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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Taxes [Abstract] |
Income Taxes | 11. INCOME TAXES The income tax provision, for the years ended December 31, differs from that computed using the enacted combined Canadian federal and provincial statutory income tax rate for the following reasons: millions of dollars 2024 2023 Income before provision for income taxes $ 409 $ 1,173 Statutory income tax rate 29.0% 29.0% Income taxes, at statutory income tax rate 119 340 Deferred income taxes on regulated income recorded as regulatory assets and regulatory liabilities (90) (72) Interest and financing expenses (58) - Valuation allowance (58) 3 Tax credits (57) (53) Goodwill impairment charge 49 - Amortization of deferred income tax regulatory liabilities (36) (33) Foreign tax rate variance (31) (36) Additional impact from the sale of LIL equity interest 22 - Tax effect of equity earnings (14) (15) Manufacturing allowance (9) (8) Other 4 2 Income tax (recovery) expense $ (159) $ 128 Effective income tax rate (39%) 11% Bahamian Domestic Minimum Top -up Tax Act (“Domestic Top -up Tax Act”): On November 28, 2024, the Domestic Top -up Tax Act was enacted with an effective date of January 1, 2024.The Domestic Top -up Tax Act did not have an impact on the Company. Excessive Interest and Financing Expenses Limitation (“EIFEL”) Regime: On June 20, 2024, Bill C-59, an Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023, and certain provisions of the budget tabled in Parliament on March 28, 2023, was enacted. Bill C-59 includes the EIFEL regime, which is effective January 1, 2024. EIFEL applies to limit a company’s net interest and financing expense deduction to no more than 30 per cent of earnings before interest, income taxes, depreciation, and amortization for tax purposes. Any denied interest and financing expenses under the EIFEL regime can be carried forward indefinitely. During 2024, the Company incurred $ 185 million of interest and financing expenses in connection with a specific financing structure. The interest and financing expenses related to the financing structure as well as $ 88 million of other interest and financing expenses are expected to be denied under the EIFEL regime. It was determined that the Company is more likely than not to realize the tax benefit of the denied interest and financing expenses in future periods and therefore a $ 79 million deferred income tax asset has been recorded as at December 31, 2024. In Q4 2024, the Company recognized a $ 58 million tax benefit related to the denied interest and financing expenses and the reversal of the related deferred income tax liability in connection with the financing structure and its wind-up. Canadian Global Minimum Tax Act (“GMTA”): On June 20, 2024, the GMTA was enacted with an effective date of January 1, 2024. The GMTA did not have an impact on the Company. Barbados Domestic Tax Rate Change: On May 24, 2024, the Government of Barbados signed the Income Tax (Amendment and Validation) Act into law. The legislation, effective January 1, 2024, implemented a corporate income tax rate of 9 per cent, requiring BLPC to remeasure its deferred income tax liabilities. Barbados Corporation Top -up Tax (Amendment) Act (“Top -up Tax Act”): On May 24, 2024, the Top -up Tax Act was enacted with an effective date of January 1, 2024. The Top -up Tax Act did not have an impact on the Company . United States Inflation Reduction Act (“IRA”): On August 16, 2022, the IRA was signed into legislation. The IRA includes numerous tax incentives for clean energy, such as the extension and modification of existing investment and production tax credits for projects placed in service through 2024, and introduces new technology-neutral clean energy related tax credits beginning in 2025. As of December 31, 2024, the Company has recorded a $ 82 million (December 31, 2023 – $ 30 million) regulatory liability on the Consolidated Balance Sheets in recognition of its obligation to pass the incremental tax benefits realized to customers. The following table reflects the composition of taxes on income from continuing operations presented in the Consolidated Statements of Income for the years ended December 31: millions of dollars 2024 2023 Current income taxes Canada $ 29 $ 26 United States 4 5 Deferred income taxes Canada (200) 93 United States 155 128 Adjustments to beginning of the year valuation allowance Canada (61) - Investment tax credits United States (6) (29) Operating loss carryforwards Canada (4) (93) United States (76) (2) Income tax (recovery) expense $ (159) $ 128 The following table reflects the composition of income before provision for income taxes presented in the Consolidated Statements of Income for the years ended December 31: millions of dollars 2024 2023 Canada $ 156 $ 171 United States 203 964 Other 50 38 Income before provision for income taxes $ 409 $ 1,173 The deferred income tax assets and liabilities presented in the Consolidated Balance Sheets as at December 31 consisted of the following: millions of dollars 2024 2023 Deferred income tax assets: Tax loss carryforwards $ 1,118 $ 1,195 Tax credit carryforwards 534 454 Regulatory liabilities 225 175 Derivative instruments 144 205 Other 462 372 Total deferred