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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 components of the Registrant’s income tax expense (benefit) were as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
CenterPoint Energy - Continuing Operations |  |  |  |  |
Current income tax expense (benefit): |  |  |  |  |
Federal | $ | 106 |  |  | $ | 294 |  |  | $ | — |
State | 33 |  |  | 46 |  |  | (28) |
Total current expense (benefit) | 139 |  |  | 340 |  |  | (28) |
Deferred income tax expense (benefit): |  |  |  |  |
Federal | 119 |  |  | 16 |  |  | 78 |
State | (88) |  |  | 4 |  |  | 60 |
Total deferred expense | 31 |  |  | 20 |  |  | 138 |
Total income tax expense | $ | 170 |  |  | $ | 360 |  |  | $ | 110 |
CenterPoint Energy - Discontinued Operations |  |  |  |  |
Current income tax expense: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | 91 |
State | — |  |  | — |  |  | 35 |
Total current expense | — |  |  | — |  |  | 126 |
Deferred income tax expense (benefit): |  |  |  |  |
Federal | — |  |  | — |  |  | 127 |
State | — |  |  | — |  |  | (52) |
Total deferred expense (benefit) | — |  |  | — |  |  | 75 |
Total income tax expense (benefit) | $ | — |  |  | $ | — |  |  | $ | 201 |
Houston Electric |  |  |  |  |
Current income tax expense (benefit): |  |  |  |  |
Federal | $ | (26) |  |  | $ | 23 |  |  | $ | 22 |
State | 34 |  |  | 16 |  |  | 22 |
Total current expense | 8 |  |  | 39 |  |  | 44 |
Deferred income tax expense (benefit): |  |  |  |  |
Federal | 159 |  |  | 86 |  |  | 31 |
State | 1 |  |  | — |  |  | 1 |
Total deferred expense (benefit) | 160 |  |  | 86 |  |  | 32 |
Total income tax expense | $ | 168 |  |  | $ | 125 |  |  | $ | 76 |
CERC - Continuing Operations |  |  |  |  |
Current income tax expense (benefit): |  |  |  |  |
Federal | $ | 12 |  |  | $ | 30 |  |  | $ | — |
State | 3 |  |  | 28 |  |  | (25) |
Total current expense (benefit) | 15 |  |  | 58 |  |  | (25) |
Deferred income tax expense (benefit): |  |  |  |  |
Federal | 95 |  |  | 164 |  |  | 67 |
State | (136) |  |  | 14 |  |  | 34 |
Total deferred expense (benefit) | (41) |  |  | 178 |  |  | 101 |
Total income tax expense (benefit) | $ | (26) |  |  | $ | 236 |  |  | $ | 76 |
A reconciliation of income tax expense (benefit) using the federal statutory income tax rate to the actual income tax expense and resulting effective income tax rate is as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
CenterPoint Energy - Continuing Operations (1) (2) (3) |  |  |  |  |
Income before income taxes | $ | 1,087 |  |  | $ | 1,417 |  |  | $ | 778 |
Federal statutory income tax rate | 21 | % |  | 21 | % |  | 21 | %
Expected federal income tax expense | 228 |  |  | 298 |  |  | 163 |
Increase (decrease) in tax expense resulting from: |  |  |  |  |
State income tax expense, net of federal income tax | 25 |  |  | 46 |  |  | 63 |
State valuation allowance, net of federal income tax | — |  |  | — |  |  | (15) |
State law change, net of federal income tax | (69) |  |  | — |  |  | (23) |
Equity AFUDC | (13) |  |  | (8) |  |  | (6) |
Excess deferred income tax amortization | (44) |  |  | (51) |  |  | (75) |
Goodwill impairment | — |  |  | 84 |  |  | — |
Sale of Energy Systems Group | 28 |  |  | — |  |  | — |
Other, net | 15 |  |  | (9) |  |  | 3 |
Total | (58) |  |  | 62 |  |  | (53) |
Total income tax expense | $ | 170 |  |  | $ | 360 |  |  | $ | 110 |
Effective tax rate | 16 | % |  | 25 | % |  | 14 | %
CenterPoint Energy - Discontinued Operations (4) |  |  |  |  |
Income before income taxes | $ | — |  |  | $ | — |  |  | $ | 1,019 |
Federal statutory income tax rate | — | % |  | — | % |  | 21 | %
Expected federal income tax expense | — |  |  | — |  |  | 214 |
Increase (decrease) in tax expense resulting from: |  |  |  |  |
State income tax expense, net of federal income tax | — |  |  | — |  |  | 14 |
State law change, net of federal income tax | — |  |  | — |  |  | (27) |
Total | — |  |  | — |  |  | (13) |
Total income tax expense | $ | — |  |  | $ | — |  |  | $ | 201 |
Effective tax rate | — | % |  | — | % |  | 20 | %
