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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Judgment and the use of estimates are required in developing the provision for income taxes and reporting of tax-related assets and liabilities. The interpretation of tax laws and associated regulations involves uncertainty as taxing authorities may interpret the laws differently. NIPSCO’s historical business activities through the closing of the NIPSCO Minority Interest Transaction were included in the consolidated U.S. federal and certain state income tax returns of NiSource Inc. Historically, NIPSCO has been treated as a taxable division of its corporate parent, NiSource Inc., and then as a division of NIPSCO Holdings I effective April 13, 2023. In connection with the NIPSCO Minority Interest Transaction, NIPSCO Holdings I retained NIPSCO’s income tax balances and 80.1% of the excess deferred income tax regulatory balances as described below. NIPSCO Holdings I’s income tax balances are based on the difference between the financial statement amount and the tax basis of its investment in NIPSCO Holdings II. Income Tax Expense. The components of income tax expense (benefit) were as follows:
Year Ended December 31, (in millions) | 2023 |  | 2022 |  | 2021
Income Taxes |  |  |  |  |
Current |  |  |  |  |
Federal | $ | — |  |  | $ | 0.4 |  |  | $ | (0.1) |
State | 5.3 |  |  | 7.3 |  |  | 6.0 |
Total Current | 5.3 |  |  | 7.7 |  |  | 5.9 |
Deferred |  |  |  |  |
Federal |  |  |  |  |
Taxes before operating loss carryforwards and investment credits | 49.7 |  |  | 87.9 |  |  | 35.7 |
Tax utilization expense of operating loss carryforwards | 65.1 |  |  | 93.1 |  |  | 63.5 |
Investment tax credits | (2.1) |  |  | — |  |  | — |
State | 22.5 |  |  | (23.0) |  |  | 13.8 |
Total Deferred | 135.2 |  |  | 158.0 |  |  | 113.0 |
Deferred Investment Credits | (1.0) |  |  | (1.1) |  |  | (1.1) |
Income Taxes | $ | 139.5 |  |  | $ | 164.6 |  |  | $ | 117.8 |
In connection with the NIPSCO Minority Interest Transaction, NiSource recognized a $63.5 million income tax benefit in additional paid in capital related to 19.9% of NIPSCO’s excess deferred income taxes attributable to Blackstone’s noncontrolling interest. This benefit does not impact NIPSCO’s regulatory books or the excess deferred taxes that will benefit customers through lower future rates in accordance with applicable regulatory orders. See Note 4, "Noncontrolling Interest," for further discussion of the NIPSCO Minority Interest Transaction. 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) | 2023 |  | 2022 |  | 2021
Book income before income taxes | $ | 813.9 |  |  |  |  | $ | 956.4 |  |  |  |  | $ | 706.6 |  |  |
Tax expense at statutory federal income tax rate | 170.8 |  |  | 21.0 | % |  | 200.8 |  |  | 21.0 | % |  | 148.3 |  |  | 21.0 | %
Increases (reductions) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 13.7 |  |  | 1.7 |  |  | 4.5 |  |  | 0.5 |  |  | 14.1 |  |  | 2.0 |
Amortization of regulatory liabilities | (38.2) |  |  | (4.7) |  |  | (38.5) |  |  | (4.0) |  |  | (39.1) |  |  | (5.5) |
Fines and penalties | — |  |  | — |  |  | 0.3 |  |  | — |  |  | — |  |  | — |
Employee stock ownership plan dividends and other compensation | (1.3) |  |  | (0.2) |  |  | (1.2) |  |  | (0.1) |  |  | (1.2) |  |  | (0.2) |
Tax accrual adjustments | — |  |  | — |  |  | 0.2 |  |  | — |  |  | (0.1) |  |  | — |
Federal tax credits | (4.9) |  |  | (0.6) |  |  | (2.3) |  |  | (0.2) |  |  | (2.1) |  |  | (0.3) |
Other adjustments | (0.6) |  |  | (0.1) |  |  | 0.8 |  |  | — |  |  | (2.1) |  |  | (0.3) |
Income Taxes | $ | 139.5 |  |  | 17.1 | % |  | $ | 164.6 |  |  | 17.2 | % |  | $ | 117.8 |  |  | 16.7 | %
The difference in tax expense of $25.1 million in 2023 versus 2022 was primarily due to lower pre-tax income. The increase in tax expense of $46.8 million in 2022 versus 2021 was primarily due to increased pre-tax income, offset by the flow-through of the reduction of the Pennsylvania corporate income tax rate and the state jurisdictional mix tax effected at statutory rates. 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 liabilities were as follows:
