total tax expense (benefit) from items charged directly to member’s equity	$	348	$	(736)	$	3,618
Total federal and state income tax expense (benefit)	$	18,854	$	(5,170)	$	6,121

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2024, and 2023 was comprised of the following:

	AT DEC. 31,
(THOUSANDS)	2024		2023
Depreciation and property basis differences	$	(663,000)	$	(699,020)
Fuel costs	(2,161)		1,652
Net operating loss carryforward	11,761		35,359
Other	(4,574)		(11,465)
Other comprehensive income	2,988		3,336
Postretirement benefits	17,108		25,005
Regulated operations regulatory liability, net	(150,138)		(161,427)
Accumulated deferred federal and state income taxes, net	$	(788,016)	$	(806,560)

Tax Rate Changes

On December 4, 2024, the Louisiana state corporate income tax rate decreased from 7.5% to 5.5%, effective for the income tax periods beginning on or after January 1, 2025. In accordance with accounting guidance, the impact of the rate change was recorded on Cleco’s and Cleco Power’s consolidated financial statements at December 31, 2024. The impact was a $66.5 million decrease to Accumulated deferred federal and state income taxes, net and a $64.9 million increase to Regulatory liabilities - deferred taxes, net. The impact to income tax expense was $1.6 million.

Valuation Allowance

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. At December 31, 2024, and 2023, Cleco had a deferred tax asset resulting from a NMTC carryforward of $68.7 million and $79.0 million, respectively. If the NMTC carryforward is not utilized, it will begin to expire in 2030. Management considers it more likely than not that the deferred tax asset related to the NMTC carryforward will be realized; therefore, no valuation allowance has been recorded for Cleco and Cleco Power.

Quarterly, management monitors and evaluates the realizability of deferred tax assets, and adjustments are recorded as appropriate in future periods. In evaluating the need for a valuation allowance, management considers various factors, including the expected level of future taxable income, available tax planning strategies, and reversals of existing taxable temporary differences. If such estimates and related assumptions change in the future, Cleco and Cleco Power may be required to record a valuation allowance against its deferred tax assets, resulting in additional income tax expense in Cleco’s and Cleco Power’s Consolidated Statements of Income.

Net Operating Losses

For the 2023 tax year, Cleco had a federal net operating loss of approximately $243.5 million and a state net operating loss of $167.2 million. For the 2024 tax year, Cleco expects to utilize a federal net operating loss of $207.8 million and a state net operating loss of $88.8 million.

For the 2023 tax year, Cleco Power had a federal net operating loss of approximately $135.4 million and a state operating loss of $167.2 million. For the 2024 tax year, Cleco Power expects to utilize a federal net operating loss of $99.8 million and state net operating loss of $88.8 million.

Both the federal and state net operating losses may be carried forward indefinitely. Cleco and Cleco Power consider it more likely than not that these income tax losses will be utilized to reduce future income tax payments, and the entire net operating loss carryforward will be utilized.

Uncertain Tax Positions

Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At December 31, 2024, and 2023, Cleco and Cleco Power had no interest payable related to uncertain tax positions. For the years ended December 31, 2024, 2023, and 2022, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At December 31, 2024, and 2023, Cleco and Cleco Power had no liability for unrecognized tax positions.

Income Tax Audits

Cleco participates in the IRS’s Compliance Assurance Process in which tax positions are examined and agreed upon prior to filing the federal tax return. While the statute of limitations remains open for tax years 2021, 2022, and 2023, the IRS has placed Cleco in the Bridge phase of the Compliance Assurance Process for the 2021 tax year. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances. These tax returns were filed consistent with the IRS’s review. The IRS has accepted Cleco’s application for the Compliance Assurance Process for the 2022 tax year and the Compliance Assurance Maintenance phase for the 2023 tax year. In this maintenance phase, the IRS typically will, at its discretion, reduce the level of its review of the tax year relative to the regular Compliance Assurance Process phase.

The state income tax years 2021, 2022, and 2023 remain subject to examination by the Louisiana Department of Revenue.

Cleco classifies income tax penalties as a component of other expenses. For the years ended December 31, 2024, 2023, and 2022, no penalties were recognized.