Houston Electric (5) (6) (7) |  |  |  |  |
Income before income taxes | $ | 761 |  |  | $ | 635 |  |  | $ | 457 |
Federal statutory income tax rate | 21 | % |  | 21 | % |  | 21 | %
Expected federal income tax expense | 160 |  |  | 133 |  |  | 96 |
Increase (decrease) in tax expense resulting from: |  |  |  |  |
State income tax expense, net of federal income tax | 27 |  |  | 13 |  |  | 18 |
Excess deferred income tax amortization | (17) |  |  | (18) |  |  | (41) |
Other, net | (2) |  |  | (3) |  |  | 3 |
Total | 8 |  |  | (8) |  |  | (20) |
Total income tax expense | $ | 168 |  |  | $ | 125 |  |  | $ | 76 |
Effective tax rate | 22 | % |  | 20 | % |  | 17 | %
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
CERC - Continuing Operations (8) (9) (10) |  |  |
Income before income taxes | $ | 486 |  |  | $ | 961 |  |  | $ | 466 |
Federal statutory income tax rate | 21 | % |  | 21 | % |  | 21 | %
Expected federal income tax expense | 102 |  |  | 202 |  |  | 98 |
Increase (decrease) in tax expense resulting from: |  |  |  |  |
State income tax expense, net of federal income tax | (40) |  |  | 35 |  |  | 31 |
State law change, net of federal income tax | (66) |  |  | — |  |  | (9) |
State valuation allowance, net of federal income tax | — |  |  | — |  |  | (15) |
Goodwill impairment | — |  |  | 30 |  |  | — |
Excess deferred income tax amortization | (23) |  |  | (28) |  |  | (30) |
Other, net | 1 |  |  | (3) |  |  | 1 |
Total | (128) |  |  | 34 |  |  | (22) |
Total income tax expense (benefit) | $ | (26) |  |  | $ | 236 |  |  | $ | 76 |
Effective tax rate | (5) | % |  | 25 | % |  | 16 | %
(1)Recognized a $69 million benefit for the impact of state apportionment changes that resulted in the remeasurement of state deferred taxes of the unitary group, a $44 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, a $13 million benefit for the impact of AFUDC equity, and a $28 million expense for the gain on the Energy Systems Group sale. (2)Recognized a $51 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, an $8 million benefit for the impact of AFUDC equity, and a $84 million expense for the goodwill impairment on the Arkansas and Oklahoma Natural Gas business sale. (3)Recognized a $75 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, a $23 million benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions, a $6 million benefit for the impact of AFUDC equity, and a $15 million benefit for the impact of a change in the NOL carryforward period in Louisiana from 20 years to an indefinite period allowing for the release of the valuation allowance on certain Louisiana NOLs. (4)Recognized a $27 million benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions. (5)Recognized a $17 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions. (6)Recognized a $18 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions. (7)Recognized a $41 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions. (8)Recognized a $66 million benefit for the impact of state apportionment changes that resulted in the remeasurement of state deferred taxes of the unitary group, and a $23 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions. (9)Recognized a $28 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, and a $30 million expense for the goodwill impairment on the Arkansas and Oklahoma Natural Gas business sale. (10)Recognized a $9 million benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions, a $30 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, and a $15 million benefit for the impact of a change in the NOL carryforward period in Louisiana from 20 years to an indefinite period allowing for the release of the valuation allowance on certain Louisiana NOLs. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:
| December 31,
| 2023 |  | 2022
| (in millions)
CenterPoint Energy |  |  |
Deferred tax assets: |  |  |
Benefits and compensation | $ | 131 |  |  | $ | 121 |
Regulatory liabilities | 365 |  |  | 378 |
Loss and credit carryforwards | 76 |  |  | 84 |
Asset retirement obligations | 96 |  |  | 95 |
Other | 124 |  |  | 49 |
