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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 5. INCOME TAXES Judgment and the use of estimates are required in developing the provision for income taxes and reporting of tax-related assets and liabilities. The interpretation of tax laws and associated regulations involves uncertainty, since tax authorities may interpret the laws differently. The Companies are routinely audited by federal and state tax authorities. Ultimate resolution of income tax matters may result in favorable or unfavorable impacts to net income and cash flows, and adjustments to tax-related assets and liabilities could be material. In August 2022, the IRA was enacted which, among other things, extends the investment and production tax credits for clean energy technologies until at least 2032 and imposes a 15% alternative minimum tax on GAAP net income, as adjusted for certain items, of corporations greater than $1 billion for tax years beginning after December 31, 2022. The IRA did not impact the measurement of the Companies’ deferred income taxes or change the Companies' assessment of the realizability of deferred tax assets. The Companies continue to monitor and evaluate the impacts of the IRA, including changes in the Companies' interpretations, if any, as guidance is issued and finalized. As indicated in Note 2, certain of the Companies’ operations, including accounting for income taxes, are subject to regulatory accounting treatment. For regulated operations, many of the changes in deferred taxes from the 2017 Tax Reform Act represent amounts probable of collection from or return to customers and are presented as components of regulatory assets or liabilities. See Note 13 for additional information and current year developments. Continuing Operations Details of income tax expense for continuing operations including noncontrolling interests were as follows:
|  | Dominion Energy |  |  | Virginia Power |
Year Ended December 31, |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2023 |  |  | 2022 |  |  | 2021 |
(millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (385 | ) |  | $ | (76 | ) |  | $ | (301 | ) |  | $ | (116 | ) |  | $ | 17 |  |  | $ | 67 |
State |  |  | (99 | ) |  |  | 27 |  |  |  | 13 |  |  |  | 6 |  |  |  | (17 | ) |  |  | (13 | )
Total current expense (benefit) |  |  | (484 | ) |  |  | (49 | ) |  |  | (288 | ) |  |  | (110 | ) |  |  | — |  |  |  | 54 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxes before operating loss carryforwards and investment tax credits |  |  | 760 |  |  |  | 95 |  |  |  | 558 |  |  |  | 406 |  |  |  | 215 |  |  |  | 294 |
Tax utilization expense of operating loss carryforwards |  |  | 45 |  |  |  | 35 |  |  |  | 42 |  |  |  | — |  |  |  | — |  |  |  | — |
State |  |  | 282 |  |  |  | 73 |  |  |  | (49 | ) |  |  | 107 |  |  |  | 108 |  |  |  | 116 |
Total deferred expense |  |  | 1,087 |  |  |  | 203 |  |  |  | 551 |  |  |  | 513 |  |  |  | 323 |  |  |  | 410 |
Investment tax credits |  |  | (28 | ) |  |  | (41 | ) |  |  | (444 | ) |  |  | (14 | ) |  |  | (29 | ) |  |  | (17 | )
Total income tax expense (benefit) |  | $ | 575 |  |  | $ | 113 |  |  | $ | (181 | ) |  | $ | 389 |  |  | $ | 294 |  |  | $ | 447 |
In 2023, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with the East Ohio, PSNC and Questar Gas Transactions and Cove Point operations, including the Cove Point gain, is reflected in discontinued operations. Dominion Energy’s income tax expense from continuing operations reflects the utilization of investment tax credit carryforwards to offset a portion of the federal tax on the Cove Point gain, presented in discontinued operations. In 2022, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with the East Ohio, PSNC and Questar Gas Transactions and Cove Point operations is reflected in discontinued operations. In 2021, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with the East Ohio, PSNC and Questar Gas Transactions, Cove Point and Q-Pipe Group’s operations, including taxes on the gain, is reflected in discontinued operations. Dominion Energy’s income tax expense reflects the utilization of investment tax credit carryforwards to offset a portion of the federal tax gain on the sale. 2021 investment tax credits include the impact of the sale of SBL Holdco and a 50% noncontrolling interest in Four Brothers and Three Cedars, as described below. Discontinued