Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense.

Effective income tax rate for years ended Dec. 31:

	2022		2021 (a)		2020 (a)
Federal statutory rate	21.0	%	21.0	%	21.0	%
State income tax on pretax income, net of federal tax effect	4.9		5.0		4.9
(Decreases) increases in tax from:
Wind PTCs (b)	(27.4)		(23.4)		(15.7)
Plant regulatory differences (c)	(5.5)		(6.2)		(7.6)
Other tax credits, net NOL & tax credit allowances	(1.3)		(1.1)		(1.2)
NOL Carryback	—		—		(0.9)
Other, net	(0.1)		0.1		(0.9)
Effective income tax rate	(8.4)	%	(4.6)	%	(0.4)	%

(a)Prior period amounts have been restated to conform with current year presentation.

(b)Wind PTCs are credited to customers (reduction to revenue) and do not materially impact net income.

(c)Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred taxes are offset by corresponding revenue reductions and additional prepaid pension asset amortization.

Components of income tax expense for years ended Dec. 31:

(Millions of Dollars)	2022		2021		2020
Current federal tax expense (benefit)	$	1	$	15	$	(13)
Current state tax expense (benefit)	3		(2)		2
Current change in unrecognized tax expense	5		1		18
Deferred federal tax benefit	(239)		(183)		(89)
Deferred state tax expense	96		99		91
Deferred change in unrecognized tax expense (benefit)	3		5		(10)
Deferred ITCs	(4)		(5)		(5)
Total income tax benefit	$	(135)	$	(70)	$	(6)

Components of deferred income tax expense as of Dec. 31:

(Millions of Dollars)	2022		2021		2020
Deferred tax (benefit) expense excluding items below	$	(138)	$	148	$	237
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	8		(221)		(247)
Tax (benefit) expense allocated to other comprehensive income and other	(10)		(6)		2
Deferred tax benefit	$	(140)	$	(79)	$	(8)

Components of net deferred tax liability as of Dec. 31:

(Millions of Dollars)	2022		2021 (a)
Deferred tax liabilities:
Differences between book and tax bases of property	$	6,442	$	6,231
Regulatory assets	508		560
Operating lease assets	325		351
Deferred fuel costs	222		262
Pension expense	159		175
Other	92		88
Total deferred tax liabilities	$	7,748	$	7,667
Deferred tax assets:
Tax credit carryforward	$	1,679	$	1,261
Regulatory liabilities	742		742
Operating lease liabilities	325		351
Other employee benefits	102		119
NOL carryforward	57		247
NOL and tax credit valuation allowances	(62)		(64)
Deferred ITCs	14		15
Other	135		102
Total deferred tax assets	$	2,992	$	2,773
Net deferred tax liability	$	4,756	$	4,894

(a)Prior periods have been reclassified to conform to current year presentation.

Other Income Tax Matters — NOL amounts represent the tax loss that is carried forward and tax credits represent the deferred tax asset. NOL and tax credit carryforwards as of Dec. 31:

(Millions of Dollars)	2022		2021
Federal NOL carryforward	$	20	$	765
Federal tax credit carryforwards	1,593		1,172
State NOL carryforwards	1,022		1,648
Valuation allowances for state NOL carryforwards	(3)		(3)
State tax credit carryforwards, net of federal detriment (a)	85		89
Valuation allowances for state credit carryforwards, net of federal benefit (b)	(62)		(64)

(a)State tax credit carryforwards are net of federal detriment of $23 million and $24 million as of Dec. 31, 2022 and 2021.

(b)Valuation allowances for state tax credit carryforwards were net of federal benefit of $16 million and $17 million as of Dec. 31, 2022 and 2021.

Federal carryforward periods expire starting 2032 and state carryforward periods expire starting 2022.

Federal Loss Carryback Claims - In 2020, Xcel Energy identified certain expense related to tax years 2009 - 2011 that qualify for an extended carryback claim. As a result, a tax benefit of approximately $13 million was recognized in 2020.

Unrecognized Tax Benefits

Federal Audit — Statute of limitations applicable to Xcel Energy’s consolidated federal income tax returns expire as follows:

Tax Year(s)	Expiration
2014 - 2016	March 2024
2019	October 2023

Additionally, the statute of limitations related to the federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns. Further, the statute of limitations related to the additional federal tax loss carryback claim filed in 2020 has been extended. Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.

State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions and various other state income-based tax returns.

As of Dec. 31, 2022, Xcel Energy’s earliest open tax years (subject to examination by state taxing authorities in its major operating jurisdictions) were as follows:

State	Tax Year(s)	Expiration
Colorado	2014 - 2016	March 2025
Colorado	2018	September 2023
Minnesota	2014 - 2016	September 2024
Minnesota	2018	June 2023
Texas	2016	May 2023
Texas	2017	July 2025
Texas	2018	November 2023
Wisconsin	2016 - 2017	April 2023
Wisconsin	2018	October 2023

•In 2020, Minnesota began an audit of tax years 2015-2018. In 2022, the state of Minnesota issued its audit report without any material adjustments.

•In 2021, Texas began an audit of tax years 2016-2019. As of Dec. 31, 2022, no material adjustments have been proposed.

•In 2021, Wisconsin began an audit of tax years 2016-2019. As of Dec. 31, 2022, no material adjustments have been proposed.

•No other state income tax audits are in progress for its major operating jurisdictions as of Dec. 31, 2022.

Unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which deductibility is highly certain, but for which there is uncertainty about the timing. A change in the period of deductibility would not affect the ETR but would accelerate the payment to the taxing authority.

Unrecognized tax benefits - permanent vs. temporary:

(Millions of Dollars)	Dec. 31, 2022		Dec. 31, 2021
Unrecognized tax benefit — Permanent tax positions	$	55	$	47
Unrecognized tax benefit — Temporary tax positions	12		11
Total unrecognized tax benefit	$	67	$	58

Changes in unrecognized tax benefits:

(Millions of Dollars)	2022		2021		2020
Balance at Jan. 1	$	58	$	52	$	44
Additions based on tax positions related to the current year	7		5		9
Reductions based on tax positions related to the current year	—		—		(2)
Additions for tax positions of prior years	6		2		35
Reductions for tax positions of prior years	(1)		(1)		(34)
Reductions for tax positions related to settlements with taxing authorities	(1)		—		—
Reductions for tax positions related to statute of limitations	(2)		—		—
Balance at Dec. 31	$	67	$	58	$	52

Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:

(Millions of Dollars)	Dec. 31, 2022		Dec. 31, 2021
NOL and tax credit carryforwards	$	(40)	$	(36)

As the IRS progresses its review of the tax loss carryback claims and as state audits progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $40 million in the next 12 months.

Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.

Interest payable related to unrecognized tax benefits:

(Millions of Dollars)	2022		2021		2020
Payable for interest related to unrecognized tax benefits at Jan. 1	$	(3)	$	(3)	$	—
Interest expense related to unrecognized tax benefits	(1)		—		(3)
Payable for interest related to unrecognized tax benefits at Dec. 31	$	(4)	$	(3)	$	(3)

No penalties were accrued related to unrecognized tax benefits as of Dec. 31, 2022, 2021 or 2020.