Valuation allowance | (10) |  |  | (10) |
Total deferred tax assets | 782 |  |  | 717 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | 3,580 |  |  | 3,228 |
Regulatory assets | 401 |  |  | 601 |
Investment in ZENS and equity securities related to ZENS | 788 |  |  | 722 |
Other | 92 |  |  | 152 |
Total deferred tax liabilities | 4,861 |  |  | 4,703 |
Net deferred tax liabilities | $ | 4,079 |  |  | $ | 3,986 |
Houston Electric |  |  |
Deferred tax assets: |  |  |
Benefits and compensation | $ | 10 |  |  | $ | 10 |
Regulatory liabilities | 176 |  |  | 184 |
Asset retirement obligations | 6 |  |  | 6 |
Other | 18 |  |  | 13 |
Total deferred tax assets | 210 |  |  | 213 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | 1,497 |  |  | 1,330 |
Regulatory assets | 119 |  |  | 112 |
Total deferred tax liabilities | 1,616 |  |  | 1,442 |
Net deferred tax liabilities | $ | 1,406 |  |  | $ | 1,229 |
CERC |  |  |
Deferred tax assets: |  |  |
Benefits and compensation | $ | 21 |  |  | $ | 9 |
Regulatory liabilities | 145 |  |  | 151 |
Loss and credit carryforwards | 276 |  |  | 466 |
Asset retirement obligations | 86 |  |  | 86 |
Other | 65 |  |  | 25 |
Total deferred tax assets | 593 |  |  | 737 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | 1,602 |  |  | 1,427 |
Regulatory assets | 171 |  |  | 381 |
Other | 66 |  |  | 191 |
Total deferred tax liabilities | 1,839 |  |  | 1,999 |
Net deferred tax liabilities | $ | 1,246 |  |  | $ | 1,262 |
Tax Attribute Carryforwards and Valuation Allowance. CenterPoint Energy has no federal NOL carryforwards and no federal charitable contribution carryforwards as of December 31, 2023. As of December 31, 2023, CenterPoint Energy had $1 billion of state NOL carryforwards that expire between 2024 and 2042, and $2 million of state tax credits, net of valuation allowance, which do not expire. CenterPoint Energy reported a valuation allowance against certain state NOL and credit carryforwards because it is more likely than not that the benefit will not be realized. CERC has $931 million of federal NOL carryforwards which have an indefinite carryforward period. CERC has $657 million of gross state NOL carryforwards which expire between 2024 and 2042, and $2 million of state tax credits, net of valuation allowance, which do not expire. A reconciliation of CenterPoint Energy’s beginning and ending balance of unrecognized tax benefits, excluding interest and penalties, for 2023 and 2022 are as follows:
| Year Ended December 31,
| 2023 |  | 2022
| (in millions)
Balance, beginning of year | $ | 26 |  |  | $ | 3 |
Increases related to tax positions of prior years | — |  |  | 26 |
Decreases related to tax positions of prior years | — |  |  | (3) |
Lapse of statute of limitations | (1) |  |  | — |
Balance, end of year | $ | 25 |  |  | $ | 26 |
CenterPoint Energy’s net unrecognized tax benefits, including penalties and interest, were $29 million as of December 31, 2023 and are included in other non-current liabilities in the Consolidated Financial Statements. Included in the balance of uncertain tax positions as of December 31, 2023 are $25 million of tax benefits that, if recognized, would affect the effective tax rate. The Registrants recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. The above table does not include $4 million of accrued penalties and interest as of December 31, 2023. The Registrants believe that it is reasonably possible that there will be a $3 million decrease in unrecognized tax benefits, including penalties and interest, in the next 12 months as a result of a lapse of statutes on older exposures, a tax settlement, and/or a resolution of open audits. Tax Audits and Settlements. Tax years through 2018 and tax year 2021 have been audited and settled with the IRS for CenterPoint Energy. Tax years 2019-2020 remain open. For the 2019-2023 tax years, the Registrants are participants in the IRS’s Compliance Assurance Process. Vectren’s pre-Merger 2014-2019 tax years have been audited and settled with the IRS.

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