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Income Tax | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Tax | Income Tax The components of income tax are as follows:
| Con Edison |  | CECONY
(Millions of Dollars) | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022 |  | 2021
State |  |  |  |  |  |  |  |  |  |  |
Current | $179 |  | $5 |  | $14 |  | $(102) |  | $— |  | $1
Deferred | 6 |  | 324 |  | 79 |  | 246 |  | 110 |  | 106
Federal |  |  |  |  |  |  |  |  |  |  |
Current | 176 |  | 58 |  |  | 43 |  | (95) |  | 170 |  | 121
Deferred | 237 |  | 117 |  | 61 |  | 311 |  | (23) |  | 21
Amortization of investment tax credits | (111) |  | (6) |  | (7) |  | (2) |  | (2) |  | (3)
Total income tax expense | $487 |  | $498 |  | $190 |  | $358 |  | $255 |  | $246
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 is as follows:
| Con Edison |  | CECONY
(% of Pre-tax income) | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022 |  | 2021
STATUTORY TAX RATE |  |  |  |  |  |  |  |  |  |  |
Federal | 21 | % |  | 21 | % |  | 21 | % |  | 21 | % |  | 21 | % |  | 21 | %
Changes in computed taxes resulting from: |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income taxes | 5 |  |  | 6 |  |  | 4 |  |  | 5 |  |  | 5 |  |  | 5 |
Taxes attributable to noncontrolling interests | — |  |  | 1 |  |  | 3 |  |  | — |  |  | — |  |  | — |
Cost of removal | 1 |  |  | 1 |  |  | 2 |  |  | 2 |  |  | 1 |  |  | 1 |
Other plant-related items | — |  |  | — |  |  | (1) |  |  | (1) |  |  | (1) |  |  | (1) |
Amortization of excess deferred federal income taxes | (6) |  |  | (9) |  |  | (12) |  |  | (8) |  |  | (10) |  |  | (11) |
Renewable energy credits | — |  |  | (2) |  |  | (2) |  |  | — |  |  | — |  |  | — |
Research and development credits | — |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |
Other | — |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | — |
Impacts from the sale of the Clean Energy Businesses: |  |  |  |  |  |  |  |  |  |  |
Changes in state apportionments, net of federal income taxes | (1) |  |  | 6 |  |  | — |  |  | — |  |  | — |  |  | — |
Deferred unamortized ITC recognized on sale of subsidiary | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Effective tax rate | 16 | % |  | 24 | % |  | 14 | % |  | 18 | % |  | 16 | % |  | 15 | %
Con Edison’s effective tax rate decreased 8 percent in 2023 primarily due to tax benefits from the recognition of deferred unamortized investment tax credits and the absence of the remeasurement of state deferred income taxes on the announced sale of the Clean Energy Businesses recognized in 2022, offset in part by higher income before income tax expense in 2023 due to the gain on the sale of the Clean Energy Businesses and lower renewable energy tax credits due to the sale. On March 1, 2023, Con Edison completed the sale of all of the stock 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 $865 million ($767 million, net of tax) for the year ended December 31, 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 W and Note X. The tax effects of temporary differences, which gave rise to deferred tax assets and liabilities, are as follows:
| Con Edison | CECONY |  |  |  |
(Millions of Dollars) | 2023 | 2022 | 2023 | 2022 |  |  |  |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property basis differences | $8,542 | $8,770 | $8,001 | $7,475 |  |  |  |
Regulatory Assets: |  |  |  |  |  |  |  |
System peak reduction and energy efficiency programs | 297 | 220 | 291 | 219 |  |  |  |
Environmental remediation costs | 310 | 278 | 287 | 254 |  |  |  |
Other regulatory assets | 632 | 561 | 577 | 501 |  |  |  |
Unrecognized pension and other postretirement costs | — | 22 | — | 22 |  |  |  |
Pensions and retiree benefits – asset | 918 | 917 | 894 | 894 |  |  |  |
Operating lease right-of-use asset | 154 | 230 | 153 | 163 |  |  |  |
Equity investments | — | 26 | — | — |  |  |  |
Total deferred tax liabilities | $10,853 | $11,024 | $10,203 | $9,528 |  |  |  |
Deferred tax assets: |  |  |  |  |  |  |  |
Regulatory liabilities: |  |  |  |  |  |  |  |
Unrecognized pension and other postretirement costs | 265 | 447 | 244 | 431 |  |  |  |
Future income tax | 427 | 489 | 394 | 454 |  |  |  |
Other regulatory liabilities | 844 | 860 | 744 | 739 |  |  |  |
Tax credits carryforward | 270 | 767 | — | — |  |  |  |
Loss carryforwards | 7 | 117 | — | 24 |  |  |  |
Valuation allowance | (7) | (18) | — | — |  |  |  |
Superfund and other environmental costs | 314 | 280 | 288 | 254 |  |  |  |
Operating lease liabilities | 154 | 233 | 153 | 162 |  |  |  |
Pensions and retiree benefits – liability | 167 | 162 | 153 | 148 |  |  |  |
Asset retirement obligations | 146 | 153 | 146 | 140 |  |  |  |
