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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Significant Accounting Policy – Accounting for Income Taxes
We record the effect of income taxes in accordance with GAAP, which provides for the use of an asset and liability approach. Deferred income tax assets and liabilities are recognized for temporary differences between the basis of assets and liabilities for financial reporting and tax purposes and measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities as a result of changes in the enacted tax rates is recognized in earnings in the period of enactment. Our recognition of deferred tax assets is based upon a more-likely-than-not criterion. We routinely assess realizability based on objectively-weighted, available positive and negative evidence.
We account for uncertainties in income taxes using a benefit recognition model with a two-step approach: a more-likely-than-not recognition criterion, and a measurement attribute that measures the position as the largest amount of tax benefit that is greater than a 50% likelihood of being realized upon ultimate settlement. If the benefit does not meet the more likely than not criteria for being sustained on its technical merits, no benefit will be recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold.
The Separation – Tax Considerations
For period prior to the Separation, discussed at Note 1, "Description of the Business and Basis of Presentation", the income tax provision has been presented on a stand-alone basis as if we filed separate federal, state, local, and foreign income tax returns, referred to as the separate return method.
Tax Legislation
On July 8, 2022, the Commonwealth of Pennsylvania enacted House Bill (H.B.) 1342 which includes a corporate income tax rate reduction from 9.99% to 4.99% that will phase-in over a nine-year period.
Our total Income Tax Expense varied from the statutory federal income tax rate for the following reasons:
Year Ended December 31,
202320222021
(millions)
Income Before Income Taxes$500$482$422
Income tax expense at statutory rate10510189
State and local income taxes, net of federal benefit182417
State tax rate changes(18)(25)(3)
Other, net(1)—1
Income Tax Expense $104$100$104
Effective income tax rate20.9 %20.7 %24.7 %
Our 2023 effective tax rate includes the impact of state tax rate changes of an $18 million benefit driven by changes in tax status and updates to state apportionment which were completed in 2023 as a part of ongoing corporate tax structuring, simplification initiatives, and initial post-separation full-year tax return filings.
Our 2022 effective tax rate includes the impact of state tax rate changes of a $25 million benefit driven by the Pennsylvania legislative changes.
Components of Income Tax Expense were as follows:
Year Ended December 31,
202320222021
(millions)
Current income tax expense
Federal$(4)$16 $1 
State and other income tax (2)14 (1)
Total current income taxes(6)30 — 
Deferred income tax expense
Federal109 86 85 
State and other income tax 1 (16)19 
Total deferred income tax110 70 104 
$104 $100 $104 
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts in our Consolidated Financial Statements. We believe it is more likely than not that we will generate sufficient taxable income in future periods to realize our deferred tax assets.
Deferred tax assets (liabilities) were comprised of the following:
December 31,
20232022
(millions)
Deferred income tax balance components
Property, plant, and equipment$(369)$(336)
Federal net operating loss carry-forward184 129 
State and local net operating loss carry-forward, net of federal102 79 
Investment in equity method investees and partnerships(979)(811)
Other31 16 
Net deferred income tax asset / (liability)$(1,031)$(923)
Total deferred income tax assets and liabilities
Deferred income tax assets$319 $234 
Deferred income tax liabilities(1,350)(1,157)
Net deferred income tax asset / (liability)$(1,031)$(923)
We have recorded a deferred tax asset related to a federal net operating loss carry-forward of $184 million as of December 31, 2023. U.S. federal net operating losses will be available to be carried forward indefinitely and available to offset 80% of taxable income in future years.
We have recorded state and local deferred tax assets related to net operating loss carry-forwards of $102 million as of December 31, 2023. Of which, $97 million of the state and local net operating loss carry-forwards can be carried indefinitely and $5 million will expire from 2033 through 2042 and are available to offset varying amounts of taxable income in future years.
Uncertain Tax Positions
As of December 31, 2023 and 2022, we did not have any unrecognized tax benefits.
For periods prior to the Separation, we were a member of the consolidated tax return of DTE Energy. As of December 31, 2023, DTE Energy did not have any open tax years subject to examination by the Internal Revenue Service (IRS) for which DT Midstream is a member. DTE Energy also files in multiple states, the statutes of which are open to examination for various periods.
For periods after the Separation, our income tax returns remain subject to examination by federal, state, and local taxing jurisdiction