Operations Income tax expense reflected in discontinued operations is $1.3 billion, $197 million, and $374 million for the years ended December 31, 2023, 2022 and 2021, respectively. As discussed in Note 3, Dominion Energy entered into agreements for the East Ohio, PSNC and Questar Gas Transactions in September 2023, each of which will be treated as a stock sale for income tax purposes. In connection with the pending sales, Dominion Energy recorded a charge of $886 million, $825 million of which established deferred tax liabilities to reflect the excess of the financial reporting basis over the tax basis in the stock of the entities anticipated to be sold. These deferred taxes will reverse upon closing of the respective sales, all of which are expected to occur in 2024. In addition, Dominion Energy recorded tax expense of $278 million associated wi th completing the sale in September 2023 of its remaining 50% noncontrolling partnership interest in Cove Point to BHE as discussed in Note 9. Income taxes reflect tax expense on pre-tax income attributable to East Ohio, PSNC, Questar Gas, Wexpro and equity method earnings from Cove Point of $104 million, $233 million and $218 million, partially offset by an income tax benefit of $59 million, $38 million and $37 million related to excess deferred income tax amortization for the years ended December 31, 2023, 2022 and 2021, respectively. 2021 income tax expense also includes a $14 million benefit related to finalizing income tax returns on the GT&S Transaction and the absence of a $36 million benefit on non-deductible goodwill written off in connection with the sale of the Q-Pipe Group. Continuing Operations 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
Twelve Months Ended December 31, |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2023 |  |  | 2022 |  |  | 2021 |  |
U.S. statutory rate |  |  | 21.0 |  | % |  | 21.0 |  | % |  | 21.0 |  | % |  | 21.0 |  | % |  | 21.0 |  | % |  | 21.0 |  | %
Increases (reductions) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recognition of taxes - sale of subsidiary stock |  |  | — |  |  |  | 17.0 |  |  |  | — |  |  |  |  |  |  |  |  |  |  |
Recognition of taxes - privatization intercompany gain |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  | 2.4 |  |  |  | — |  |
State taxes, net of federal benefit |  |  | 4.1 |  |  |  | 11.3 |  |  |  | 1.1 |  |  |  | 4.7 |  |  |  | 4.6 |  |  |  | 4.6 |  |
Investment tax credits |  |  | (1.0 | ) |  |  | (7.7 | ) |  |  | (23.6 | ) |  |  | (0.8 | ) |  |  | (2.0 | ) |  |  | (0.8 | ) |
Production tax credits |  |  | (0.6 | ) |  |  | (2.7 | ) |  |  | (0.7 | ) |  |  | (0.8 | ) |  |  | (1.0 | ) |  |  | (0.6 | ) |
Valuation allowances |  |  | — |  |  |  | — |  |  |  | 0.2 |  |  |  | — |  |  |  | — |  |  |  | — |  |
Reversal of excess deferred income taxes |  |  | (2.6 | ) |  |  | (15.3 | ) |  |  | (3.3 | ) |  |  | (2.6 | ) |  |  | (3.8 | ) |  |  | (2.1 | ) |
State legislative change |  |  | (0.1 | ) |  |  | (0.1 | ) |  |  | (1.1 | ) |  |  | — |  |  |  | — |  |  |  | (0.7 | ) |
Changes in state deferred taxes associated with assets held for sale |  |  | 1.1 |  |  |  | 0.9 |  |  |  | — |  |  |  |  |  |  |  |  |  |  |
AFUDC—equity |  |  | — |  |  |  | (1.1 | ) |  |  | (0.6 | ) |  |  | — |  |  |  | (0.4 | ) |  |  | (0.5 | ) |
Settlements of uncertain tax positions |  |  | (0.4 | ) |  |  | — |  |  |  | (2.0 | ) |  |  | — |  |  |  | — |  |  |  | — |  |
Absence of tax on noncontrolling interest |  |  | — |  |  |  | — |  |  |  | (0.2 | ) |  |  |  |  |  |  |  |  |  |
Employee stock ownership plan deduction |  |  | (0.3 | ) |  |  | (1.5 | ) |  |  | (0.5 | ) |  |  |  |  |  |  |  |  |  |
Other, net |  |  | (0.2 | ) |  |  | (0.9 | ) |  |  | — |  |  |  | (0.4 | ) |  |  | 0.1 |  |  |  | 0.3 |  |
Effective tax rate |  |  | 21.0 |  | % |  | 20.9 |  | % |  | (9.7 | ) | % |  | 21.1 |  | % |  | 20.9 |  | % |  | 21.2 |  | %