income tax assets before valuation allowance 2,483 2,401 Valuation allowance (322) (363) Total deferred income tax assets after valuation allowance $ 2,161 $ 2,038 Deferred income tax liabilities: PP&E $ (3,421) $ (3,223) Regulatory assets (198) (196) Derivative instruments (105) (235) Investments subject to significant influence (46) (216) Other (330) (312) Total deferred income tax liabilities $ (4,100) $ (4,182) Consolidated Balance Sheets presentation: Long-term deferred income tax assets $ 392 $ 208 Long-term deferred income tax liabilities (2,331) (2,352) Net deferred income tax liabilities $ (1,939) $ (2,144) Considering all evidence regarding the utilization of the Company’s deferred income tax assets, it has been determined that Emera is more likely than not to realize all recorded deferred income tax assets, except for certain loss carryforwards and unrealized capital losses on long-term debt and investments. A valuation allowance of $ 322 million has been recorded as at December 31, 2024 (2023 – $ 363 million) related to the loss carryforwards, long-term debt and investments. During 2024, the Company recognized a $ 58 million tax benefit primarily due to the utilization of certain loss carryforwards, which were subject to a valuation allowance as at December 31, 2023. The Company intends to indefinitely reinvest earnings from certain foreign operations. Accordingly, $ 4.7 billion as at December 31, 2024 (2023 – $ 4.7 billion) in cumulative temporary differences for which deferred taxes might otherwise be required, have not been recognized. It is impractical to estimate the amount of income and withholding tax that might be payable if a reversal of temporary differences occurred. Emera’s NOL, capital loss and tax credit carryforwards and their expiration periods as at December 31, 2024 consisted of the following: Subject to Tax Valuation Net Tax Expiration millions of dollars Carryforwards Allowance Carryforwards Period Canada NOL $ 2,420 $ (967) $ 1,453 2026 - 2044 Capital loss 55 (55) - Indefinite Tax Credit 2 (1) 1 2028 - 2042 United States Federal NOL $ 1,587 $ (1) $ 1,586 2036 - Indefinite State NOL 1,351 (1) 1,350 2026 - Indefinite Tax credit 533 (3) 530 2025 - 2044 Other NOL $ 91 $ (23) $ 68 2025 - 2031 The following table provides details of the change in unrecognized tax benefits for the years ended December 31 as follows: millions of dollars 2024 2023 Balance, January 1 $ 37 $ 33 Increases due to tax positions related to current year 6 5 Increases due to tax positions related to a prior year 2 1 Decreases due to tax positions related to a prior year (3) (2) Balance, December 31 $ 42 $ 37 Unrecognized tax benefits relate to the timing of certain tax deductions at NSPI and research and development tax credits primarily at TEC. The total amount of unrecognized tax benefits as at December 31, 2024 was $ 42 million (2023 – $ 37 million), which would affect the effective tax rate if recognized. The total amount of accrued interest with respect to unrecognized tax benefits was $ 10 million (2023 – $ 9 million) with $ 1 million interest expense recognized in the Consolidated Statements of Income (2023 – $ 2 million). No penalties have been accrued. The balance of unrecognized tax benefits could change in the next 12 months as a result of resolving Canada Revenue Agency (“CRA”) and Internal Revenue Service audits. A reasonable estimate of any change cannot be made at this time. NSPI and the CRA are currently in a dispute with respect to the timing of certain tax deductions for its 2006 through 2010 and 2013 through 2016 taxation years. The ultimate permissibility of the tax deductions is not in dispute; rather, it is the timing of those deductions. The cumulative net amount in dispute to date is $ 126 million (2023 – $ 126 million), including interest. NSPI has prepaid $ 55 million (2023 – $ 55 million) of the amount in dispute, as required by CRA. On November 29, 2019, NSPI filed a Notice of Appeal with the Tax Court of Canada with respect to its dispute of the 2006 through 2010 taxation years. Should NSPI be successful in defending its position, all payments including applicable interest will be refunded. If NSPI is unsuccessful in defending any portion of its position, the resulting taxes and applicable interest will be deducted from amounts previously paid, with the difference, if any, either owed to, or refunded from, the CRA. The related tax deductions will be available in subsequent years. Should NSPI be similarly reassessed by the CRA for years not currently in dispute, further payments will be required; however, the ultimate permissibility of these deductions would be similarly not in dispute. NSPI and its advisors believe that NSPI has reported its tax position appropriately. NSPI continues to assess its options to resolving the dispute; however, the outcome of the Notice of Appeal process is not determinable at this time. Emera files a Canadian federal income tax return, which includes its Nova Scotia provincial income tax. Emera’s subsidiaries file Canadian, US, Barbados, and St. Lucia income tax returns. As at December 31, 2024, the Company’s tax years still open to examination by taxing authorities include 2006 and subsequent years.

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