Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:

	Dominion Energy						Virginia Power						Dominion Energy Gas
Three Months Ended March 31,	2020			2019			2020			2019			2020				2019
U.S. statutory rate		21.0	%		21.0	%		21.0	%		21.0	%		21.0	%			21.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		4.4			2.2			4.8			4.6			2.9				3.4
Investment tax credits		(4.1	)		(1.5	)		(6.4	)		(3.2	)		—				—
Production tax credits		(0.4	)		(0.8	)		(0.8	)		(1.0	)		—				—
Reversal of excess deferred income    taxes		(9.5	)		(5.1	)		(8.1	)		(5.0	)		(0.7	)			(0.7	)
Write-off of regulatory assets		—			(34.1	)		—			—			—				—
AFUDC - equity		(1.6	)		(1.4	)		(0.7	)		—			(0.4	)			(0.5	)
Other, net		(2.5	)		(0.6	)		0.3			0.1			(2.4	)	(1)		(3.3	)	(1)
Effective tax rate		7.3	%		(20.3	)%		10.1	%		16.5	%		20.4	%			19.9	%

(1) Includes (2.7)% and  (3.6) % relating to the absence of tax on noncontrolling interest in 2020 and 2019, respectively.

For the Companies’ rate-regulated entities, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be 35%. The Companies have recorded an estimate of excess deferred income tax amortization in 2020. The reversal of these excess deferred income taxes will impact the effective tax rate and rates charged to customers. See Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019 for more information.

In March 2020, the CARES Act was enacted which includes several significant business tax provisions that modify or temporarily suspend certain provisions of the 2017 Tax Reform Act.  The CARES Act provisions are intended to improve cash flow and liquidity by, among other things, providing a temporary five-year carryback for certain net operating losses, accelerating the refund of previously generated corporate alternative minimum tax credits and temporarily loosening the business interest limitation to 50% of adjusted taxable income for certain businesses.  While Dominion Energy intends to utilize the income tax provisions of the CARES Act to accelerate the recognition of certain tax attributes, where applicable, they are not expected to provide a material benefit.

In connection with the SCANA Combination, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project.  Dominion Energy’s 2019 effective tax rate reflects deferred income tax expense of $198 million in satisfaction of this commitment.  Dominion Energy’s 2019 effective tax rate also reflects the changes in consolidated state income taxes resulting from the SCANA Combination.

As of March 31, 2020, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of these unrecognized tax benefits.