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Income Tax | 9 Months Ended
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Sep. 30, 2023
Income Tax Disclosure [Abstract] |
Income Tax | Income Tax Con Edison’s income tax expense was $144 million for the three months ended September 30, 2023 and $160 million for the three months ended September 30, 2022. The decrease in income tax expense is primarily due to lower income before income tax expense and higher flow-through of COVID-19 assistance benefits for uncollectible accounts, offset in part by changes in state apportionments resulting in higher state income taxes and lower renewable energy tax credits. CECONY’s income tax expense was $109 million for the three months ended September 30, 2023 and $124 million for the three months ended September 30, 2022. The decrease in income tax expense is primarily due to higher flow-through of COVID-19 assistance benefits for uncollectible accounts and a favorable tax adjustment from a prior year tax return primarily due to an increase in the general business tax credits, offset in part by higher income before income tax expense and higher reserve for injuries and damages. Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes for the three months ended September 30, 2023 and 2022 is as follows:
| For the Three Months Ended September 30, |  |
| Con Edison | CECONY |  |
(% of Pre-tax income) | 2023 | 2022 | 2023 | 2022 |  |
STATUTORY TAX RATE |  |  |  |  |  |
Federal | 21 | % | 21 | % | 21 | % | 21 | % |  |
Changes in computed taxes resulting from: |  |  |  |  |  |
State income tax, net of federal income tax benefit | 8 |  | 6 |  | 5 |  | 5 |  |  |
Amortization of excess deferred federal income taxes | (6) |  | (6) |  | (7) |  | (7) |  |  |
Cost of removal | 1 |  | 1 |  | 1 |  | 1 |  |  |
Renewable energy credits | — |  | (1) |  | — |  | — |  |  |
Allowance for uncollectible accounts, net of COVID-19 assistance | (2) |  | — |  | (2) |  | 1 |  |  |
Impacts from the sale of the Clean Energy Businesses: |  |  |  |  |  |
State taxes on sale of subsidiary, net of federal income tax benefit | 1 |  | — |  | — |  | — |  |  |
Other | (2) |  | — |  | (1) |  | (1) |  |  |
Effective tax rate | 21 | % | 21 | % | 17 | % | 20 | % |  |
Con Edison’s income tax expense was $416 million for the nine months ended September 30, 2023 and $330 million for the nine months ended September 30, 2022. The increase in income tax expense is primarily due to higher income before income tax expense due to the gain on the sale of the Clean Energy Businesses ($214 million), lower renewable energy tax credits ($13 million), offset in part by higher flow-through of COVID-19 assistance benefits for uncollectible accounts ($19 million), tax benefits from the recognition of deferred unamortized investment tax credits ($105 million), and changes in state apportionments, net of federal income taxes ($27 million). CECONY’s income tax expense was $297 million for the nine months ended September 30, 2023 and $232 million for the nine months ended September 30, 2022. The increase in income tax expense is primarily due to higher income before income tax expense, lower flow-through tax benefits in 2023 for plant-related items, lower research and development credits from prior years, a remeasurement of state deferred tax assets and liabilities as a result of the enacted New York State legislation and a decrease in the amortization of excess deferred federal income taxes due to the TCJA, offset in part by lower allowance for uncollectible accounts and higher flow-through of COVID-19 assistance benefits for uncollectible accounts. Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes for the nine months ended September 30, 2023 and 2022 is as follows:
| For the Nine Months Ended September 30,
| Con Edison | CECONY
(% of Pre-tax income) | 2023 | 2022 | 2023 | 2022
STATUTORY TAX RATE |  |  |  |
Federal | 21 | % | 21 | % | 21 | % | 21 | %
Changes in computed taxes resulting from: |  |  |  |
State income tax, net of federal income tax benefit | 5 |  | 6 |  | 5 |  | 5 |
Taxes attributable to non-controlling interest | — |  | 1 |  | — |  | — |
Cost of removal | 1 |  | 1 |  | 2 |  | 2 |
Other plant-related items | — |  | — |  | (1) |  | (1) |
Renewable energy credits | (1) |  | (2) |  | — |  | — |
Amortization of excess deferred federal income taxes | (5) |  | (8) |  | (8) |  | (10) |
Impacts from the sale of the Clean Energy Businesses: |  |  |  |
Changes in state apportionments, net of federal income taxes | (1) |  | — |  | — |  | — |
Deferred unamortized investment tax credit recognized on sale of subsidiary | (4) |  | — |  | — |  | — |
Other | — |  | — |  | — |  | — |
