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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income Tax Summary
DTE Energy files a consolidated federal income tax return. DTE Electric is a part of the consolidated federal income tax return of DTE Energy. DTE Energy and its subsidiaries file consolidated and/or separate company income tax returns in various states and localities, including a consolidated return in the State of Michigan. DTE Electric is part of the Michigan consolidated income tax return of DTE Energy. The federal, state and local income tax expense for DTE Electric is determined on an individual company basis with no allocation of tax expenses or benefits from other affiliates of DTE Energy. DTE Electric had income tax receivables with DTE Energy of $31 million and $8 million at December 31, 2021 and 2020, respectively.
On July 1, 2021, DTE Energy completed the separation of its natural gas pipeline, storage and gathering non-utility business, DT Midstream. Refer to Note 4 to the Consolidated Financial Statements, "Dispositions and Impairments" for additional information regarding the separation. The separation was a tax free distribution to shareholders, but triggered certain tax effects at DTE Energy including the remeasurement of state deferred tax assets and liabilities and the recognition of a deferred intercompany gain. The state remeasurement reduced deferred tax liabilities and generated a deferred tax benefit of $85 million. The recognition of the deferred intercompany gain resulted in $9 million of additional deferred tax expense. Both of these impacts were reflected in Income Tax Expense (Benefit) in the Consolidated Statements of Operations for the year ended December 31, 2021.
The Registrants' total Income Tax Expense varied from the statutory federal income tax rate for the following reasons:
202120202019
DTE Energy(In millions)
Income Before Income Taxes$656 $1,082 $1,013 
Income tax expense at 21% statutory rate$138 $227 $213 
Production tax credits(138)(121)(128)
TCJA regulatory liability amortization(103)(76)(38)
State deferred tax remeasurement due to separation of DT Midstream, net of federal benefit(85)— — 
Investment tax credits(3)(4)(4)
Net operating loss carryback— (34)— 
Enactment of West Virginia income tax legislation, net of federal benefit8 — — 
Deferred intercompany gain9 — — 
Valuation allowance on charitable contribution carryforwards18 3 6 
State and local income taxes, excluding items above, net of federal benefit30 47 29 
Other, net(4)(5)(7)
Income Tax Expense (Benefit)$(130)$37 $71 
Effective income tax rate(19.9)%3.4 %7.0 %
202120202019
DTE Electric(In millions)
Income Before Income Taxes$970 $887 $854 
Income tax expense at 21% statutory rate$204 $186 $179 
TCJA regulatory liability amortization(73)(62)(35)
Production tax credits(70)(55)(45)
Investment tax credits(3)(4)(4)
State and local income taxes, excluding items above, net of federal benefit54 50 49 
Other, net(8)(6)(6)
Income Tax Expense$104 $109 $138 
Effective income tax rate10.7 %12.3 %16.2 %
Components of the Registrants' Income Tax Expense were as follows:
202120202019
DTE Energy(In millions)
Current income tax expense (benefit)
Federal$(33)$(249)$(183)
State and other income tax(12)4 3 
Total current income taxes(45)(245)(180)
Deferred income tax expense (benefit)
Federal(42)227 218 
State and other income tax(43)55 33 
Total deferred income taxes(85)282 251 
$(130)$37 $71 
202120202019
DTE Electric(In millions)
Current income tax expense (benefit)
Federal$(11)$15 $25 
State and other income tax(7)5 16 
Total current income taxes(18)20 41 
Deferred income tax expense
Federal47 30 51 
State and other income tax75 59 46 
Total deferred income taxes122 89 97 
$104 $109 $138 
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts in the Registrants' Consolidated Financial Statements.
The Registrants' deferred tax assets (liabilities) were comprised of the following at December 31:
DTE EnergyDTE Electric
2021202020212020
(In millions)
Property, plant, and equipment$(3,970)$(3,691)$(3,428)$(3,099)
Regulatory assets and liabilities(117)(102)(64)(53)
Tax credit carry-forwards1,260 1,144 379 278 
Pension and benefits310 310 282 264 
Federal net operating loss carry-forward199 109 5 — 
State and local net operating loss carry-forwards73 36 15 — 
Investments in equity method investees58 51 (1)— 
Other75 115 71 85 
(2,112)(2,028)(2,741)(2,525)
Less: Valuation allowance(51)(41)— — 
Long-term deferred income tax liabilities$(2,163)$(2,069)$(2,741)$(2,525)
Deferred income tax assets$2,224 $2,050 $988 $883 
Deferred income tax liabilities(4,387)(4,119)(3,729)(3,408)
$(2,163)$(2,069)$(2,741)$(2,525)
Tax credit carry-forwards for DTE Energy include $1.3 billion of general business credits that expire from 2032 through 2041. No valuation allowance is required for the tax credits carry-forward deferred tax asset.
