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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
(12) Income Taxes

Income tax (benefit) expense is comprised of the following (in thousands):
 Year Ended December 31,
 202420232022
Federal   
Current$(8,121)$2,925 $5,024 
Deferred(3,807)2,929 (5,993)
Investment tax credits1,970 (129)(130)
State
Current
(41)(1,971)3,363 
Deferred
560 3,785 (2,869)
Income Tax (Benefit) Expense$(9,439)$7,539 $(605)

Deferred income tax expense is comprised of the following (in thousands):

 Year Ended December 31,
 202420232022
Deferred tax expense excluding items below
$54,950 $61,537 $39,349 
Adjustments to other noncurrent liabilities, regulatory assets, and liabilities
(65,596)(54,732)(48,428)
Tax (benefit) expense allocated to other comprehensive income
(293)(91)217 
Adjustments to deferred income taxes for production tax credit cash transfer
7,692 — — 
Investment tax credits1,970 (129)(130)
Deferred tax (benefit) expense
$(1,277)$6,585 $(8,992)

Our effective tax rate typically differs from the federal statutory tax rate primarily due to the regulatory impact of flowing through the federal and state tax benefit of repairs deductions, state tax benefit of accelerated tax depreciation deductions (including bonus depreciation when applicable), and production tax credits. The regulatory accounting treatment of these deductions requires immediate income recognition for temporary tax differences of this type, which is referred to as the flow-through method. When the flow-through method of accounting for temporary differences is reflected in regulated revenues, we record deferred income taxes and establish related regulatory assets and liabilities.

The following table reconciles our effective income tax rate to the federal statutory rate:
 Year Ended December 31,
 202420232022
Federal statutory rate21.0 %21.0 %21.0 %
State income tax, net of federal provisions0.2 0.3 0.3 
Flow-through repairs deductions(10.8)(12.9)(12.4)
Release of unrecognized tax benefits (inclusive of related interest previously accrued)(9.8)(1.6)— 
Production tax credits(5.2)(5.1)(7.2)
Gas repairs safe harbor method change(3.3)— — 
Amortization of excess deferred income taxes(1.4)(1.1)(0.9)
Prior year permanent return to accrual adjustments(0.2)— (0.8)
Plant and depreciation of flow through items4.4 3.3 (0.1)
Unregulated Tax Cuts and Jobs Act excess deferred income taxes— (1.7)— 
Reduction to previously claimed alternative minimum tax credit— 1.6 — 
Other, net0.7 (0.1)(0.2)
Effective tax rate(4.4)%3.7 %(0.3)%

The table below summarizes the significant differences in income tax expense (benefit) based on the differences between our effective tax rate and the federal statutory rate (in thousands). All of our income from continuing operations is primarily from domestic operations.
Year Ended December 31,
202420232022
Income Before Income Taxes$214,672 $201,670 $182,403 
Income tax calculated at federal statutory rate45,081 42,350 38,304 
Permanent or flow through adjustments:
State income, net of federal provisions374 606 562 
Flow-through repairs deductions(23,132)(25,922)(22,665)
Release of unrecognized tax benefits (2024 is inclusive of $4.1 million of related interest previously accrued)
(20,993)(3,241)— 
Production tax credits(11,069)(10,274)(13,166)
Gas repairs safe harbor method change(6,994)— — 
Amortization of excess deferred income taxes(2,930)(2,184)(1,657)
Prior year permanent return to accrual adjustments(433)45 (1,397)
Plant and depreciation of flow through items9,360 6,595 (222)
Unregulated Tax Cuts and Jobs Act excess deferred income taxes— (3,385)— 
Reduction to previously claimed alternative minimum tax credit— 3,186 — 
Other, net1,297 (237)(364)
(54,520)(34,811)(38,909)
Income Tax (Benefit) Expense$(9,439)$7,539 $(605)

