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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Income Tax Expense. The components of income tax expense (benefit) were as follows: 
Year Ended December 31, (in millions)
202220212020
Income Taxes
Current
Federal$0.4 $(0.1)$0.2 
State7.3 6.0 11.7 
Total Current7.7 5.9 11.9 
Deferred
Federal181.0 99.2 (0.4)
State(23.0)13.8 (27.4)
Total Deferred158.0 113.0 (27.8)
Deferred Investment Credits(1.1)(1.1)(1.2)
Income Taxes$164.6 $117.8 $(17.1)
Statutory Rate Reconciliation. The following table represents a reconciliation of income tax expense at the statutory federal income tax rate to the actual income tax expense from continuing operations:
Year Ended December 31, (in millions)
202220212020
Book income (loss) before income taxes$956.4 $706.6 $(31.3)
Tax expense (benefit) at statutory federal income tax rate200.8 21.0 %148.3 21.0 %(6.6)21.0 %
Increases (reductions) in taxes resulting from:
State income taxes, net of federal income tax benefit4.5 0.5 14.1 2.0 (11.7)37.4 
Amortization of regulatory liabilities(38.5)(4.0)(39.1)(5.5)(38.4)122.7 
Fines and penalties0.3 — — — 11.8 (37.7)
Employee stock ownership plan dividends and other compensation(1.2)(0.1)(1.2)(0.2)(1.3)4.2 
Deferred taxes on TCJA regulatory liability divested— — — — 23.3 (74.5)
Tax accrual adjustments0.2 — (0.1)— 8.9 (28.4)
Federal tax credits(2.3)(0.2)(2.1)(0.3)(2.5)8.0 
Other adjustments0.8 — (2.1)(0.3)(0.6)1.9 
Income Taxes$164.6 17.2 %$117.8 16.7 %$(17.1)54.6 %
The difference in tax expense year-over-year has a relative impact on the effective tax rate proportional to pretax income or loss. The 0.5% increase in effective tax rate in 2022 versus 2021 was primarily due to decreased amortization of excess deferred income taxes, offset by the state jurisdictional mix of pre-tax income in 2022 tax effected at statutory tax rates, and the reduction of the Pennsylvania corporate income tax rate.
The 37.9% decrease in effective tax rate in 2021 versus 2020 was primarily the result of higher pre-tax income, state jurisdictional mix of pre-tax income in 2021 tax effected at statutory tax rates and increased amortization of excess deferred federal income taxes in 2021 compared to 2020. These items were offset by decreased deferred tax expense recognized on the sale of Columbia of Massachusetts' regulatory liability in 2020, established due to TCJA in 2017, that would have otherwise been recognized over the amortization period, 2020 non-deductible penalties and valuation allowance related to Columbia of Massachusetts and 2020 one-time tax accrual adjustments.
Net Deferred Income Tax Liability Components. Deferred income taxes result from temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The principal components of our net deferred tax liability were as follows:
At December 31, (in millions)
20222021
Deferred tax liabilities
Accelerated depreciation and other property differences$2,527.9 $2,454.4 
Other regulatory assets348.4 308.6 
Total Deferred Tax Liabilities2,876.3 2,763.0 
Deferred tax assets
Other regulatory liabilities and deferred investment tax credits (including TCJA)294.3 284.7 
Pension and other postretirement/postemployment benefits124.7 104.8 
Net operating loss carryforward and AMT credit carryforward491.0 545.9 
Environmental liabilities20.7 22.2 
Other accrued liabilities55.9 42.1 
Other, net43.0 111.7 
Total Deferred Tax Assets1,029.6 1,111.4 
Valuation Allowance(7.8)(7.8)
Net Deferred Tax Assets1,021.8 1,103.6 
Net Deferred Tax Liabilities$1,854.5 $1,659.4 
At December 31, 2022, we have federal net operating loss carryforwards of $410.0 million (tax effected). The federal net operating loss carryforwards are available to offset taxable income and will begin to expire in 2036. We believe it is more likely than not that we will realize the benefit from the federal net operating loss carryforwards.
We also have $73.2 million (tax effected, net of federal benefit) of state net operating loss carryforwards. Depending on the jurisdiction in which the state net operating loss was generated, the carryforwards will begin to expire in 2028.
We believe it is more likely than not that a portion of the benefit from certain state NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $7.8 million (net) on the deferred tax assets related to sale of Massachusetts Business assets reflected in the state net operating loss carryforward presented above.
Unrecognized Tax Benefits. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
At December 31, 2022, (in millions)
202220212020
Opening Balance$21.7 $21.7 $23.2 
Gross decreases - tax positions in prior period— — (1.5)
Gross increases - current period tax positions— — — 
Ending Balance$21.7 $21.7 $21.7 
Offset for net operating loss carryforwards(21.7)(21.7)(21.7)
Balance, Less Net Operating Loss Carryforwards$— $— $— 
We present accrued interest on unrecognized tax benefits, accrued interest on other income tax liabilities and tax penalties in "Income Taxes" on our Statements of Consolidated Income (Loss). Interest expense recorded on unrecognized tax benefits and other income tax liabilities was immaterial for all periods presented. There were no accruals for penalties recorded in the Statements of Consolidated Income (Loss) for the years ended December 31, 2022, 2021 and 2020, and there were no balances for accrued penalties recorded on the Consolidated Balance Sheets as of December 31, 2022 and 2021.
We are subject to income taxation in the United States and various state jurisdictions, primarily Indiana, Pennsylvania, Kentucky, Massachusetts, Maryland and Virginia.
We participate in the IRS CAP, which provides the opportunity to resolve tax matters with the IRS before filing each year's consolidated federal income tax return. As of December 31, 2022, tax years through 2021 have been audited and are effectively closed to further assessment. The Company has transitioned to the Bridge Phase of the IRS CAP for the year ended December 31, 2022, which will remain open until an audit is completed or the statute of limitation expires.
The statute of limitations in each of the state jurisdictions in which we operate remains open between 3-4 years from the date the state income tax returns are filed. As of December 31, 2022, there were no state income tax audits in progress that would have a material impact on the consolidated financial statements.