Dominion Energy’s 2023 effective tax rate includes a net income tax expense of $29 million associated with the remeasurement of consolidated state deferred taxes as a result of the East Ohio, PSNC and Questar Gas Transactions and sale of Dominion Energy’s 50% noncontrolling partnership interest in Cove Point as discussed in Notes 3 and 9, respectively. In August 2022, Dominion Energy sold 100% of the equity interests in Hope in a stock sale for income tax purposes. Dominion Energy’s 2022 effective tax rate reflects the current income tax expense on the sale of Hope’s stock. Virginia Power transferred its existing privatization operations in Virginia to Dominion Energy, and Dominion Energy contributed these assets to Dominion Privatization. As the original owner of these privatization assets, Virginia Power is required to recognize the income tax expense on Dominion Energy’s transaction with Dominion Privatization. As such, Virginia Power’s 2022 effective tax rate reflects an income tax expense of $34 million on this transaction. Dominion Energy’s 2021 effective tax rate includes income tax benefits of $196 million and $196 million associated with the write-off of remaining unamortized investment tax credit liabilities attributable to the sale of SBL Holdco and a 50% noncontrolling interest in Four Brothers and Three Cedars, respectively. In December 2021, unrecognized tax benefits related to several state uncertain tax positions acquired in the SCANA Combination were effectively settled through negotiations with the taxing authority. Management believed it was reasonably possible these unrecognized tax benefits could decrease through settlement negotiations or payments during 2021, however no income tax benefits could be recognized unless or until the positions were effectively settled. Resolution of these uncertain tax positions decreased income tax expense by $38 million. In addition, the Companies’ effective tax rates reflect the benefit of a state legislative change enacted in April 2021 for tax years beginning January 1, 2022. Dominion Energy’s effective tax rate reflects a $21 million deferred tax benefit, inclusive of a $16 million deferred tax benefit at Virginia Power. The Companies’ deferred income taxes consist of the following:
|  | Dominion Energy |  |  | Virginia Power |
At December 31, |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
(millions) |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Total deferred income tax assets |  | $ | 2,150 |  |  | $ | 2,960 |  |  | $ | 1,281 |  |  | $ | 1,695 |
Total deferred income tax liabilities |  |  | 8,761 |  |  |  | 7,981 |  |  |  | 4,905 |  |  |  | 4,760 |
Total net deferred income tax liabilities |  | $ | 6,611 |  |  | $ | 5,021 |  |  | $ | 3,624 |  |  | $ | 3,065 |
Total deferred income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation method and plant basis differences |  | $ | 4,588 |  |  | $ | 4,449 |  |  | $ | 3,588 |  |  | $ | 3,437 |
Excess deferred income taxes |  |  | (811 | ) |  |  | (847 | ) |  |  | (600 | ) |  |  | (616 | )
Unrecovered nuclear plant cost |  |  | 450 |  |  |  | 479 |  |  |  |  |  |  |
DESC rate refund |  |  | (67 | ) |  |  | (89 | ) |  |  |  |  |  |
Toshiba Settlement |  |  | (147 | ) |  |  | (162 | ) |  |  |  |  |  |
Nuclear decommissioning |  |  | 1,109 |  |  |  | 1,001 |  |  |  | 332 |  |  |  | 311 |
Deferred state income taxes |  |  | 975 |  |  |  | 786 |  |  |  | 620 |  |  |  | 544 |
Federal benefit of deferred state income taxes |  |  | (220 | ) |  |  | (160 | ) |  |  | (130 | ) |  |  | (114 | )
Deferred fuel, purchased energy and gas costs |  |  | 299 |  |  |  | 509 |  |  |  | 267 |  |  |  | 403 |
Pension benefits |  |  | 324 |  |  |  | 330 |  |  |  | (110 | ) |  |  | (105 | )
Other postretirement benefits |  |  | 116 |  |  |  | 58 |  |  |  | 125 |  |  |  | 111 |
Loss and credit carryforwards |  |  | (1,022 | ) |  |  | (1,782 | ) |  |  | (309 | ) |  |  | (751 | )
Deferred unamortized investment tax credits |  |  | (257 | ) |  |  | (265 | ) |  |  | (164 | ) |  |  | (164 | )
Valuation allowances |  |  | 130 |  |  |  | 137 |  |  |  | 8 |  |  |  | 7 |
Partnership basis differences |  |  | 70 |  |  |  | 466 |  |  |  |  |  |  |
Total deferred taxes on stock held for sale |  |  | 804 |  |  |  | — |  |  |  |  |  |  |
Other |  |  | 270 |  |  |  | 111 |  |  |  | (3 | ) |  |  | 2 |
Total net deferred income tax liabilities |  | $ | 6,611 |  |  | $ | 5,021 |  |  | $ | 3,624 |  |  | $ | 3,065 |
At December 31, 2023, Dominion Energy had the following deductible loss and credit carryforwards:
|  | Deductible |  |  | Deferred |  |  | Valuation |  |  | Expiration
|  | Amount |  |  | Tax Asset |  |  | Allowance |  |  | Period
(millions) |  |  |  |  |  |  |  |  |  |  |
Federal losses |  | $ | 576 |  |  | $ | 121 |  |  | $ | — |  |  | 2037
Federal investment credits |  | — |  |  |  | 264 |  |  | — |  |  | 2041-2043
Federal production and other credits |  | — |  |  |  | 91 |  |  | — |  |  | 2041-2043