In 2023, the Internal Revenue Service (IRS) issued a safe harbor method of accounting for the repair and maintenance of natural gas transmission and distribution property. For the year ending December 31, 2024, after completion of our impact analysis of the gas repairs safe harbor method change, we recorded an income tax benefit of approximately $7.0 million related to tax deductions for repair costs that were previously capitalized in the 2022 and prior tax years.
The components of the net deferred income tax liability recognized in our Consolidated Balance Sheets are related to the following temporary differences (in thousands):
 December 31,
 20242023
NOL carryforward$123,043 $113,366 
Production tax credit97,695 94,283 
Customer advances32,455 28,300 
Compensation accruals12,717 10,716 
Pension / postretirement benefits9,078 15,131 
Unbilled revenue6,477 10,604 
Environmental liability5,415 5,760 
Interest rate hedges2,985 3,280 
Reserves and accruals2,252 3,098 
Other, net3,369 2,677 
Deferred Tax Asset295,486 287,215 
Excess tax depreciation(713,416)(660,440)
Flow through depreciation(132,944)(120,558)
Goodwill amortization(89,827)(88,323)
Regulatory assets and other(22,729)(18,414)
Deferred Tax Liability(958,916)(887,735)
Deferred Tax Liability, net$(663,430)$(600,520)

As of December 31, 2024, our total federal NOL carryforward was approximately $486.6 million. Our federal NOL carryforward does not expire. Our state NOL carryforward as of December 31, 2024 was approximately $391.2 million. If unused, our state NOL carryforwards will expire in 2033. We believe it is more likely than not that sufficient taxable income will be generated to utilize these NOL carryforwards.

At December 31, 2024, our total production tax credit carryforward was approximately $97.7 million. If unused, our production tax credit carryforwards will expire as follows: $1.8 million in 2035, $10.9 million in 2036, $11.1 million in 2037, $10.9 million in 2038, $11.5 million in 2039, $13.1 million in 2040, $11.5 million in 2041, $13.2 million in 2042, $2.6 million in 2043, and $11.1 million in 2044. We believe it is more likely than not that sufficient taxable income will be generated to utilize these production tax credit carryforwards.

Unrecognized Tax Benefits

We recognize tax positions that meet the more-likely-than-not threshold as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. The change in unrecognized tax benefits is as follows (in thousands):
 202420232022
Unrecognized Tax Benefits at January 1$28,074 $30,330 $32,049 
Gross increases - tax positions in prior period— — — 
Gross increases - tax positions in current period— — — 
Gross decreases - tax positions in current period(1,574)(2,256)(1,719)
Lapse of statute of limitations(16,888)— — 
Unrecognized Tax Benefits at December 31$9,612 $28,074 $30,330 

Our unrecognized tax benefits include approximately $7.4 million and $24.4 million related to tax positions as of December 31, 2024 and 2023, that if recognized, would impact our annual effective tax rate. During the year ending December 31, 2024, due to the expiration of the statute of limitations we decreased our unrecognized tax benefits by $16.9 million. On April 14, 2023, the Internal Revenue Service (IRS) issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting for gas repairs expenditures. During the year ended December 31, 2023, we adopted this method
and decreased our total unrecognized tax benefits by $0.5 million and recognized an income tax benefit of approximately $3.2 million for previously unrecognized tax benefits. In the next twelve months we expect the statute of limitations to expire for certain unrecognized tax benefits, which would result in a decrease to our total unrecognized tax benefits of approximately $9.4 million.

Our policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2024, we have accrued $3.0 million for the payment of interest and penalties in the Consolidated Balance Sheets. As of December 31, 2023, we had $4.5 million accrued for the payment of interest and penalties.

Tax years 2021 and forward remain subject to examination by the IRS and state taxing authorities. During the first quarter of 2023 the IRS commenced and concluded a limited scope examination of our 2019 amended federal income tax return. This examination resulted in a reduction to our previously claimed alternative minimum tax credit refund that is reflected in the table above.