Income Taxes

12 Months Ended

Dec. 31, 2023

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 $7 million at December 31, 2023, primarily related to federal taxes, and $1 million at December 31, 2022, primarily related to state taxes. Income tax receivables with DTE Energy are included in Accounts Receivable - Affiliates on the DTE Electric Consolidated Statements of Financial Position. .

The Registrants' total Income Tax Expense varied from the statutory federal income tax rate for the following reasons:

	2023			2022			2021
DTE Energy	(In millions)
Income Before Income Taxes	$	1,566		$	1,112		$	656
Income tax expense at 21% statutory rate	$	329		$	234		$	138
Production tax credits	(91)			(91)			(138)
TCJA regulatory liability amortization	(63)			(155)			(103)
Investment tax credits	(44)			(1)			(3)
Enactment of state income tax legislation, net of federal benefit	(1)			—			8
State deferred tax remeasurement due to separation of DT Midstream, net of federal benefit	—			—			(85)
Valuation allowance on charitable contribution carryforwards	—			9			18
State and local income taxes, excluding items above, net of federal benefit	59			42			30
Other, net	(20)			(9)			5
Income Tax Expense (Benefit)	$	169		$	29		$	(130)
Effective income tax rate	10.8		%	2.6		%	(19.9)		%

	2023			2022			2021
DTE Electric	(In millions)
Income Before Income Taxes	$	850		$	981		$	970
Income tax expense at 21% statutory rate	$	179		$	206		$	204
Production tax credits	(79)			(83)			(70)
TCJA regulatory liability amortization	(53)			(145)			(73)
State and local income taxes, excluding items above, net of federal benefit	45			56			54
Other, net	(14)			(8)			(11)
Income Tax Expense	$	78		$	26		$	104
Effective income tax rate	9.2		%	2.7		%	10.7		%

Components of the Registrants' Income Tax Expense were as follows:

	2023		2022		2021
DTE Energy	(In millions)
Current income tax benefit
Federal	$	(10)	$	(13)	$	(33)
State and other income tax	(2)		(2)		(12)
Total current income taxes	(12)		(15)		(45)
Deferred income tax expense (benefit)
Federal	103		(13)		(42)
State and other income tax	78		57		(43)
Total deferred income taxes	181		44		(85)
	$	169	$	29	$	(130)

	2023		2022		2021
DTE Electric	(In millions)
Current income tax expense (benefit)
Federal	$	1	$	1	$	(11)
State and other income tax	(5)		—		(7)
Total current income taxes	(4)		1		(18)
Deferred income tax expense (benefit)
Federal	19		(46)		47
State and other income tax	63		71		75
Total deferred income taxes	82		25		122
	$	78	$	26	$	104

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 Energy				DTE Electric
	2023		2022		2023		2022
	(In millions)
Property, plant, and equipment	$	(3,423)	$	(3,897)	$	(2,693)	$	(3,188)
Regulatory assets and liabilities	(1,158)		(493)		(1,314)		(589)
Tax credit carryforwards	1,519		1,378		572		487
Pension and benefits	77		111		69		103
Federal net operating loss carryforward	202		266		71		58
State and local net operating loss carryforwards	76		97		49		38
Investments in equity method investees	(33)		65		—		—
Other	130		137		137		145
	(2,610)		(2,336)		(3,109)		(2,946)
Less: Valuation allowance	(39)		(58)		—		—
Long-term deferred income tax liabilities	$	(2,649)	$	(2,394)	$	(3,109)	$	(2,946)
Deferred income tax assets	$	2,415	$	2,317	$	1,202	$	1,081
Deferred income tax liabilities	(5,064)		(4,711)		(4,311)		(4,027)
	$	(2,649)	$	(2,394)	$	(3,109)	$	(2,946)

Tax credit carryforwards for DTE Energy include $1.5 billion of general business credits that expire from 2032 through 2043. No valuation allowance is required for the tax credit carryforwards deferred tax asset.

DTE Energy has a pre-tax federal net operating loss carryforward of $964 million as of December 31, 2023 which can 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 carryforwards of $76 million and $97 million at December 31, 2023 and 2022, respectively. Most of the state and local net operating loss carryforwards expire from 2024 through 2042 with the remainder being carried forward indefinitely.

DTE Energy has recorded valuation allowances of $39 million and $58 million at December 31, 2023 and 2022, respectively, including $19 million and $31 million for the respective periods related to the state net operating loss carryforwards noted above. The remaining valuation allowances are related to charitable contribution 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 carryforwards for DTE Electric include $572 million of general business credits that expire from 2036 through 2043. No valuation allowance is required for the tax credit carryforwards deferred tax asset.

DTE Electric has a pre-tax federal net operating loss carryforward of $338 million as of December 31, 2023 which can be carried forward indefinitely. No valuation allowance is required for the federal net operating loss deferred tax asset.

DTE Electric has $49 million and $38 million in state and local deferred tax assets related to net operating loss carryforwards at December 31, 2023 and 2022, respectively, which will expire from 2030 through 2042. 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. DTE Energy's policy election is to follow the flow-through method of accounting for investment tax credits earned from its non-utility businesses and the deferral method of accounting for its regulated utilities due to different economic profiles of the various entities. The flow-through method used by the non-utility businesses recognizes investment tax credits in earnings when the related assets are placed in service. The investment tax credits generated by the regulated utilities are deferred and amortized to earnings 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:

	2023		2022		2021
DTE Energy	(In millions)
Balance at January 1	$	13	$	10	$	10
Additions for tax positions of prior years	2		5		—
Reductions for tax positions of prior years	(5)		(2)		—
Settlements	(10)		—		—
Balance at December 31	$	—	$	13	$	10

	2023		2022		2021
DTE Electric	(In millions)
Balance at January 1	$	13	$	13	$	13
Settlements	(13)		—		—
Balance at December 31	$	—	$	13	$	13

During 2023, DTE Energy's unrecognized tax benefits decreased by $10 million as a result of an audit settlement related to state exposures and $5 million due to recognition of a federal tax claim. For DTE Electric, unrecognized tax benefits decreased by $13 million due to the audit settlement related to state exposures. Recognition of these tax benefits, net of any federal benefit, resulted in a reduction of $13 million and $10 million to Income Tax Expense on the respective DTE Energy and DTE Electric Consolidated Statements of Operations for the year ended December 31, 2023.

The Registrants recognize interest and penalties pertaining to income taxes in Interest expense and Other expenses, respectively, on the Consolidated Statements of Operations. DTE Energy recognized a nominal amount of interest expense related to income taxes in 2023, 2022, and 2021. DTE Electric recognized a nominal amount of interest expense in 2023 and $1 million in both 2022 and 2021.

Accrued interest pertaining to income taxes at December 31, 2022 was $5 million and $8 million for DTE Energy and DTE Electric, respectively. As a result of the state tax audit settlement noted above, there is no remaining accrued interest pertaining to income taxes as of December 31, 2023. DTE Energy and DTE Electric have not accrued any penalties pertaining to income taxes.

In 2023, DTE Energy, including DTE Electric, settled a federal tax audit for the 2021 tax year. DTE Energy's federal income tax returns for 2022 and subsequent years remain subject to examination by the IRS. DTE Energy's Michigan Corporate Income Tax returns for the year 2019 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.