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Income taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income taxes
Note 13 · Income taxes
The components of income taxes attributable to income (loss) from continuing operations for common stock were as follows:
HEI consolidatedHawaiian Electric consolidated
Years ended December 31202420232022202420232022
(in thousands)   
Federal   
Current $13,220 $22,206 $61,511 $34,216 $40,365 $75,118 
Deferred(376,141)1,951 (37,922)(373,316)(3,444)(39,646)
Deferred tax credits, net*— 52 4,031 — 22 137 
 (362,921)24,209 27,620 (339,100)36,943 35,609 
State      
Current 2,009 2,924 6,467 7,864 9,367 15,780 
Deferred (110,050)7,401 4,772 (108,311)4,883 (1,769)
Deferred tax credits, net*— — 56 — — 56 
 (108,041)10,325 11,295 (100,447)14,250 14,067 
Total$(470,962)$34,534 $38,915 $(439,547)$51,193 $49,676 
*     In 2022, primarily represents federal tax credits related to Mauo’s solar-plus-storage project, deferred and amortized starting in 2022.
A reconciliation of the amount of income taxes computed at the federal statutory rate to the amount provided in the consolidated statements of income was as follows:
HEI consolidatedHawaiian Electric consolidated
Years ended December 31202420232022202420232022
(in thousands)   
Amount at the federal statutory income tax rate $(376,235)$38,283 $42,410 $(349,423)$51,899 $50,526 
Increase (decrease) resulting from:      
State income taxes, net of federal income tax benefit
(85,483)7,989 8,812 (79,487)11,097 11,026 
Net deferred tax asset (liability) adjustment related to the Tax Act
(6,200)(7,316)(9,886)(6,200)(7,316)(9,886)
Tax credits, net
(2,987)(2,251)(487)(2,987)(2,251)(397)
Other, net (57)(2,171)(1,934)(1,450)(2,236)(1,593)
Total$(470,962)$34,534 $38,915 $(439,547)$51,193 $49,676 
Effective income tax rate (%)26.3 18.9 19.3 26.4 20.7 20.6 
The tax effects of book and tax basis differences that give rise to deferred tax assets and liabilities were as follows:
HEI consolidatedHawaiian Electric consolidated
December 312024202320242023
(in thousands)  
Deferred tax assets  
Wildfire tort-related claims
$483,749 $— $483,749 $— 
Regulatory liabilities, excluding amounts attributable to property, plant and equipment
76,765 78,884 $76,765 $78,884 
Lease liabilities
130,556 109,480 128,610 107,409 
Retirement benefits45,879 28,623 40,568 23,247 
Revenue taxes48,379 49,522 48,379 49,522 
Capital loss carryforward
66,430 — — — 
Other1
35,827 27,003 22,387 20,817 
Total deferred income tax assets
887,585 293,512 800,458 279,879 
Valuation allowances
(73,459)— — — 
Total deferred income tax assets, net
814,126 293,512 800,458 279,879 
Deferred tax liabilities  
Property, plant and equipment related542,109 527,323 532,257 513,064 
Lease right-of-use assets
130,483 109,420 128,610 107,409 
Regulatory assets, excluding amounts attributable to property, plant and equipment
21,678 21,872 21,678 21,872 
Other 47,148 37,103 46,330 36,535 
Total deferred income tax liabilities
741,418 695,718 728,875 678,880 
Net deferred income tax asset (liability)
$72,708 $(402,206)$71,583 $(399,001)
1     As of December 31, 2024, HEI consolidated has deferred tax assets of $3.8 million relating to the benefit of state tax credit carryforwards of $5.2 million. These state tax credit carryforwards primarily relate to the West Loch PV project that do not expire.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. Based upon historical taxable income and projections for future taxable income, management believes it is more likely than not the Company and the Utilities will realize substantially all of the benefits of the deferred tax assets, excluding the capital loss from the sale of ASB. As of December 31, 2024 and 2023, valuation allowances for deferred tax benefits were $73.5 million and nil, respectively, recorded on HEI consolidated related to the capital loss from the sale of ASB and the book/tax difference in equity basis of retained ASB stock. Since capital losses can only be offset against capital gains, the Company believes that it is more likely than not that the tax benefit from ASB's capital loss will not be realized. This is due to the lack of expected capital gains and no tax strategies in place to generate capital gains within the next five years before the loss expires. As a result, a valuation allowance was established in 2024. The Utilities are included in the consolidated federal and Hawaii income tax returns of HEI and are subject to the provisions of HEI’s tax sharing agreement, which determines each subsidiary’s (or subgroup’s) income tax return liabilities and refunds on a standalone basis as if it filed a separate return (or subgroup consolidated return).
