Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before income taxes from continuing operations for each of the years ended December 31 were as follows:

	2023		2022		2021
	(In thousands)
United States	$	539,898	$	300,529	$	286,066
Foreign	—		—		—
Income before income taxes from continuing operations	$	539,898	$	300,529	$	286,066

Income tax expense (benefit) from continuing operations for the years ended December 31 was as follows:

	2023		2022		2021
	(In thousands)
Current:
Federal	$	50,180	$	21,337	$	11,737
State	13,707		7,176		4,414
Foreign	—		—		—
	63,887		28,513		16,151
Deferred:
Income taxes:
Federal	(5,960)		16,105		19,092
State	(601)		4,245		6,546
Investment tax credit - net	2,147		898		1,755
	(4,414)		21,248		27,393
Total income tax expense	$	59,473	$	49,761	$	43,544

Components of deferred tax assets and deferred tax liabilities at December 31 were as follows:

	2023		2022
	(In thousands)
Deferred tax assets:
Postretirement	$	28,953	$	30,228
Environmental compliance	28,873		—
Compensation-related	27,363		19,867
Operating lease liabilities	14,242		13,914
Customer advances	8,312		7,615
Legal and environmental contingencies	4,881		8,265
Other	29,753		24,024
Total deferred tax assets	142,377		103,913
Deferred tax liabilities:
Basis differences on property, plant and equipment	421,212		405,428
Postretirement	39,110		47,340
Purchased gas adjustment	34,618		33,567
Environmental compliance	16,221		—
Operating lease right-of-use-assets	14,116		13,667
Intangible assets	12,756		12,032
Other	62,076		46,593
Total deferred tax liabilities	600,109		558,627
Valuation allowance	816		785
Net deferred income tax liability	$	458,548	$	455,499

As of December 31, 2023 and 2022, the Company had various state income tax net operating loss carryforwards of $816,000 and $785,000, respectively, and state income tax credit carryforwards, excluding alternative minimum tax credit carryforwards, of $33.7 million and $35.1 million, respectively. The state income tax credit carryforwards are due to expire between 2025 and 2037. Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation allowances in the future.

The following table reconciles the change in the net deferred income tax liability from December 31, 2022, to December 31, 2023, to deferred income tax expense:

	2023
(In thousands)
Change in net deferred income tax liability from the preceding table	$	3,049
Excess deferred income tax amortization	(8,383)
Deferred taxes associated with other comprehensive loss	(46)
Other	966
Deferred income tax expense for the period	$	(4,414)

Total income tax expense differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for this difference were as follows:

Years ended December 31,	2023			2022			2021
	Amount		%	Amount		%	Amount		%
	(Dollars in thousands)
Computed tax at federal statutory rate	$	113,379	21.0	$	63,111	21.0	$	60,074	21.0
Increases (reductions) resulting from:
State income taxes, net of federal income tax	11,677		2.2	9,268		3.1	9,971		3.5
Tax-free debt for equity exchange	(38,967)		(7.2)	—		—	—		—
Federal renewable energy credit	(15,175)		(2.8)	(15,343)		(5.1)	(13,914)		(4.9)
Excess deferred income tax amortization	(8,383)		(1.6)	(9,008)		(3.0)	(10,295)		(3.6)
Other	(3,058)		(.6)	1,733		.6	(2,292)		(.8)
Total income tax expense	$	59,473	11.0	$	49,761	16.6	$	43,544	15.2

The Company's effective tax rate for 2023 differs from the U.S. federal statutory rate of 21 percent due primarily to the permanent difference on the gain on the Knife River retained shares due to the tax-free treatment of the disposition of the shares through the debt-for-equity exchange that was completed in November 2023, the impact of credits and deductions provided by law, and excess deferred income tax amortization. The debt-for equity exchange included an exchange of the approximately 10 percent of Knife River retained shares owned by the Company.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. The Company is no longer subject to U.S. federal, non-U.S., state or local income tax examinations by tax authorities for years ending prior to 2020.

For the years ended December 31, 2023, 2022 and 2021, total reserves for uncertain tax positions were not material. The Company recognizes interest and penalties accrued relative to unrecognized tax benefits in income tax expense.