Income Taxes

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income Tax Expense

The components of income tax expense from continuing operations for 2023, 2022 and 2021 were as follows:

	2023		2022		2021
	(In thousands)
Current
Federal	$	(1,274)	$	2,849	$	—
State	13,550		28,125		252
Deferred
Federal	83,244		43,435		128,867
State	18,259		3,101		24,617
Income tax expense	$	113,779	$	77,510	$	153,736

Reconciliations of the provision for income taxes computed at the statutory rate of 21 percent to the reported provisions for income taxes from continuing operations for 2023, 2022 and 2021 are set forth below:

	2023		2022		2021
	(In thousands)
Tax at statutory rate	$	209,925	$	178,901	$	172,053
Common stock dividends deductible for tax reporting	(1,355)		(1,355)		(1,372)
State taxes (net of federal benefit)	25,129		24,669		19,647
Amortization of excess deferred taxes	(123,953)		(127,193)		(45,382)
Other, net	4,033		2,488		8,790
Income tax expense	$	113,779	$	77,510	$	153,736

Deferred income taxes reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that gave rise to significant components of the deferred tax liabilities and deferred tax assets at September 30, 2023 and 2022 are presented below:

	2023		2022
	(In thousands)
Deferred tax assets:
Employee benefit plans	$	50,576	$	57,094
Net operating loss carryforwards	504,121		485,061
Charitable and other credit carryforwards	10,084		1,903
Regulatory excess deferred tax	76,943		110,548
Lease asset	58,633		50,007
Other	42,257		44,035
Total deferred tax assets	742,614		748,648
Valuation allowance	(351)		(523)
Net deferred tax assets	742,263		748,125
Deferred tax liabilities:
Difference in net book value and net tax value of assets	(2,674,341)		(2,431,757)
Gas cost adjustments	(47,822)		(43,964)
Winter Storm Uri regulatory asset	(28,116)		(20,710)
Lease liability	(51,666)		(50,007)
Rate deferral adjustment	(47,218)		(49,309)
Interest rate agreements	(149,969)		(106,820)
Other	(48,105)		(45,063)
Total deferred tax liabilities	(3,047,237)		(2,747,630)
Net deferred tax liabilities	$	(2,304,974)	$	(1,999,505)

At September 30, 2023, we had $458.7 million (tax effected) of federal net operating loss carryforwards. The federal net operating loss carryforwards are available to offset future taxable income and have no expiration date. The Company has $8.2 million (tax effected) charitable contribution carryforwards to offset future taxable income as of September 30, 2023.

The Company also has $45.4 million (tax effected) of state net operating loss carryforwards (net of $11.9 million of federal effects) and $1.9 million of state tax credits carryforwards (net of $0.5 million of federal effects). Depending on the jurisdiction in which the state net operating loss was generated, the carryforwards expiration period begins in fiscal 2026.

At September 30, 2023 and 2022, we had recorded liabilities associated with unrecognized tax benefits totaling $58.6 million and $52.7 million, which includes $12.0 million and $12.8 million in deferred tax liabilities. The following table reconciles the beginning and ending balance of our unrecognized tax benefits:

	2023		2022		2021
	(In thousands)
Unrecognized tax benefits - beginning balance	$	52,683	$	32,792	$	30,921
Increase (decrease) resulting from prior period tax positions	(631)		(721)		671
Increase resulting from current period tax positions	6,586		20,612		1,200
Unrecognized tax benefits - ending balance	58,638		52,683		32,792
Less: deferred federal and state income tax benefits	(12,314)		(11,063)		(6,886)
Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year	$	46,324	$	41,620	$	25,906

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties included within interest charges in our consolidated statements of comprehensive income. During the years ended September 30, 2023, 2022 and 2021, the Company recognized approximately $3.4 million, $1.3 million and $1.4 million in interest and penalties. The Company had approximately $15.1 million, $11.7 million and $10.4 million for the payment of interest and penalties accrued at September 30, 2023, 2022 and 2021.

We file income tax returns in the U.S. federal jurisdiction as well as in various states where we have operations. We have concluded substantially all U.S. federal income tax matters through fiscal year 2009 and concluded substantially all Texas income tax matters through fiscal year 2010.

Regulatory Excess Deferred Taxes

Regulatory excess net deferred taxes represent changes in our net deferred tax liability related to our cost of service ratemaking due to the enactment of the Tax Cuts and Jobs Act of 2017 (the TCJA) and a Kansas legislative change enacted in fiscal 2020. As of September 30, 2023 and 2022, $131.3 million and $159.8 million is recorded in other current liabilities.

Currently, the regulatory excess net deferred tax liability is being returned over various periods. Of this amount, $279.4 million, is being returned to customers over 35 - 60 months. An additional $53.5 million is being returned to customers on a provisional basis over 15 - 69 years until our regulators establish the final refund periods. The refund of the remaining $4.0 million will be addressed in future rate proceedings.