XML 39 R21.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
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.