XML 31 R16.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income tax expense were:
202320222021
Current:
Federal$10,185 8,570 8,587 
State4,281 3,170 2,633 
Deferred:
Federal(8,871)(3,223)(3,811)
State361 (21)960 
$5,956 8,496 8,369 

The following table reconciles income tax expense to the amount computed by applying the federal statutory rate to income before income taxes of $90,943, $82,324 and $68,847 in 2023, 2022 and 2021, respectively:
202320222021
Income tax at federal statutory rate$19,098 17,288 14,458 
Increase (decrease) in taxes attributable to:
State taxes, net of federal income tax benefit6,001 5,328 4,572 
Uncertain tax positions(4,330)1,483 1,678 
Property flow-through(9,045)(13,091)(8,573)
Reversal of excess deferred taxes recognized in regulatory liability(3,625)(3,885)(3,295)
Pension flow-through(597)27 429 
Stock-based compensation(491)(297)(331)
Other items, net(1,055)1,643 (569)
$5,956 8,496 8,369 
The components of the net deferred tax liability as of December 31 was as follows:
20232022
Deferred tax assets:
Advances and contributions$25,714 25,462 
Unamortized investment tax credit517 575 
Pensions, postretirement benefits and stock-based compensation17,844 23,161 
Debt premium, net4,157 4,868 
California franchise tax713 640 
Deferred revenue841 1,444 
Tax related regulatory liability
24,358 25,750 
Other7,077 6,627 
Total deferred tax assets81,221 88,527 
Deferred tax liabilities:
Utility plant243,786 229,500 
Pension and postretirement13,247 17,709 
Deferred gain and other-property6,456 5,982 
Regulatory asset - business combinations debt premium, net4,157 4,868 
Intangibles2,693 2,943 
Tax related regulatory asset
44,155 38,599 
Section 481(a) adjustments— 1,573 
Other5,255 5,508 
Total deferred tax liabilities319,749 306,682 
Net deferred tax liabilities$238,528 218,155 
Management evaluates the realizability of deferred tax assets based on all available evidence, both positive and negative. The realization of deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods in which the deferred tax assets are expected to reverse. Based on all available evidence, management believes it is more likely than not that SJW Group will realize the benefits of its deferred tax assets. Net operating loss carryforwards expire beginning in 2032 and ending in 2039. As of December 31, 2023, the estimated amount of net operating loss carryforwards available to offset future taxable income for Connecticut purposes is $18,369. The estimated state tax credit carryforwards are $707 which will expire beginning in 2024 and ending in 2040.
The change in the net deferred tax liabilities of $20,373 in 2023 included other non-cash items primarily consisting of regulatory assets and liabilities relating to income tax temporary differences.
The total amount of unrecognized tax benefits, before the impact of deductions for state taxes, excluding interest and penalties was $4,511 and $9,004 as of December 31, 2023 and 2022, respectively. The amount of tax benefits, net of any federal benefits for state taxes that would impact the effective rate, if recognized, is approximately $4,048 and $8,262 as of December 31, 2023 and 2022, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
202320222021
Balance at beginning of year$9,004 7,961 6,468 
Increase related to tax positions taken during the current year231 1,549 1,376 
Increase related to tax positions taken during a prior year364 — 117 
Reductions related to statute expiration(1,191)(284)— 
Reductions related to tax positions taken in a prior year(3,897)(222)— 
Balance at end of year$4,511 9,004 7,961 

The decrease in gross unrecognized tax benefits in 2023 was primarily due to the release of an uncertain tax position reserve relating to repairs tax deductions. In April 2023, the IRS issued additional tax guidance that has allowed the company to revisit
certain historical income tax reserves. Pursuant to the issuance of this guidance, which provided additional clarification regarding some of the uncertain tax areas, the company re-evaluated the risk relating to repair deductions. The result of the analysis led to a release of an uncertain tax position reserve. The release relates to repairs expenditures which are more likely than not to be sustained on audit. The release due to re-evaluation of the reserve was $3,125.
SJW Group’s policy is to classify interest and penalties associated with unrecognized tax benefits, if any, in tax expense. Accrued interest expense, net of the benefit of tax deductions which would be available on the payment of such interest, is approximately $455 as of December 31, 2023. SJW Group has not accrued any penalties for unrecognized tax benefits. The amount of interest recognized in 2023 was a decrease to expense of $151.
SJW Group currently does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of lapse of the statute of limitations.
SJW Group files U.S. federal income tax returns and income tax returns in various states and is subject to ordinary statute of limitation of three years for federal and three or four years for different state returns. However, due to tax attribute carryforwards, SJW Group is subject to examination for tax years 2012 forward for federal and state returns of CTWS and its subsidiaries. The statute of limitation for SJW Group returns is closed for these extended years and remains open for 2020 and forward for federal and 2019 or 2020 and forward for different states.