At December 31, (in millions) | 2023 |  | 2022
Deferred tax liabilities |  |  |
Accelerated depreciation and other property differences | $ | 1,384.8 |  |  | $ | 2,473.6 |
Partnership basis differences | 1,241.9 |  |  | 54.3 |
Other regulatory assets | 212.1 |  |  | 348.4 |
Total Deferred Tax Liabilities | 2,838.8 |  |  | 2,876.3 |
Deferred tax assets |  |  |
Other regulatory liabilities and deferred investment tax credits (including TCJA) | 182.2 |  |  | 294.3 |
Pension and other postretirement/postemployment benefits | 58.6 |  |  | 124.7 |
Loss and credit carryforwards | 422.9 |  |  | 491.0 |
Environmental liabilities | 10.1 |  |  | 20.7 |
Other accrued liabilities | 40.3 |  |  | 55.9 |
Other, net | 50.7 |  |  | 43.0 |
Total Deferred Tax Assets | 764.8 |  |  | 1,029.6 |
Valuation Allowance | (6.4) |  |  | (7.8) |
Net Deferred Tax Assets | 758.4 |  |  | 1,021.8 |
Net Deferred Tax Liabilities | $ | 2,080.4 |  |  | $ | 1,854.5 |
In connection with closing the NIPSCO Minority Interest Transaction, NIPSCO’s deferred taxes were removed from its GAAP books and were reconstituted as deferred taxes on the outside basis difference of NiSource’s investment in NIPSCO Holdings II. These deferred taxes are reflected as partnership basis differences above. NiSource has the following deductible loss and credit carryforwards:
At December 31, 2023 (in millions) | Deductible Amount |  | Deferred Tax Asset |  | Valuation Allowance |  | Expiration Period
Federal losses | $ | 1,642.4 |  |  | $ | 344.9 |  |  | $ | — |  |  | 2037
Federal investment tax credits | — |  |  | 2.1 |  |  | — |  |  | 2043
Federal production tax credits | — |  |  | 0.8 |  |  | — |  |  | 2040-2043
Federal other credit | — |  |  | 15.7 |  |  | — |  |  | 2029-2043
State losses, net of federal benefit | 2,371.7 |  |  | 95.1 |  |  | (6.4) |  |  | 2031-2037
Total |  |  | $ | 458.6 |  |  | $ | (6.4) |  |  |
We believe it is not more likely than not that a portion of the benefit from certain state net operating loss carryforwards will be realized. We have recorded a valuation allowance of $6.4 million (net of federal benefit) 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, 2023, (in millions) | 2023 |  | 2022 |  | 2021
Opening Balance | $ | 21.7 |  |  | $ | 21.7 |  |  | $ | 21.7 |
Gross decreases - tax positions in prior period | — |  |  | — |  |  | — |
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 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, 2023, tax years through 2021 have been audited and are closed to further assessment. The Company has transitioned to the Bridge Phase of the IRS CAP for the year ended December 31, 2022 and participated in the Bridge Plus pilot program. Although NiSource has not received a final acceptance letter from the IRS for its 2022 return, no adjustments are expected, and the year is effectively closed to further assessment. 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, 2023, there were no state income tax audits in progress that would have a material impact on the consolidated financial statements. NiSource is obligated to report adjustments resulting from IRS audits or settlements to state taxing authorities. In addition, if NiSource utilizes net operating losses or tax credits generated in years for which the statute of limitations has expired, such amounts are generally subject to examination. On April 14, 2023, the IRS issued Revenue Procedure 2023-15 which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve linear property and non-linear natural gas transmission and distribution property must be capitalized as improvements or are allowable as deductions. The Company is planning to elect this change in tax accounting method with its 2023 consolidated tax return filing in the upcoming year and continues to analyze and quantify the provisions of the safe harbor method of accounting.

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