XML 35 R19.htm IDEA: XBRL DOCUMENT v3.25.0.1
Taxes on Income
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Taxes on Income Taxes on Income
Registrant records deferred income taxes for temporary differences pursuant to the accounting guidance that addresses items recognized for income tax purposes in different periods than when they are reported in the financial statements. These items include differences in net asset basis (primarily related to differences in depreciation lives and methods, and differences in capitalization methods) and the treatment of certain regulatory balancing accounts, and construction contributions and advances. The accounting guidance for income taxes requires that rate-regulated enterprises record deferred income taxes and offsetting regulatory liabilities and assets for temporary differences where the rate regulator has prescribed flow-through treatment for rate-making purposes (Note 3). Deferred investment tax credits (“ITC”) are amortized ratably to deferred tax expense over the remaining lives of the property that gave rise to the credits.
GSWC is included in both AWR’s consolidated federal income tax and its combined California state franchise tax returns. The impact of California’s unitary apportionment on the amount of AWR’s California income tax liability is a function of both the profitability of AWR’s non-California activities and the proportion of AWR’s California sales to its total sales. GSWC’s income tax expense is computed as if GSWC were autonomous and separately files its income tax returns, which is consistent with the method adopted by the CPUC in setting GSWC’s customer rates.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into federal law. IRA, among other things, imposes a nondeductible 1% excise tax after December 31, 2022 on the fair market value of certain stock that is “repurchased” by a publicly traded U.S. corporation or acquired by certain of its subsidiaries. The taxable amount is reduced by the fair market value of certain issuances of stock throughout the year. Registrant did not have a stock repurchase program in effect for 2023 and 2024 and does not have current plans to institute such a program; consequently, this excise tax was not incurred in 2023 and 2024 and is not expected to have a material impact on its consolidated financial position in the future. If average annual adjusted financial statement income exceeds $1 billion over a 3-taxable-year period, IRA also imposes a 15% corporate alternative minimum tax on adjusted financial statement income for taxable years beginning after December 31, 2022. Registrant does not expect to incur this tax in the foreseeable future.
The significant components of the deferred tax assets and liabilities as reflected in the balance sheets at December 31, 2024 and 2023 are:
 AWRGSWC
 December 31,December 31,
(dollars in thousands)2024202320242023
Deferred tax assets:    
Regulatory-liability-related (1)
$28,851 $32,042 $27,171 $30,407 
Contributions and advances6,768 6,660 7,103 6,981 
Other 5,801 5,924 5,632 6,041 
Total deferred tax assets$41,420 $44,626 $39,906 $43,429 
Deferred tax liabilities:    
Fixed assets$(169,666)$(161,820)$(162,366)$(155,131)
Regulatory-asset-related: depreciation and other(43,149)(36,337)(39,635)(33,242)
Balancing and memorandum accounts (non-flowed-through)
(8,778)(8,046)(4,315)(2,514)
Total deferred tax liabilities(221,593)(206,203)(206,316)(190,887)
Accumulated deferred income taxes, net$(180,173)$(161,577)$(166,410)$(147,458)
 (1) Primarily represents the gross-up portion of the deferred income tax (on the excess-deferred-tax regulatory liability) brought about by the Tax Cuts and Jobs Act's reduction of the federal income tax rate.