State losses |  |  | 2,678 |  |  |  | 131 |  |  |  | (51 | ) |  | 2024-2043
State minimum tax credits |  | — |  |  |  | 327 |  |  | — |  |  | No expiration
State investment and other credits |  | — |  |  |  | 125 |  |  |  | (79 | ) |  | 2024-2033
Total |  | $ | 3,254 |  |  | $ | 1,059 |  |  | $ | (130 | ) |  |
At December 31, 2023, Virginia Power had the following deductible loss and credit carryforwards:
|  | Deductible |  |  | Deferred |  |  | Valuation |  |  | Expiration
|  | Amount |  |  | Tax Asset |  |  | Allowance |  |  | Period
(millions) |  |  |  |  |  |  |  |  |  |  |
Federal investment credits |  | $ | — |  |  | $ | 241 |  |  | $ | — |  |  | 2041-2043
Federal production and other credits |  | — |  |  |  | 58 |  |  | — |  |  | 2041-2043
State losses |  |  | 3 |  |  |  | — |  |  | — |  |  | 2042
State investment and other credits |  | — |  |  |  | 9 |  |  |  | (8 | ) |  | 2024
Total |  | $ | 3 |  |  | $ | 308 |  |  | $ | (8 | ) |  |
A reconciliation of changes in Dominion Energy’s unrecognized tax benefits follows. Virginia Power does no t have any unrecognized tax benefits in the periods presented:
|  | Dominion Energy |  |
|  | 2023 |  |  | 2022 |  |  | 2021 |  |
(millions) |  |  |  |  |  |  |  |  |  |
Balance at January 1, |  | $ | 117 |  |  | $ | 128 |  |  | $ | 167 |  |
Prior period positions - increases |  |  | 5 |  |  |  | 8 |  |  |  | 48 |  |
Prior period positions - decreases |  |  | (12 | ) |  |  | (8 | ) |  |  | (59 | ) |
Current period positions - increases |  |  | — |  |  |  | 2 |  |  |  | 2 |  |
Settlements with tax authorities |  |  | — |  |  |  | (3 | ) |  |  | (26 | ) |
Expiration of statutes of limitations |  |  | — |  |  |  | (10 | ) |  |  | (4 | ) |
Balance at December 31, |  | $ | 110 |  |  | $ | 117 |  |  | $ | 128 |  |
Certain unrecognized tax benefits, or portions thereof, if recognized, would affect the effective tax rate. Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations. For Dominion Energy and its subsidiaries, these unrecognized tax benefits were $52 million, $64 million and $72 million at December 31, 2023, 2022 and 2021, respectively. In discontinued operations, these unrecognized tax benefits were $38 million at December 31, 2023 and $33 million at both December 31, 2022 and 2021. For Dominion Energy, the change in these unrecognized tax benefits decreased income tax expense by $8 million, $7 million and $34 million in 2023, 2022 and 2021, respectively. Dominion Energy participates in the IRS Compliance Assurance Process which provides the opportunity to resolve complex tax matters with the IRS before filing its federal income tax returns, thus achieving certainty for such tax return filing positions agreed to by the IRS. The IRS has completed its audit of tax years through 2019. The statute of limitations has not yet expired for years after 2019. Although Dominion Energy has not received a final letter indicating no changes to its taxable income for tax years 2022, 2021 and 2020, no material adjustments are expected. The IRS examination of tax year 2023 is ongoing. It is reasonably possible that settlement negotiations and expiration of statutes of limitations could result in a decrease in unrecognized tax benefits in 2024 by up to $27 million for Dominion Energy. If such changes were to occur, other than revisions of the accrual for interest on tax underpayments and overpayments, earnings could increase by up to $14 million for Dominion Energy. Otherwise, with regard to 2023 and prior years, the Companies cannot estimate the range of reasonably possible changes to unrecognized tax benefits that may occur in 2024. For each of the major states in which Dominion Energy operates or previously operated, the earliest tax year remaining open for examination is as follows:
State |  | Earliest Open Tax Year
Pennsylvania(1) |  | 2012
Connecticut |  | 2020
Virginia(2) |  | 2020
Utah(1) |  | 2019
South Carolina |  | 2020
(1) Considered a major state for entities presented in discontinued operations. (2) Considered a major state for Virginia Power’s operations. The Companies are also obligated to report adjustments resulting from IRS settlements to state tax authorities. In addition, if Dominion Energy utilizes operating losses or tax credits generated in years for which the statute of limitations has expired, such amounts are generally subject to examination.

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