Equity investments | 98 | — | — | — |  |  |  |
Other | 125 | 14 | 108 | 45 |  |  |  |
Total deferred tax assets | 2,810 | 3,504 | 2,230 | 2,397 |  |  |  |
Net deferred tax liabilities | $8,043 | $7,520 | $7,973 | $7,131 |  |  |  |
Unamortized investment tax credits | 26 | 121 | 11 | 13 |  |  |  |
Net deferred tax liabilities and unamortized investment tax credits | $8,069 | $7,641 | $7,984 | $7,144 |  |  |  |
At December 31, 2023, Con Edison has $270 million in general business tax credit carryovers (primarily renewable energy tax credits). If unused, these general business tax credit carryovers will begin to expire in 2038. A deferred tax asset for these tax attribute carryforwards was recorded, and no valuation allowance was provided, as it is more likely than not that the deferred tax asset will be realized. At December 31, 2023, Con Edison has a deferred tax asset on its New York City net operating loss carryforward of $8 million that will begin to expire, if unused, in 2035. Con Edison recorded a full valuation allowance against this deferred tax asset as it is not more likely than not that the deferred tax assets will be realized. At December 31, 2022, the Clean Energy Businesses had a deferred tax asset on non New York net operating losses of $43 million, with a valuation allowance of $9 million against the deferred tax assets. During the year ended December 31, 2023, $26 million of deferred tax assets on state net operating losses were utilized as a result of the sale of the Clean Energy Businesses with $17 million of deferred taxes remaining which are not expected to be utilized. Con Edison has written off the $17 million and the related $9 million valuation allowance as these deferred tax assets will not be realized due to the sale of the Clean Energy Businesses. 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 an increase in accumulated plant-related 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 Net Operating Loss 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 year ended December 31, 2023. Uncertain Tax Positions Under the accounting rules for income taxes, the Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, including resolution of any related appeals and litigation processes, based solely on the technical merits of the position. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for Con Edison and CECONY follows:
| Con Edison | CECONY
(Millions of Dollars) | 2023 | 2022 | 2021 | 2023 | 2022 | 2021
Balance at January 1, | $23 | $17 | $14 | $8 | $5 | $3
Additions based on tax positions related to the current year | 8 | 3 | 3 | 4 | 2 | 2
Additions based on tax positions of prior years | 3 | 6 | 2 | 1 | 1 | 1
Reductions for tax positions of prior years | (11) | (1) | (2) | (6) | — | (1)
Settlements | (12) | (2) | — | — | — | —
Balance at December 31, | $11 | $23 | $17 | $7 | $8 | $5
At December 31, 2023, the estimated uncertain tax positions for Con Edison was $11 million ($7 million for CECONY). For the year ended December 31, 2023, Con Edison recognized $8 million ($4 million for CECONY) of income tax expense related to current year positions, and recognized a tax benefit of $8 million ($5 million for CECONY) related to positions in prior years. In 2023, Con Edison settled with the IRS on the research and development credits related to the Clean Energy Businesses for the 2020-2021 tax years resulting in a reduction in the liability for general business credit carryovers of $12 million, for which an uncertain tax position had previously been recorded. In addition, CECONY reversed $6 million in uncertain tax positions related to the same tax years that reduced its effective tax rate. Con Edison and CECONY reasonably expect to resolve within the next twelve months approximately $3 million of various federal uncertainties due to the expected completion of ongoing tax examinations, of which the entire amount, if recognized, would reduce their effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $11 million ($10 million, net of federal taxes) with $7 million attributable to CECONY. 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. In 2023, 2022 and 2021, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At December 31, 2023 and December 31, 2022, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets. 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. Con Edison’s federal tax return for 2022 remains under examination. State and local tax returns remain open for examination in New York State for tax years 2015 through 2022, in New Jersey for tax years 2019 through 2022 and in New York City for tax years 2019 through 2022.

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