DTE Energy has a pre-tax federal net operating loss carry-forward of $950 million as of December 31, 2021. The net operating loss carry-forwards generated in 2015 and 2016 will expire from 2035 through 2036, and the net operating loss carry-forward generated in 2018 and subsequent years will be carried forward indefinitely. No valuation allowance is required for the federal net operating loss deferred tax asset.
DTE Energy has state and local deferred tax assets related to net operating loss carry-forwards of $73 million and $36 million at December 31, 2021 and 2020, respectively. Most of the state and local net operating loss carry-forwards expire from 2022 through 2041 with the remainder being carried forward indefinitely.
DTE Energy has recorded valuation allowances of $51 million and $41 million at December 31, 2021 and 2020, respectively, including $29 million and $30 million for the respective periods related to the state net operating loss carryforwards noted above. The remaining valuation allowances related to charitable contribution carryforwards. The change in balances in 2021 includes establishing a valuation allowance of $18 million based on a change in expected ability to utilize certain of these charitable contributions carryforwards.
In assessing the realizability of deferred tax assets, DTE Energy considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
Tax credit carry-forwards for DTE Electric include $379 million of general business credits that expire from 2036 through 2041. No valuation allowance is required for the tax credits carry-forward deferred tax asset.
DTE Electric has a pre-tax federal net operating loss carry-forward of $24 million as of December 31, 2021. The net operating loss carry-forward will be carried forward indefinitely. No valuation allowance is required for the federal net operating loss deferred tax asset.
DTE Electric has $15 million in state and local deferred tax assets related to net operating loss carry-forwards at December 31, 2021 which will expire in 2030 and 2031. DTE Electric had no state and local deferred tax assets related to net operating loss carry-forwards at December 31, 2020. No valuation allowance is required for the state and local net operating loss deferred tax assets.
The above tables exclude unamortized investment tax credits that are shown separately on the Registrants' Consolidated Statements of Financial Position. Investment tax credits are deferred and amortized to income over the average life of the related property.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the Registrants is as follows:
202120202019
DTE Energy(In millions)
Balance at January 1$10 $10 $10 
Additions for tax positions of prior years— — — 
Balance at December 31$10 $10 $10 
202120202019
DTE Electric(In millions)
Balance at January 1$13 $13 $13 
Additions for tax positions of prior years— — — 
Balance at December 31$13 $13 $13 
If recognized, all of the Registrants' unrecognized tax benefits would favorably impact their effective tax rate in future years. The Registrants do not anticipate any material decrease in unrecognized tax benefits in the next twelve months.
The Registrants recognize interest and penalties pertaining to income taxes in Interest expense and Other expenses, respectively, on the Consolidated Statements of Operations.
Accrued interest pertaining to income taxes for DTE Energy totaled $5 million at December 31, 2021 and 2020. DTE Energy recognized a nominal amount of interest expense related to income taxes in 2021 and $1 million in 2020 and 2019. DTE Energy has not accrued any penalties pertaining to income taxes.
Accrued interest pertaining to income taxes for DTE Electric totaled $7 million at December 31, 2021 and $6 million at December 31, 2020. DTE Electric recognized interest expense related to income taxes of $1 million in 2021, 2020, and 2019. DTE Electric has not accrued any penalties pertaining to income taxes.
In 2021, DTE Energy, including DTE Electric, settled a federal tax audit for the 2019 tax year. DTE Energy's federal income tax returns for 2020 and subsequent years remain subject to examination by the IRS. DTE Energy's Michigan Business Tax returns for the years 2008-2011 and Michigan Corporate Income Tax returns for the year 2017 and subsequent years remain subject to examination by the State of Michigan. DTE Energy also files tax returns in numerous state and local jurisdictions with varying statutes of limitation.