XML 48 R21.htm IDEA: XBRL DOCUMENT
v3.22.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Certain assets and liabilities are reported differently for income tax purposes than they are for financial statement purposes. The tax effect of these differences is recorded as deferred taxes. We calculate deferred taxes using currently enacted income tax rates. APS has recorded regulatory assets and regulatory liabilities related to income taxes on its Consolidated Balance Sheets in accordance with accounting guidance for regulated operations. The regulatory assets are for certain temporary differences, primarily the allowance for equity funds used during construction, investment tax credit (“ITC”) basis adjustment and tax expense of Medicare subsidy. The regulatory liabilities primarily relate to the change in income tax rates and deferred taxes resulting from ITCs. In accordance with regulatory requirements, APS ITCs are deferred and are amortized over the life of the related property with such amortization applied as a credit to reduce current income tax expense in the Statements of Income. Net income associated with the Palo Verde sale leaseback VIEs is not subject to tax. As a result, there is no income tax expense associated with the VIEs recorded on the Pinnacle West Consolidated and APS Consolidated Statements of Income. See Note 17 for additional details related to the Palo Verde sale leaseback VIEs. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, at the beginning and end of the year that are included in accrued taxes and unrecognized tax benefits (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Total unrecognized tax benefits, January 1 | $ | 45,086 |  |  | $ | 45,655 |  |  | $ | 43,435 |  |  | $ | 45,086 |  |  | $ | 45,655 |  |  | $ | 43,435 |
Additions for tax positions of the current year | 1,399 |  |  | 3,305 |  |  | 3,418 |  |  | 1,399 |  |  | 3,305 |  |  | 3,418 |
Additions for tax positions of prior years | 2,069 |  |  | 1,449 |  |  | 1,431 |  |  | 2,069 |  |  | 1,449 |  |  | 1,431 |
Reductions for tax positions of prior years for: |  |  |  |  |  |  |  |  |  |  |
Changes in judgment | (3,495) |  |  | (2,659) |  |  | (1,965) |  |  | (3,495) |  |  | (2,659) |  |  | (1,965) |
Settlements with taxing authorities | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Lapses of applicable statute of limitations | (1,962) |  |  | (2,664) |  |  | (664) |  |  | (1,962) |  |  | (2,664) |  |  | (664) |
Total unrecognized tax benefits, December 31 | $ | 43,097 |  |  | $ | 45,086 |  |  | $ | 45,655 |  |  | $ | 43,097 |  |  | $ | 45,086 |  |  | $ | 45,655 |
Included in the balances of unrecognized tax benefits are the following tax positions that, if recognized, would decrease our effective tax rate (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Tax positions, that if recognized, would decrease our effective tax rate | $ | 28,246 |  |  | $ | 26,300 |  |  | $ | 25,714 |  |  | $ | 28,246 |  |  | $ | 26,300 |  |  | $ | 25,714 |
As of the balance sheet date, the tax year ended December 31, 2019, and all subsequent tax years remain subject to examination by the IRS. With a few exceptions, we are no longer subject to state income tax examinations by tax authorities for years before 2018. We reflect interest and penalties, if any, on unrecognized tax benefits in the Pinnacle West Consolidated and APS Consolidated Statements of Income as income tax expense. The amount of interest expense or benefit recognized related to unrecognized tax benefits are as follows (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Unrecognized tax benefit interest expense/(benefit) recognized | $ | (139) |  |  | $ | (535) |  |  | $ | 266 |  |  | $ | (139) |  |  | $ | (535) |  |  | $ | 266 |
