XML 40 R19.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
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, provides for transferability of certain tax credits and imposes a 15% alternative minimum tax on corporations with GAAP net income greater than $1 billion, as adjusted for certain items, 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,

2024

 

2023

 

2022

 

2024

 

2023

 

2022

 

(millions)

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

Federal

$

(235

)

$

(385

)

$

(76

)

$

(23

)

$

(116

)

$

17

 

State

 

32

 

 

(99

)

 

27

 

 

67

 

 

6

 

 

(17

)

Total current expense (benefit)

 

(203

)

 

(484

)

 

(49

)

 

44

 

 

(110

)

 

—

 

Deferred:

 

 

 

 

 

 

Federal

 

 

 

 

 

 

Taxes before operating loss
   carryforwards and investment tax credits

 

446

 

 

758

 

 

55

 

 

325

 

 

406

 

 

215

 

Tax utilization expense of operating
   loss carryforwards

 

40

 

 

45

 

 

35

 

 

—

 

 

—

 

 

—

 

State

 

60

 

 

277

 

 

59

 

 

60

 

 

107

 

 

108

 

Total deferred expense

 

546

 

 

1,080

 

 

149

 

 

385

 

 

513

 

 

323

 

Investment tax credits

 

(35

)

 

 

(28

)

 

 

(41

)

 

 

(21

)

 

 

(14

)

 

 

(29

)

Total income tax expense

$

308

 

$

568

 

$

59

 

$

408

 

$

389

 

$

294

 

In 2024, 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, is reflected in discontinued operations. Dominion Energy’s income tax expense from continuing operations reflects the utilization of tax credit carryforwards to offset a portion of the federal tax on the gains from the East Ohio, PSNC and Questar Gas Transactions, presented in discontinued operations.

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.

 

Discontinued Operations

Income tax expense reflected in discontinued operations is $31 million, $1.3 billion, and $207 million for the years ended December 31, 2024, 2023 and 2022, 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 was treated as a stock sale for income tax purposes. During 2023 in connection with the pending sales, Dominion Energy recorded a charge of $835 million to establish deferred tax liabilities to reflect the excess of the financial reporting basis over tax basis in the stock of the entities to be sold. These deferred taxes reversed upon closing of the respective sales, all of which occurred in 2024. In addition, Dominion Energy recorded tax expense of $278 million associated with completing the sale in September 2023 of its remaining 50% noncontrolling partnership interest in Cove Point to BHE as discussed in Note 9. During 2024, Dominion Energy recorded a tax benefit of $39 million, including the reversal of $851 million of the deferred tax liabilities associated with the East Ohio, PSNC and Questar Gas Transactions previously established during 2023 and 2024. 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 $60 million, $116 million and $242 million, partially offset by an income tax benefit of $11 million, $59 million and $38 million related to excess deferred income tax amortization for the years ended December 31, 2024, 2023 and 2022, respectively.

 

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,

 

2024

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

2022

 

 

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

 

 

—

 

 

 

—

 

 

 

28.0

 

 

 

 

 

 

 

 

 

 

 

Recognition of taxes - privatization
   intercompany gain

 

 

 

 

 

 

 

 

 

 

 

—

 

 

 

—

 

 

 

2.4

 

 

State taxes, net of federal benefit

 

 

3.6

 

 

 

3.9

 

 

 

15.9

 

 

 

4.5

 

 

 

4.7

 

 

 

4.6

 

 

Investment tax credits

 

 

(1.6

)

 

 

(1.0

)

 

 

(12.6

)

 

 

(0.9

)

 

 

(0.8

)

 

 

(2.0

)

 

Production tax credits

 

 

(4.8

)

 

 

(0.6

)

 

 

(4.5

)

 

 

(4.5

)

 

 

(0.8

)

 

 

(1.0

)

 

Reversal of excess deferred income
    taxes

 

 

(3.1

)

 

 

(2.6

)

 

 

(25.2

)

 

 

(2.0

)

 

 

(2.6

)

 

 

(3.8

)

 

State legislative change

 

 

—

 

 

 

(0.1

)

 

 

(0.1

)

 

 

—

 

 

 

—

 

 

 

—

 

 

Changes in state deferred taxes
    associated with assets held for sale

 

 

—

 

 

 

1.1

 

 

 

0.9

 

 

 

 

 

 

 

 

 

 

 

AFUDC—equity

 

 

(0.8

)

 

 

—

 

 

 

(1.9

)

 

 

(0.7

)

 

 

—

 

 

 

(0.4

)

 

Settlements of uncertain tax positions

 

 

(0.7

)

 

 

(0.4

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

Employee stock ownership plan
    deduction

 

 

(0.3

)

 

 

(0.3

)

 

 

(2.5

)

 

 

 

 

 

 

 

 

 

 

Other, net

 

 

0.8

 

 

 

(0.1

)

 

 

(0.9

)

 

 

0.6

 

 

 

(0.4

)

 

 

0.1

 

 

Effective tax rate

 

 

14.1

 

%

 

20.9

 

%

 

18.1

 

%

 

18.0

 

%

 

21.1

 

%

 

20.9

 

%

The IRA created a nuclear production tax credit for electricity produced and sold beginning in 2024. Dominion Energy’s and Virginia Power’s 2024 effective tax rate includes an $89 million income tax benefit for the estimated net realizable value of the nuclear production tax credit. The ultimate nuclear production tax credit realized by the Companies could vary significantly based on pending final U.S. Treasury guidance.

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.

The Companies’ deferred income taxes consist of the following:

 

Dominion Energy

 

Virginia Power

 

At December 31,

2024

 

2023

 

2024

 

2023

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes:

 

 

 

 

Total deferred income tax assets

$

1,854

 

 

$

2,150

 

$

1,082

 

$

1,281

 

Total deferred income tax liabilities

 

8,266

 

 

 

8,771

 

 

5,127

 

 

4,905

 

Total net deferred income tax liabilities

$

6,412

 

$

6,621

 

$

4,045

 

$

3,624

 

Total deferred income taxes:

 

 

 

 

Depreciation method and plant basis differences

$

4,878

 

 

$

4,588

 

$

3,765

 

$

3,588

 

Excess deferred income taxes

 

(790

)

 

 

(811

)

 

(587

)

 

(600

)

Unrecovered nuclear plant cost

 

 

420

 

 

 

450

 

 

 

 

 

 

 

DESC rate refund

 

 

(49

)

 

 

(67

)

 

 

 

 

 

 

Toshiba Settlement

 

 

(133

)

 

 

(147

)

 

 

 

 

 

 

Nuclear decommissioning

 

1,232

 

 

 

1,109

 

 

357

 

 

332

 

Deferred state income taxes

 

1,046

 

 

 

976

 

 

676

 

 

620

 

Federal benefit of deferred state income taxes

 

(230

)

 

 

(220

)

 

(142

)

 

(130

)

Deferred fuel, purchased energy and gas costs

 

189

 

 

 

299

 

 

178

 

 

267

 

Pension benefits

 

345

 

 

 

324

 

 

(116

)

 

(110

)

Other postretirement benefits

 

174

 

 

 

116

 

 

141

 

 

125

 

Loss and credit carryforwards

 

(680

)

 

 

(1,022

)

 

—

 

 

(309

)

Deferred unamortized investment tax credits

 

 

(250

)

 

 

(257

)

 

 

(159

)

 

 

(164

)

Valuation allowances

 

113

 

 

 

130

 

 

—

 

 

8

 

Partnership basis differences

 

(30

)

 

 

70

 

 

(98

)

 

 

—

 

Total deferred taxes on stock held for sale

 

 

—

 

 

 

814

 

 

 

 

 

 

 

Other

 

177

 

 

 

269

 

 

30

 

 

(3

)

Total net deferred income tax liabilities

$

6,412

 

$

6,621

 

$

4,045

 

 

$

3,624

 

At December 31, 2024, Dominion Energy had the following deductible loss and credit carryforwards:

 

 

 

Deductible Amount

 

 

Deferred Tax Asset(1)

 

 

Valuation Allowance

 

 

Expiration Period

(millions)

 

 

 

 

 

 

 

 

 

 

Federal losses

$

391

 

$

82

 

$

—

 

 

2037

Federal production and other credits

—

 

 

22

 

—

 

 

2036-2038

State losses

 

2,245

 

 

115

 

 

(50

)

 

2025-2043

State minimum tax credits

—

 

 

378

 

—

 

 

No expiration

State investment and other credits

—

 

 

113

 

 

(63

)

 

2025-2033

Total

$

2,636

 

$

710

 

$

(113

)

 

(1)
Includes $38 million of unrecognized tax benefits.

At December 31, 2024, Virginia Power had no deductible loss or credit carryforwards.

A reconciliation of changes in Dominion Energy’s unrecognized tax benefits follows. Virginia Power does not have any unrecognized tax benefits in the periods presented:

 

Dominion Energy

 

 

2024

 

 

2023

 

 

2022

 

 

(millions)

 

 

 

 

 

 

 

Balance at January 1,

$

110

 

 

$

117

 

 

$

128

 

 

Prior period positions - increases

 

13

 

 

 

5

 

 

 

8

 

 

Prior period positions - decreases

 

(18

)

 

 

(12

)

 

 

(8

)

 

Current period positions - increases

 

—

 

 

 

—

 

 

 

2

 

 

Settlements with tax authorities

 

(13

)

 

 

—

 

 

 

(3

)

 

Expiration of statutes of limitations

 

(14

)

 

 

—

 

 

 

(10

)

 

Balance at December 31,

$

78

 

 

$

110

 

 

$

117

 

 

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 $30 million, $52 million and $64 million at December 31, 2024, 2023 and 2022, respectively. In discontinued operations, these unrecognized tax benefits were $32 million, $38 million and $33 million at December 31, 2024, 2023 and 2022, respectively. For Dominion Energy, the change in these unrecognized tax benefits decreased income tax expense by $22 million, $8 million and $7 million in 2024, 2023 and 2022, 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 2023, 2022, 2021 and 2020, no material adjustments are expected. The IRS examination of tax year 2024 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 2025 by up to $38 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 $30 million for Dominion Energy. Otherwise, with regard to 2024 and prior years, the Companies cannot estimate the range of reasonably possible changes to unrecognized tax benefits that may occur in 2025.

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

2021

Virginia(2)

2021

Utah(1)

2021

South Carolina

2021

 

(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.