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Note 7 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

7. Income Taxes

 

Components of income tax expense were as follows for the years ended December 31:

 

Millions

 

2023

  

2022

  

2021

 

Current tax expense:

            

Federal

 $1,417  $1,465  $1,446 

State

  314   340   347 

Foreign

  6   7   8 

Total current tax expense

  1,737   1,812   1,801 

Deferred and other tax expense/(benefit):

            

Federal

  219   320   199 

State [a]

  (104)  (59)  (44)

Foreign

  2   1   (1)

Total deferred and other tax expense

  117   262   154 

Total income tax expense

 $1,854  $2,074  $1,955 

 

[a]

In 2023, Nebraska, Iowa, Kansas, and Arkansas enacted corporate income tax legislation that resulted in a $114 million reduction of our deferred tax expense. In 2022, Nebraska, Iowa, Arkansas, and Idaho enacted corporate income tax legislation that resulted in a $95 million reduction of our deferred tax expense. In 2021, Nebraska, Oklahoma, Idaho, Louisiana, and Arkansas enacted corporate income tax legislation that resulted in a $32 million reduction of our deferred tax expense.

 

For the years ended December 31, reconciliations between statutory and effective tax rates are as follows:

 

Tax Rate Percentages

 

2023

  

2022

  

2021

 

Federal statutory tax rate

  21.0

%

  21.0

%

  21.0

%

State statutory rates, net of federal benefits

  3.4   3.6   3.7 

Deferred tax adjustments

  (1.2)  (1.0)  (0.6)

Dividends received deduction

  (0.6)  (0.5)  (0.5)

Excess tax benefits from equity compensation plans

  (0.1)  (0.2)  (0.3)

Other

  -   -   (0.2)

Effective tax rate

  22.5

%

  22.9

%

  23.1

%

 

Deferred income tax assets/(liabilities) were comprised of the following at December 31:

 

Millions

 

2023

  

2022

 

Deferred income tax liabilities:

        

Property

 $(12,987) $(12,910)

Operating lease assets

  (404)  (411)

Other

  (556)  (591)

Total deferred income tax liabilities

  (13,947)  (13,912)

Deferred income tax assets:

        

Operating lease liabilities

  394   401 

Accrued casualty costs

  168   164 

Accrued wages

  50   50 

Stock compensation

  26   26 

Other

  186   238 

Total deferred income tax assets

  824   879 

Net deferred income tax liability

 $(13,123) $(13,033)

 

In 2023 and 2022, there were no valuation allowances against deferred tax assets.

 

A reconciliation of changes in unrecognized tax benefits liabilities/(assets) from the beginning to the end of the reporting period is as follows:

 

Millions

 

2023

  

2022

  

2021

 

Unrecognized tax benefits at January 1

 $34  $38  $74 

Lapse of statutes of limitations

  (4)  (3)  (1)

Decreases for positions taken in prior years

  (1)  (4)  (24)

Increases for positions taken in current year

  1   3   3 

Refunds from/(payments to) and settlements with taxing authorities

  -   -   (12)

Increases/(decreases) for interest and penalties

  -   -   (3)

Increases for positions taken in prior years

  -   -   1 

Unrecognized tax benefits at December 31

 $30  $34  $38 

 

We recognize interest and penalties as part of income tax expense. Total accrued liabilities/(receivables) for interest and penalties were ($4) million and ($3) million at December 31, 2023 and 2022, respectively. Total interest and penalties recognized as part of income tax expense/(benefit) were ($1) million for 2023, ($2) million for 2022, and ($5) million for 2021.

 

Several state tax authorities are examining our state income tax returns for years 2018 through 2022.

 

We do not expect our unrecognized tax benefits to change significantly in the next 12 months. The portion of our unrecognized tax benefits that relates to permanent changes in tax and interest would reduce our effective tax rate, if recognized. The remaining unrecognized tax benefits relate to tax positions for which only the timing of the benefit is uncertain. The unrecognized tax benefits that would reduce our effective tax rate are $30 million for 2023, $31 million for 2022, and $31 million for 2021.