Following are the total amount of accrued liabilities for interest recognized related to unrecognized benefits that could reverse and decrease our effective tax rate to the extent matters are settled favorably (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Unrecognized tax benefit interest accrued | $ | 1,181 |  |  | $ | 1,320 |  |  | $ | 1,855 |  |  | $ | 1,181 |  |  | $ | 1,320 |  |  | $ | 1,855 |
Additionally, as of December 31, 2022, we have recognized less than $1 million of interest expense to be paid on the underpayment of income taxes for certain adjustments that we have filed, or will file, with the IRS. The components of income tax expense are as follows (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| Year Ended December 31, |  | Year Ended December 31,
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | 35,617 |  |  | $ | (5,041) |  |  | $ | 11,869 |  |  | $ | 103,349 |  |  | $ | 1,514 |  |  | $ | 57,299 |
State | 1,950 |  |  | 2,458 |  |  | 1,932 |  |  | 161 |  |  | (11) |  |  | 99 |
Total current | 37,567 |  |  | (2,583) |  |  | 13,801 |  |  | 103,510 |  |  | 1,503 |  |  | 57,398 |
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | 23,693 |  |  | 95,327 |  |  | 53,398 |  |  | (31,860) |  |  | 101,175 |  |  | 15,122 |
State | 13,567 |  |  | 17,342 |  |  | 10,974 |  |  | 19,150 |  |  | 22,875 |  |  | 16,244 |
Total deferred | 37,260 |  |  | 112,669 |  |  | 64,372 |  |  | (12,710) |  |  | 124,050 |  |  | 31,366 |
Income tax expense/(benefit) | $ | 74,827 |  |  | $ | 110,086 |  |  | $ | 78,173 |  |  | $ | 90,800 |  |  | $ | 125,553 |  |  | $ | 88,764 |
The following chart compares pretax income at the 21% statutory federal income tax rate to income tax expense (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| Year Ended December 31, |  | Year Ended December 31,
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Federal income tax expense at statutory rate | $ | 120,887 |  |  | $ | 156,666 |  |  | $ | 136,127 |  |  | $ | 132,920 |  |  | $ | 162,762 |  |  | $ | 142,020 |
Increases (reductions) in tax expense resulting from: |  |  |  |  |  |  |  |  |  |  |
State income tax net of federal income tax benefit | 17,740 |  |  | 22,656 |  |  | 19,146 |  |  | 19,000 |  |  | 23,339 |  |  | 20,124 |
State income tax credits net of federal income tax benefit | (5,482) |  |  | (7,015) |  |  | (8,951) |  |  | (3,744) |  |  | (5,277) |  |  | (7,213) |
Net operating loss carryback tax benefit | — |  |  | (5,915) |  |  | — |  |  | — |  |  | — |  |  | — |
Excess deferred income taxes — Tax Cuts and Jobs Act | (36,241) |  |  | (36,558) |  |  | (50,543) |  |  | (36,241) |  |  | (36,558) |  |  | (50,543) |
Allowance for equity funds used during construction (see Note 1) | (4,629) |  |  | (4,180) |  |  | (2,747) |  |  | (4,629) |  |  | (4,180) |  |  | (2,747) |
Palo Verde VIE noncontrolling interest (see Note 17) | (3,617) |  |  | (3,617) |  |  | (4,094) |  |  | (3,617) |  |  | (3,617) |  |  | (4,094) |
Investment tax credit amortization | (5,608) |  |  | (7,620) |  |  | (7,510) |  |  | (5,608) |  |  | (7,620) |  |  | (7,510) |
Other federal income tax credits | (10,867) |  |  | (6,976) |  |  | (4,616) |  |  | (7,721) |  |  | (3,912) |  |  | (3,035) |
Other | 2,644 |  |  | 2,645 |  |  | 1,361 |  |  | 440 |  |  | 616 |  |  | 1,762 |