Effective tax rate | 16 | % | 19 | % | 19 | % | 17 | %
On March 1, 2023, Con Edison completed the sale of the Clean Energy Businesses, which was accounted for as a stock sale for GAAP purposes and a deemed sale of assets and liquidation for tax purposes. Con Edison's pre-tax gain on the sale of the Clean Energy Businesses was $866 million ($784 million, net of tax) for the nine months ended September 30, 2023. The sale included all assets, operations and projects of the Clean Energy Businesses with the exception of tax equity interests and a deferred project, that were treated as distributions to Con Edison. See Note S and Note T. In April 2023, the IRS released Revenue Procedure 2023-15, which provides a safe harbor method of accounting that taxpayers may use to determine whether certain expenditures to maintain, repair, replace, or improve natural gas transmission and distribution property must be capitalized as improvements by the taxpayer or currently deducted for federal income tax purposes. This revenue procedure also provides procedures for taxpayers to obtain automatic consent to change their method of accounting to the safe harbor method of accounting permitted by this revenue procedure. Con Edison recorded a reduction in its current tax payable and an increase in accumulated deferred tax liabilities of $228 million ($204 million for CECONY) to reflect the cumulative impact of this change in accounting method for the Utilities. In May 2023, New York State passed a law that extended the increase in the corporate franchise tax rate from 6.5 percent to 7.25 percent for another three-year period, through tax year 2026, for taxpayers with taxable income greater than $5 million. The law also temporarily extended the business capital tax through tax year 2026, not to exceed an annual maximum tax liability of $5 million per taxpayer, with a corporation paying the higher of its franchise or income tax liability during the same period. New York State also passed a law establishing a permanent rate of 30 percent for the metropolitan transportation business tax surcharge. As a result of the sale of the Clean Energy Businesses in 2023, Con Edison has New York State taxable income in excess of $5 million after using its entire New York State NOL carryforward, and therefore, the group is subject to the higher 7.25 percent rate (9.425 percent with the surcharge rate) on its taxable income for tax year 2023. As a result of this legislation, CECONY remeasured its deferred tax assets and liabilities that would reverse before 2027 and recorded state deferred income tax expense (net of federal benefit) and an increase in accumulated deferred tax liabilities of $10 million for the nine months ended September 30, 2023, all of which was recorded in the second quarter of 2023. Uncertain Tax Positions At September 30, 2023, the estimated liability for uncertain tax positions for Con Edison was $10 million ($7 million for CECONY). For the nine months ended September 30, 2023, Con Edison recognized $2 million of income tax expense mostly related to research and development credits on the Clean Energy Businesses. In the third quarter of 2023, Con Edison settled with the IRS on the research and development credits related to the Clean Energy Businesses for the 2016-2020 tax years which resulted in a reduction in both uncertain tax positions and related deferred tax assets for general business credit carryovers of $12 million. In addition, CECONY reversed $4 million in uncertain tax positions related to the same tax years that reduced its effective tax rate. Con Edison reasonably expects to resolve within the next twelve months approximately $9 million of various federal uncertainties due to the expected completion of ongoing tax examinations, of which the entire amount, if recognized, would reduce Con Edison's effective tax rate. The amount related to CECONY is $5 million, that, if recognized, would reduce CECONY’s effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $10 million, with $7 million attributable to CECONY. In October 2023, Con Edison reached a settlement with New York State and closed its open examinations for the 2010-2014 tax years and paid $6 million in interest and $4 million in income taxes after applying the remaining $12 million of a special deposit made in 2013. New York State tax returns for 2015-2021 remain open. The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. For the nine months ended September 30, 2023 and 2022, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At September 30, 2023 and December 31, 2022, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.

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