Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

We file a consolidated federal income tax return. Income tax expense allocated to our subsidiaries is based upon their respective taxable incomes and tax credits. State income tax returns are filed on a separate company basis in most states where we have operations and/or are required to file. Our state returns for tax years after 2016 are subject to examination. At December 31, 2022, the 2015 through 2019 federal income tax returns are under examination, and no report has been issued at this time.

During 2022, the Company settled its Internal Revenue Service examination relating to the 2015-2019 tax years. As a result, we had federal NOLs totaling $6.3 million and $12.2 million in 2019 and 2018, respectively. Under the CARES Act, discussed below, we elected to carry the losses back to 2015 and 2013. The company recovered $12.8 million of tax and received interest income of $0.8 million as a result of carrying back the NOLs referred to above. For state income tax purposes, we had NOL in various states of $67.7 million and $14.6 million as of December 31, 2022 and 2021, respectively, almost all of which will expire in 2040. Excluding NOLs from discontinued operations, we have recorded deferred tax assets of $1.5 million related to state NOL carry-forwards at both December 31, 2022 and 2021, respectively. We have not recorded a valuation allowance to reduce the future benefit of the tax NOL because we believe they will be fully utilized.

Tax Law Changes

In March 2020, the CARES Act was signed into law and included several significant changes to the Internal Revenue Code. The CARES Act includes certain tax relief provisions including the ability to carryback five years net operating losses arising in a tax year beginning in 2018, 2019, or 2020. This provision allows a taxpayer to recover taxes previously paid at a 35 percent federal income tax rate during tax years prior to 2018. In addition, the CARES Act removed the taxable income limitation to allow a tax NOL to fully offset taxable income for tax years beginning before January 1, 2021. Tax benefits associated with this legislation were not available for the year ended December 31, 2022. As a result, our income tax expense for the years ended December 31, 2021 included a tax benefit $0.9 million, attributable to the tax NOL carryback provided under the CARES Act for losses generated in 2018 and 2019. This NOL carryback was applied to our 2013 and 2015 tax years in which we paid federal income taxes at a 35 percent tax rate.

On December 22, 2017, President Trump signed into law the TCJA. Substantially all of the provisions of the TCJA were effective for taxable years beginning on or after January 1, 2018. The provisions that significantly impacted us include the reduction of the corporate federal income tax rate from 35 percent to 21 percent. Our federal income tax expense for periods beginning on January 1, 2018 and thereafter are based on the new federal corporate income tax rate. The TCJA included changes to the Internal Revenue Code, which materially impacted our 2017 financial statements. ASC 740, Income Taxes, requires recognition of the effects of changes in tax laws in the period in which the law is enacted. ASC 740 requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. During 2018, we completed the assessment of the impact of accounting for certain effects of the TCJA. At the date of enactment in 2017, we re-measured deferred income taxes based upon the new corporate tax rate. See Note 18, Rates and Other Regulatory Activities, for further discussion of the TCJA's impact on our regulated businesses.

The following tables provide: (a) the components of income tax expense in 2022, 2021, and 2020; (b) the reconciliation between the statutory federal income tax rate and the effective income tax rate for 2022, 2021, and 2020 from continuing operations; and (c) the components of accumulated deferred income tax assets and liabilities at December 31, 2022 and 2021.

	For the Year Ended December 31,
	2022		2021		2020
(in thousands)
Current Income Tax Expense
Federal	$	8,284	$	2,775	$	(2,777)
State	1,948		(96)		2,162
Other	(47)		(47)		(47)
Total current income tax expense (benefit)	10,185		2,632		(662)
Deferred Income Tax Expense (1)
Property, plant and equipment	14,968		24,074		23,224
Deferred gas costs	8,923		1,857		(714)
Pensions and other employee benefits	1,109		(655)		(75)
FPU merger-related premium cost and deferred gain	(351)		(351)		156
Net operating loss carryforwards	2		97		5,107
Other	(1,004)		1,577		(3,498)
Total deferred income tax expense	23,647		26,599		24,200
Income Tax Expense from Continuing Operations	33,832		29,231		23,538
Income Tax Expense from Discontinued Operations	—		—		153
Total Income Tax	$	33,832	$	29,231	$	23,691

(1) Includes $7.8 million, $8.2 million, and $4.9 million of deferred state income taxes for the years 2022, 2021 and 2020, respectively.

	For the Year Ended December 31,
	2022			2021			2020
(in thousands)
Reconciliation of Effective Income Tax Rates from Continuing Operations
Federal income tax expense (1)	$	25,982		$	23,666		$	19,778
State income taxes, net of federal benefit	7,714			6,371			5,051
ESOP dividend deduction	(177)			(180)			(218)
CARES Act Tax Benefit	—			(919)			(1,841)
Other	313			293			768
Total Income Tax Expense from Continuing Operations	$	33,832		$	29,231		$	23,538
Effective Income Tax Rate from Continuing Operations	27.34		%	25.94		%	24.99		%

(1) Federal income taxes were calculated at 21 percent for 2022, 2021, and 2020.

	As of December 31,
	2022		2021
(in thousands)
Deferred Income Taxes
Deferred income tax liabilities:
Property, plant and equipment	$	238,687	$	224,034
Acquisition adjustment	5,915		6,266
Loss on reacquired debt	164		183
Deferred gas costs	11,288		2,366
Natural gas conversion costs	5,026		5,529
Storm reserve liability	5,791		5,783
Other	8,236		6,301
Total deferred income tax liabilities	$	275,107	$	250,462
Deferred income tax assets:
Pension and other employee benefits	$	3,985	$	5,354
Environmental costs	1,052		996
Net operating loss carryforwards	1,488		1,490
Storm reserve liability	453		448
Accrued expenses	9,007		4,843
Other	2,955		3,781
Total deferred income tax assets	$	18,940	$	16,912
Deferred Income Taxes Per Consolidated Balance Sheets	$	256,167	$	233,550