The following is a reconciliation of the Company’s liability for unrecognized tax benefits for 2024, 2023 and 2022.
HEI consolidatedHawaiian Electric consolidated
(in millions)202420232022202420232022
Unrecognized tax benefits, January 1$27.7 $30.6 $17.1 $15.6 $11.7 $11.6 
Additions based on tax positions taken during the year0.7 0.5 19.0 — 0.3 0.1 
Reductions based on tax positions taken during the year(0.1)— (3.5)— — — 
Additions for tax positions of prior years1.5 3.8 0.6 1.5 3.7 0.2 
Reductions for tax positions of prior years(4.6)(7.2)(2.6)(0.6)(0.1)(0.2)
Lapses of statute of limitations(1.9)— — (0.5)— — 
Settlement(10.8)— — (10.8)— — 
Unrecognized tax benefits, December 31$12.5 $27.7 $30.6 $5.2 $15.6 $11.7 
The Internal Revenue Service began its examination of the Company’s U.S. income tax returns for 2017 and 2018 in the third quarter of 2020. As of December 31, 2024, the Company’s 2017 and 2018 IRS examination was completed and resulted in a reversal of $10.8 million of unrecognized tax benefits.
At December 31, 2024 and 2023, there were $5.2 million and $13.8 million of unrecognized tax benefits, respectively, that, if recognized, would affect the Company’s and Utilities’ annual effective tax rate.
Based on information currently available, the Company and the Utilities believe these accruals have adequately provided for potential income tax issues with federal and state tax authorities, and that the ultimate resolution of tax issues for all open tax periods will not have a material adverse effect on its results of operations, financial condition or liquidity.
Tax years post 2020 remains open under Federal and Hawaii statues of limitations.
HEI consolidated. The Company recognizes interest accrued related to unrecognized tax benefits in “Interest expense, net” and penalties, if any, in operating expenses. In 2024, 2023 and 2022, the Company recognized approximately $0.3 million, $1.3 million and $0.4 million, respectively, in interest expense. The Company had $2.3 million and $1.9 million of interest accrued as of December 31, 2024 and 2023, respectively.
Hawaiian Electric consolidated. The Utilities recognize interest accrued related to unrecognized tax benefits in “Interest expense and other charges, net” and penalties, if any, in operating expenses. In each of 2024, 2023 and 2022, the Utilities recognized approximately $0.3 million, $0.1 million and $0.1 million in interest expense, respectively. The Utilities had $0.1 million and $0.4 million of interest accrued as of December 31, 2024 and 2023, respectively.
As of December 31, 2024, the disclosures above present the Company’s and the Utilities’ accruals for potential tax liabilities, which involve management’s judgment regarding the likelihood of the benefits being sustained under governmental review.
Tax developments. The Inflation Reduction Act of 2022 (IRA) was signed by President Biden on August 16, 2022. Key provisions under the IRA include a 15% corporate alternative minimum tax (CAMT) imposed on certain large corporations and a 1% excise tax on stock repurchases after December 31, 2022. Based on current interpretation of the law and current guidance available we do not believe HEI will be impacted by the CAMT or stock repurchase excise tax provisions.
The IRA also creates new tax credits and enhances others to stimulate investment in renewable energy sources. Certain provisions of the IRA became effective in tax year 2023. The Company is exploring clean energy tax incentives included in the IRA. However, the potential IRA tax credits would not be material to the Company’s financial statements given the current operations of the business.