Income Taxes

12 Months Ended

Dec. 31, 2023

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 2017 are subject to examination. At December 31, 2023, the 2015 through 2019 federal income tax returns are no longer under examination.

For state income tax purposes, we had NOL in various states of $72.9 million and $67.7 million as of December 31, 2023 and 2022, respectively, almost all of which will expire in 2040. Excluding NOLs from discontinued operations, we have recorded deferred tax assets of $1.8 million and $1.5 million related to state NOL carry-forwards at December 31, 2023 and 2022, 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. As a result, our income tax expense for the year 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 and then applied back to our 2013 and 2015 tax years in which we paid federal income taxes at a 35 percent tax rate. Tax benefits associated with this legislation were not available for the year ended December 31, 2023.

On December 22, 2017, the TCJA was signed into law. 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 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 2023, 2022, and 2021; (b) the reconciliation between the statutory federal income tax rate and the effective income tax rate for 2023, 2022, and 2021; and (c) the components of accumulated deferred income tax assets and liabilities at December 31, 2023 and 2022.

	For the Year Ended December 31,
	2023		2022		2021
(in thousands)
Current Income Tax Expense
Federal	$	14,736	$	8,284	$	2,775
State	5,496		1,948		(96)
Other	(47)		(47)		(47)
Total current income tax expense (benefit)	20,185		10,185		2,632
Deferred Income Tax Expense (1)
Property, plant and equipment	17,797		14,968		24,074
Deferred gas costs	(7,739)		8,923		1,857
Pensions and other employee benefits	(974)		1,109		(655)
FPU merger-related premium cost and deferred gain	(351)		(351)		(351)
Net operating loss carryforwards	(370)		2		97
Other	(470)		(1,004)		1,577
Total deferred income tax expense	7,893		23,647		26,599
Total Income Tax	$	28,078	$	33,832	$	29,231

(1) Includes less than $0.1 million, $7.8 million, and $8.2 million of deferred state income taxes for the years 2023, 2022 and 2021, respectively.

	For the Year Ended December 31,
	2023			2022			2021
(in thousands)
Reconciliation of Effective Income Tax Rates
Federal income tax expense (1)	$	24,214		$	25,982		$	23,666
State income taxes, net of federal benefit	4,377			7,714			6,371
ESOP dividend deduction	(184)			(177)			(180)
CARES Act Tax Benefit	—			—			(919)
Other	(329)			313			293
Total Income Tax Expense	$	28,078		$	33,832		$	29,231
Effective Income Tax Rate	24.35		%	27.34		%	25.94		%

(1) Federal income taxes were calculated at 21 percent for 2023, 2022, and 2021.

	As of December 31,
	2023		2022
(in thousands)
Deferred Income Taxes
Deferred income tax liabilities:
Property, plant and equipment	$	252,125	$	238,687
Acquisition adjustment	5,564		5,915
Loss on reacquired debt	145		164
Deferred gas costs	3,550		11,288
Natural gas conversion costs	4,824		5,026
Storm reserve liability	5,797		5,791
Other	9,655		8,236
Total deferred income tax liabilities	$	281,660	$	275,107
Deferred income tax assets:
Pension and other employee benefits	$	4,993	$	3,985
Environmental costs	951		1,052
Net operating loss carryforwards	1,847		1,488
Storm reserve liability	213		453
Accrued expenses	3,335		9,007
Other	11,239		2,955
Total deferred income tax assets	$	22,578	$	18,940
Deferred Income Taxes Per Consolidated Balance Sheets	$	259,082	$	256,167