Income Taxes

3 Months Ended

Mar. 31, 2022

Income Taxes [Abstract]

Income Taxes

Note 14 – Income Taxes

The Company’s effective tax rate was (9.5)% and 2.5% for the three months ended March 31, 2022 and 2021, respectively.   The decrease in the effective tax rate for the first quarter is primarily attributed to an increase in our income tax benefit associated with the tax deduction for qualifying infrastructure and the amortization of the customer surcredit tax repair catch-up adjustment during the first quarter of 2022 in our Regulated Natural Gas segment.  The statutory Federal tax rate is 21% for the three months ended March 31, 2022 and 2021. For states with a corporate net income tax, the state corporate net income tax rates range from 2.5% to 9.99% for all periods presented. In determining its interim tax provision, the Company reflects its estimated permanent and flow-through tax differences for the taxable year, including the basis difference for the adoption of the tangible property regulations. Qualifying utility asset improvement costs and the amortization of excess deferred income taxes caused the year-to-date effective tax rate to be significantly different from the statutory rate in both 2021 and 2022.

On March 16, 2020, the Company completed the Peoples Gas Acquisition. On March 31, 2020, the Company changed the method of tax accounting for certain qualifying infrastructure investments at its Peoples Natural Gas subsidiary, its largest natural gas subsidiary in Pennsylvania. This change allows a tax deduction for qualifying utility asset improvement costs that were formerly capitalized for tax purposes. Consistent with the Company’s accounting for differences between book and tax expenditures in Pennsylvania, the Company is utilizing the flow-through method to account for this timing difference. In addition, the Company calculated the income tax benefits for qualifying capital expenditures made prior to March 16, 2020 (“catch-up adjustment”) and has recorded a regulatory liability for $160,655 for these income tax benefits. On May 6, 2021, the Pennsylvania Public Utility Commission approved a settlement order which stipulates, among other points, that the catch-up adjustment be provided to utility customers over a five-year period, and the Company can continue to use flow-through accounting for the current tax repair benefit until its next base rate case. The five-year customer surcredit for the catch-up adjustment was initiated in August 2021. During the first quarter of 2022, $12,487 of income tax benefits were amortized as refunds were being made to Peoples Natural Gas customers. In addition, the Company contributed $500 to a customer-bill payment assistance program in July 2021 and in December 2021 provided $5,000 in relief to past-due accounts for natural gas customers impacted by the COVID-19 pandemic through a rate credit fulfilling this requirement.