The current and deferred components of income tax expense are as follows:
 AWR
 Year Ended December 31,
(dollars in thousands)202420232022
Current   
Federal$19,680 $26,327 $14,845 
State8,451 10,489 6,016 
Total current tax expense$28,131 $36,816 $20,861 
Deferred   
Federal$1,656 $4,157 $2,991 
State386 626 (188)
Total deferred tax (benefit) expense2,042 4,783 2,803 
Total income tax expense $30,173 $41,599 $23,664 
 GSWC
 Year Ended December 31,
(dollars in thousands)202420232022
Current   
Federal$13,570 $22,564 $10,582 
State6,551 10,176 4,909 
Total current tax expense$20,121 $32,740 $15,491 
Deferred   
Federal$1,362 $2,867 $1,507 
State1,386 82 (652)
Total deferred tax (benefit) expense2,748 2,949 855 
Total income tax expense$22,869 $35,689 $16,346 
The reconciliations of the effective tax rates (“ETR”) to the federal statutory rate are as follows:
 AWR
 Year Ended December 31,
(dollars in thousands)202420232022
Federal taxes on pretax income at statutory rate $31,383 $34,969 $21,433 
Increase (decrease) in taxes resulting from: 
State income tax, net of federal benefit6,508 9,785 4,335 
Excess deferred tax amortization(1,467)(1,648)(1,311)
Flow-through on fixed assets1,075 1,067 1,076 
Flow-through on removal costs(3,096)(2,255)(1,802)
Investment tax credit(69)(71)(71)
Excess deferred tax adjustment - change in estimate
(5,015)— — 
Other – net854 (248)4 
Total income tax expense from operations$30,173 $41,599 $23,664 
Pretax income from operations$149,441 $166,520 $102,060 
Effective income tax rate20.2 %25.0 %23.2 %
 GSWC
Year Ended December 31,
(dollars in thousands)202420232022
Federal taxes on pretax income at statutory rate$24,640 $29,063 $14,724 
Increase (decrease) in taxes resulting from: 
State income tax, net of federal benefit5,772 9,169 3,119 
Excess deferred tax amortization(1,491)(1,681)(1,130)
Flow-through on fixed assets1,058 1,041 1,010 
Flow-through on removal costs(3,029)(2,225)(1,715)
Investment tax credit(69)(71)(71)
Excess deferred tax adjustment - change in estimate
(5,015)— — 
Other – net1,003 393 409 
Total income tax expense from operations$22,869 $35,689 $16,346 
Pretax income from operations$117,332 $138,397 $70,116 
Effective income tax rate19.5 %25.8 %23.3 %
The AWR and GSWC ETRs differ from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including certain tax effects from stock compensation; (iii) the ongoing amortization of the excess deferred income tax liability; and (iv) differences between book and taxable income that are treated as flowed-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation-related items). As regulated utilities, GSWC and BVES treat certain temporary differences as being flowed through to customers in computing their income tax expense consistent with the income tax method used in their CPUC-jurisdiction rate making. Flowed-through
items either increase or decrease tax expense and thus impact the ETR. Furthermore, in connection with the 2017 Tax Cuts and Jobs Act, GSWC was required to remeasure its cumulative deferred income tax balances in 2017 to reflect the impact of the reduction in the corporate income tax rate from 35% to 21%, which resulted in excess deferred income taxes that were recorded as regulatory liabilities representing estimated amounts to be refunded to customers (Note 3). On January 30, 2025, the CPUC issued a final decision in connection with GSWC's recent general rate case that, among other things, adopted a settlement agreement between GSWC and Cal Advocates, which excluded from customer rates certain excess deferred income tax balances generated by activities outside of ratemaking that were previously recorded as regulatory liabilities. Because of the final CPUC decision, and an alternate proposed decision received in December 2024, both of which approved the settlement agreement in its entirety, GSWC recorded an income tax benefit of $5 million in 2024 to reflect a change in estimate that decreased its regulatory liabilities (Note 3) associated with excess deferred income tax balances as of December 31, 2024.
AWR and GSWC had no unrecognized tax benefits at December 31, 2024, 2023 and 2022.
Registrant’s policy is to classify interest on income tax over/underpayments in interest income/expense and penalties in “other” expenses. Registrant did not have any material interest receivables/payables from/to taxing authorities as of December 31, 2024 and 2023, nor did it recognize any material interest income/expense or accrue any material tax-related penalties during the years ended December 31, 2024, 2023 and 2022.
Registrant files federal, California and various other state income tax returns. AWR’s 2021-2023 tax years remain subject to examination/assessment by the Internal Revenue Service. AWR filed refund claims with the California Franchise Tax Board (“FTB”) for the 2005 through 2020 tax years in connection with prior federal refund claims, other state issues, or both, and the FTB continues to review the claims. While the statute of limitations to assess tax has closed through the tax year 2019, the 2020–2023 tax years remain subject to examination/assessment by the FTB.