Income tax expense/(benefit) | $ | 74,827 |  |  | $ | 110,086 |  |  | $ | 78,173 |  |  | $ | 90,800 |  |  | $ | 125,553 |  |  | $ | 88,764 |
The components of the net deferred income tax liability were as follows (dollars in thousands):
| Pinnacle West Consolidated |  | APS Consolidated
| December 31, |  | December 31,
| 2022 |  | 2021 |  | 2022 |  | 2021
DEFERRED TAX ASSETS |  |  |  |  |  |  |
Risk management activities | $ | 8,826 |  |  | $ | 677 |  |  | $ | 8,826 |  |  | $ | 677 |
Regulatory liabilities: |  |  |  |  |  |  |
Excess deferred income taxes — Tax Cuts and Jobs Act | 295,014 |  |  | 306,915 |  |  | 295,014 |  |  | 306,915 |
Asset retirement obligation and removal costs | 107,104 |  |  | 174,952 |  |  | 107,104 |  |  | 174,952 |
Unamortized investment tax credits | 48,035 |  |  | 49,601 |  |  | 48,035 |  |  | 49,601 |
Other postretirement benefits | 66,893 |  |  | 92,654 |  |  | 66,893 |  |  | 92,654 |
Other | 62,915 |  |  | 65,815 |  |  | 62,915 |  |  | 65,815 |
Operating lease liabilities | 184,030 |  |  | 204,890 |  |  | 182,663 |  |  | 204,378 |
Pension liabilities | 33,674 |  |  | 42,136 |  |  | 30,436 |  |  | 37,814 |
Coal reclamation liabilities | 44,312 |  |  | 43,165 |  |  | 44,312 |  |  | 43,165 |
Renewable energy incentives | 19,948 |  |  | 22,646 |  |  | 19,948 |  |  | 22,646 |
Credit and loss carryforwards | 37,647 |  |  | 57,077 |  |  | 13,654 |  |  | 18,902 |
Other | 72,605 |  |  | 74,184 |  |  | 72,605 |  |  | 74,184 |
Total deferred tax assets | 981,003 |  |  | 1,134,712 |  |  | 952,405 |  |  | 1,091,703 |
DEFERRED TAX LIABILITIES |  |  |  |  |  |  |
Plant-related | (2,518,164) |  |  | (2,570,613) |  |  | (2,518,164) |  |  | (2,570,613) |
Risk management activities | (32,648) |  |  | (27,276) |  |  | (32,648) |  |  | (27,276) |
Pension and other postretirement assets | (96,845) |  |  | (133,624) |  |  | (96,196) |  |  | (132,769) |
Other special use funds | (57,572) |  |  | (64,610) |  |  | (57,572) |  |  | (64,610) |
Operating lease right-of-use assets | (184,030) |  |  | (204,890) |  |  | (182,663) |  |  | (204,378) |
Regulatory assets: |  |  |  |  |  |  |
Allowance for equity funds used during construction | (44,405) |  |  | (42,616) |  |  | (44,405) |  |  | (42,616) |
Deferred fuel and purchased power | (114,232) |  |  | (96,033) |  |  | (114,232) |  |  | (96,033) |
Pension benefits | (157,629) |  |  | (126,010) |  |  | (157,629) |  |  | (126,010) |
Retired power plant costs | (24,397) |  |  | (28,389) |  |  | (24,397) |  |  | (28,389) |
Other | (103,023) |  |  | (123,902) |  |  | (103,023) |  |  | (123,902) |
Other | (32,479) |  |  | (28,611) |  |  | (7,123) |  |  | (6,808) |
Total deferred tax liabilities | (3,365,424) |  |  | (3,446,574) |  |  | (3,338,052) |  |  | (3,423,404) |
Deferred income taxes — net | $ | (2,384,421) |  |  | $ | (2,311,862) |  |  | $ | (2,385,647) |  |  | $ | (2,331,701) |
As of December 31, 2022, PNW consolidated deferred tax assets for credit and loss carryforwards relate to state credit carryforwards net of federal benefit of $43 million, which first begin to expire in 2024. PNW consolidated credit and loss carryforwards amount above has been reduced by $5 million of unrecognized tax benefits. As of December 31, 2022, APS consolidated deferred tax assets for credit and loss carryforwards relate to state credit carryforwards net of federal benefit of $19 million, which first begin to expire in 2025. APS consolidated credit and loss carryforwards amount above has been reduced by $5 million of unrecognized tax benefits.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration