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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The following table sets forth our provision for income taxes for the periods indicated:
|  | Years Ended December 31,
|  | 2023 |  | 2022 |  | 2021 |
|  | (Millions of dollars)
Current tax expense (benefit) |  |  |  |  |  |  |
Federal |  | $ | (3) |  |  | $ | 52 |  |  | $ | 3 |  |
State |  | 12 |  |  | 12 |  |  | 9 |  |
Total current tax expense |  | 9 |  |  | 64 |  |  | 12 |  |
Deferred tax expense |  |  |  |  |  |  |
Federal |  | 739 |  |  | 423 |  |  | 433 |  |
State |  | 90 |  |  | 41 |  |  | 39 |  |
Total deferred tax expense |  | 829 |  |  | 464 |  |  | 472 |  |
Total provision for income taxes |  | $ | 838 |  |  | $ | 528 |  |  | $ | 484 |  |
The following table is a reconciliation of our income tax provision for the periods indicated:
|  | Years Ended December 31,
|  | 2023 |  | 2022 |  | 2021 |
|  | (Millions of dollars)
Income before income taxes |  | $ | 3,497 |  |  | $ | 2,250 |  |  | $ | 1,984 |  |
Federal statutory income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | % |
Provision for federal income taxes |  | 734 |  |  | 472 |  |  | 417 |  |
State income taxes, net of federal benefit |  | 100 |  |  | 54 |  |  | 40 |  |
Deferred tax rate change, inclusive of valuation allowance |  | 2 |  |  | (1) |  |  | 6 |  |
Excess tax benefits from share-based compensation |  | 1 |  |  | (1) |  |  | (2) |  |
Other, net (a) |  | 1 |  |  | 4 |  |  | 23 |  |
Income tax provision |  | $ | 838 |  |  | $ | 528 |  |  | $ | 484 |  |
(a) The year ended December 31, 2021, includes $19 million impact from previously recognized gains on certain benefit plan investments. The following table sets forth the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities as of the dates indicated:
|  | December 31, 2023 |  | December 31, 2022 |  |
Deferred tax assets |  | (Millions of dollars)
Employee benefits and other accrued liabilities |  | $ | 88 |  |  | $ | 82 |  |  |
Federal net operating loss |  | 2,534 |  |  | 1,105 |  |  |
State net operating loss and benefits |  | 492 |  |  | 196 |  |  |
Derivative instruments |  | — |  |  | 19 |  |  |
Interest expense limitation |  | 210 |  |  | 25 |  |  |
Other |  | 20 |  |  | 5 |  |  |
Total deferred tax assets |  | 3,344 |  |  | 1,432 |  |  |
Valuation allowance for state net operating loss and tax credits |  |  |  |  |  |
Carryforward expected to expire prior to utilization |  | (240) |  |  | (75) |  |  |
Net deferred tax assets |  | 3,104 |  |  | 1,357 |  |  |
Deferred tax liabilities |  |  |  |  |  |
Excess of tax over book depreciation |  | 104 |  |  | 95 |  |  |
Derivative instruments |  | 7 |  |  | — |  |  |
Investment in partnerships (a) |  | 5,587 |  |  | 3,001 |  |  |
Total deferred tax liabilities |  | 5,698 |  |  | 3,096 |  |  |
Net deferred tax liabilities |  | $ | 2,594 |  |  | $ | 1,739 |  |  |
(a) Due primarily to excess of tax over book depreciation. In August 2022, the U.S. government enacted the IRA into law. The IRA includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period. The CAMT became effective for the 2023 tax year. We do not expect the CAMT to have an impact on our cash taxes in the 2024 tax year. However, when our CAMT liability is greater than our regular U.S. federal income tax liability for any particular year, the CAMT liability would effectively accelerate our future U.S. federal income tax obligations but provide an offsetting credit against our regular U.S. federal income tax liability for future years. As a result, we expect that any future impact will be limited to timing differences in future tax years. As of December 31, 2023, we have federal net operating loss carryforwards of $12.1 billion, which have an indefinite carryforward period. We expect to generate taxable income and utilize these net operating loss carryforwards in future periods. We also have loss and credit carryovers in multiple states, $10.9 billion of which have an indefinite carryforward period and $1.2 billion of which will expire between 2024 and 2038. We have deferred tax assets related to federal and state net operating loss and credit carryforwards of $3.0 billion and $1.3 billion in 2023 and 2022, respectively. We believe that it is more likely than not that the tax benefits of certain state carryforwards will not be utilized; therefore, we recorded a valuation allowance, which was increased by $165 million and $6 million in 2023 and 2021, respectively, and reduced by $1 million in 2022 through net income.

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