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Income Taxes | 9 Months Ended
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Sep. 30, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Note 5. Income Taxes For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:
|  | Dominion Energy |  |  | Virginia Power |
Nine Months Ended September 30, |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
U.S. statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Increases (reductions) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of federal benefit |  |  | 1.5 |  |  |  | (898.5 | ) |  |  | 4.7 |  |  |  | 4.5 |
Investment tax credits |  |  | (30.5 | ) |  |  | (325.2 | ) |  |  | (5.6 | ) |  |  | (5.3 | )
Production tax credits |  |  | (2.4 | ) |  |  | (66.3 | ) |  |  | (0.9 | ) |  |  | (0.8 | )
Reversal of excess deferred income taxes |  |  | (14.5 | ) |  |  | (375.6 | ) |  |  | (1.9 | ) |  |  | (4.1 | )
Write-off of regulatory assets |  |  | — |  |  |  | 16,565.9 |  |  |  | — |  |  |  | — |
Change in tax status |  |  | (6.1 | ) |  |  | — |  |  |  | — |  |  |  | — |
AFUDC - equity |  |  | (1.1 | ) |  |  | (55.8 | ) |  |  | (0.3 | ) |  |  | — |
Changes in state deferred taxes associated with assets held for sale |  |  | (11.6 | ) |  |  | — |  |  |  | — |  |  |  | — |
Absence of tax on noncontrolling interest |  |  | 14.1 |  |  |  | — |  |  |  | — |  |  |  | — |
Other, net |  |  | (1.8 | ) |  |  | (987.3 | ) |  |  | — |  |  |  | (1.2 | )
Effective tax rate |  |  | (31.4 | )% |  | 13,878.2% |  |  |  | 17.0 | % |  |  | 14.1 | %
For the Companies’ rate-regulated entities, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be 35%. The Companies have recorded an estimate of excess deferred income tax amortization in 2020. The reversal of these excess deferred income taxes will impact the effective tax rate and rates charged to customers. See Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019 for more information. For the nine months ended September 30, 2020, Dominion Energy’s effective tax rate reflects an income tax benefit of $45 million associated with the remeasurement of consolidated state deferred taxes with the classification of gas transmission and storage operations as held for sale. In addition, Dominion Energy’s effective tax rate reflects an income tax expense of $55 million attributable to the noncontrolling interest primarily associated with the impairment of solar assets held in partnership form discussed in Note 11. In March 2020, the CARES Act was enacted which includes several significant business tax provisions that modify or temporarily suspend certain provisions of the 2017 Tax Reform Act. The CARES Act provisions are intended to improve cash flow and liquidity by, among other things, providing a temporary five-year carryback for certain net operating losses, accelerating the refund of previously generated corporate alternative minimum tax credits and temporarily loosening the business interest limitation to 50% of adjusted taxable income for certain businesses. Dominion Energy utilized the income tax provisions of the CARES Act to accelerate the recognition of certain tax attributes, but they did not provide a material benefit. In July 2020, the U.S. Department of Treasury issued final regulations providing guidance about the limitation on the deduction for business interest expenses and issued proposed regulations on the application of these rules to certain pass-through entities and partners in those entities under the 2017 Tax Reform Act as modified by the CARES Act. Dominion Energy is assessing the impact of these regulations, but expects interest expense to be deductible in 2020. Dominion Energy’s 2019 effective tax rate is a function of the nominal year-to-date pre-tax income primarily driven by charges associated with the SCANA Combination, charges at Virginia Power for the early retirement of assets and charges associated with the voluntary retirement program. In connection with the SCANA Combination, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project. Dominion Energy’s 2019 effective tax rate reflects deferred income tax expense of $198 million in satisfaction of this commitment. Dominion Energy’s 2019 effective tax rate also reflects the changes in consolidated state income taxes resulting from the SCANA Combination. As of September 30, 2020, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of these unrecognized tax benefits. Discontinued operations Income tax expense (benefit) reflected in discontinued operations is $(572) million and $47 million for the nine months ended September 30, 2020 and 2019, respectively. The 2020 income tax expense reflects a charge of $81 million for the write-off of tax-related regulatory assets associated with the Atlantic Coast Pipeline project.

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