INCOME TAXES

6 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

11. INCOME TAXES

ASC Topic 740, Income Taxes requires the use of an estimated annual effective tax rate for purposes of determining the income tax provision during interim reporting periods. In calculating its estimated annual effective tax rate, the Company considers forecasted annual pre-tax income and estimated permanent book versus tax differences. Adjustments to the effective tax rate and management's estimates will occur as information and assumptions change.

Changes in tax laws or tax rates are recognized in the financial reporting period that includes the enactment date, the date on which the act is signed into law. Similarly, the tax effect of unusual or infrequent events and transactions are recognized in the financial reporting period in which they occur. These items are excluded from the calculation of the estimated annual effective tax rate and are reported discretely in each interim reporting period.

NJR evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with uncertain tax positions. A tax benefit claimed, or expected to be claimed, on a tax return may be recognized only if it is more likely than not that the tax position will be upheld upon examination by the applicable taxing authority and is measured based on the largest tax benefit that is more than 50% likely to be realized. Interest and penalties related to unrecognized tax benefits, if any, are recognized within income tax expense, and accrued interest and penalties are recognized within other noncurrent liabilities on the Unaudited Condensed Consolidated Balance Sheets.

Effective Tax Rate

The estimated annual effective tax rates were 23.2% and 21.7%, for the six months ended March 31, 2025 and 2024, respectively.

To the extent there are discrete tax items that are not included in the estimated annual effective tax rate, the actual reported effective tax rate may differ from the estimated annual effective tax rate. Discrete tax items primarily relate to the income tax effects associated with the sale of the Company’s residential solar energy projects and host customer contracts for the six months ended March 31, 2025 and the vesting of share based awards for the six months ended March 31, 2024. NJR’s effective tax rate was 22.8% and 21.3% during the six months ended March 31, 2025 and 2024, respectively.

Other Tax Items

As of March 31, 2025 and September 30, 2024, the Company has tax credit carryforwards of approximately $191.8M and $191.6M, respectively, which each have a life of 20 years. The Company expects to utilize this entire carryforward prior to expiration, which would begin in fiscal 2036.

As of March 31, 2025 and September 30, 2024, the Company has state income tax net operating losses of approximately $468.3M and $634.7M, respectively. These state net operating losses have varying carry-forward periods dictated by the state in which they were incurred; these state carry-forward periods and range from seven to 20 years, with the majority expiring after 2037. The Company expects to utilize this entire carryforward prior to expiration, except for state income tax attributes for which the Company had a valuation allowance of approximately $0.5M and $0.6M as of March 31, 2025 and September 30, 2024, respectively, for which the Company could not conclude were realizable on a more-likely-than-not basis.

In March 2024, the State of New Jersey commenced an examination of the Company's Corporate Business Tax return for NJR and certain subsidiaries for the fiscal periods ending September 30, 2019 through September 30, 2022. On January 8, 2025, this audit was completed by the State of New Jersey and no other action is necessary.