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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | INCOME TAXES Income Tax Provision — The following table summarizes the expense for income taxes on continuing operations for the periods indicated (in millions):
December 31, |  | 2024 |  | 2023 |  | 2022
Federal: | Current | $ | 4 |  |  | $ | 9 |  |  | $ | 3 |
| Deferred | (220) |  |  | 15 |  |  | (18) |
State: | Current | 29 |  |  | 16 |  |  | 2 |
| Deferred | 23 |  |  | 30 |  |  | 1 |
Foreign: | Current | 249 |  |  | 289 |  |  | 256 |
| Deferred | (26) |  |  | (98) |  |  | 21 |
Total |  | $ | 59 |  |  | $ | 261 |  |  | $ | 265 |
Effective and Statutory Rate Reconciliation — The following table summarizes a reconciliation of the U.S. statutory federal income tax rate to the Company's effective tax rate as a percentage of income from continuing operations before taxes for the periods indicated:
December 31, | 2024 |  | 2023 |  | 2022
Statutory Federal tax rate | 21 | % |  | 21 | % |  | 21 | %
State taxes, net of Federal tax benefit | (2) | % |  | 87 | % |  | (1) | %
Taxes on foreign earnings | (10) | % |  | 14 | % |  | (42) | %
Valuation allowance | 52 | % |  | 83 | % |  | (10) | %
Uncertain tax positions | — | % |  | — | % |  | 7 | %
U.S. Investment Tax Credit | (31) | % |  | (70) | % |  | — | %
Noncontrolling interest in U.S. subsidiaries | 25 | % |  | 115 | % |  | — | %
Nondeductible goodwill impairments | — | % |  | 3 | % |  | (127) | %
U.S. capital loss | (41) | % |  | — | % |  | — | %
U.S. interest expense | (5) | % |  | — | % |  | — | %
Other—net | (2) | % |  | (2) | % |  | (5) | %
Effective tax rate | 7 | % |  | 251 | % |  | (157) | %
For 2024, the (31)% U.S. Investment Tax Credit relates to investment tax credits for renewables projects placed in service this year. The (41)% U.S. capital loss relates to capital losses associated with the restructuring of a foreign holding company, which is offset in part by valuation allowance of approximately $304 million. The associated state impact is included in the (2)% state taxes, net of Federal tax benefit and is offset by valuation allowance of $74 million. Further, included in the (10)% taxes on foreign earnings is approximately $42 million of income tax benefit for the tax over book investment basis difference related to Ventanas. For 2023, included in the 14% taxes on foreign earnings are inflationary and foreign currency benefits at our Argentine businesses. Further, the Company recorded tax expense associated with the change in realizability of deferred tax assets at certain of those Argentine businesses, which is included in the 83% valuation allowance item. The (70)% U.S. Investment Tax Credit relates to investment tax credits for renewables projects placed in service in 2023. Not included in the 2023 effective tax rate is $28 million of income tax expense recorded to additional paid-in capital resulting from the Company's sales of a 20% ownership interest in AES Dominicana and a 35% ownership interest in Colon. See Note 18—Equity for details of the sales. For 2022, included in the (42)% taxes on foreign earnings is the impact of favorable LNG transactions at the Energy Infrastructure SBU and inflation and foreign currency impacts at certain Argentine businesses. The (127)% nondeductible goodwill impairments relates to the impairments at AES Andes and AES El Salvador. Not included in the 2022 effective tax rate is $27 million of income tax expense recorded to additional paid-in capital related to the Company's sale of a 14.9% ownership interest in the Southland Energy assets. See Note 18—Equity for details of the sale. Income Tax Receivables and Payables — The current income taxes receivable and payable are included in Other current assets and Accrued and other liabilities, respectively, on the accompanying Consolidated Balance Sheets. The noncurrent income taxes receivable and payable are included in Other noncurrent assets and Other noncurrent liabilities, respectively, on the accompanying Consolidated Balance Sheets. The following table summarizes the income taxes receivable and payable as of the periods indicated (in millions):
December 31, |  | 2024 |  | 2023
Income taxes receivable—current |  | $ | 85 |  |  | $ | 95 |
Income taxes receivable—noncurrent |  | 32 |  |  | 41 |
Total income taxes receivable |  | $ | 117 |  |  | $ | 136 |
Income taxes payable—current |  | $ | 71 |  |  | $ | 103 |
Income taxes payable—noncurrent |  | — |  |  | — |
Total income taxes payable |  | $ | 71 |  |  | $ | 103 |
Deferred Income Taxes — Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (b) operating loss and tax credit carryforwards. These items are stated at the enacted tax rates that are expected to be in effect when taxes are actually paid or recovered. As of December 31, 2024, the Company had federal net operating loss carryforwards for tax return purposes of approximately $589 million, which carry forward indefinitely. The Company also had capital loss carryforwards of approximately $1.7 billion, which expire in 2029. Further, the Company had federal general business tax credit carryforwards of approximately $54 million, which expire in 2040 and beyond. The Company had state net operating loss carryforwards as of December 31, 2024 of approximately $4.7 billion expiring primarily in years 2025 to 2044. As of December 31, 2024, the Company had foreign net operating loss carryforwards of approximately $2.4 billion that expire at various times beginning in 2025 and some of which carry forward without expiration. Valuation allowances increased $241 million during 2024 to $913 million at December 31, 2024. This net increase was primarily due to valuation allowance resulting from current period U.S. capital losses associated with the restructuring of a foreign holding company, partially offset by valuation allowance change related to the sale of AES Brasil. Valuation allowances increased $95 million during 2023 to $672 million at December 31, 2023. This net increase was primarily due to valuation allowance established at acquisition of a Chilean subsidiary, as well as changes in realizability of deferred tax assets at certain Argentine subsidiaries. The Company believes that it is more likely than not that the net deferred tax assets as shown below will be realized when future taxable income is generated through the reversal of existing taxable temporary differences and income that is expected to be generated by businesses that have long-term contracts or a history of generating taxable income. The following table summarizes deferred tax assets and liabilities, as of the periods indicated (in millions):
December 31, |  | 2024 |  | 2023
Differences between book and tax basis of property |  | $ | (1,104) |  |  | $ | (966) |
Investment in U.S. tax partnerships |  | (785) |  |  | (578) |
Other taxable temporary differences |  | (438) |  |  | (403) |
Total deferred tax liability |  | (2,327) |  |  | (1,947) |
Operating loss carryforwards |  | 933 |  |  | 1,132 |
Capital loss carryforwards |  | 501 |  |  | 65 |
Bad debt and other book provisions |  | 91 |  |  | 92 |
Tax credit carryforwards |  | 48 |  |  | 72 |
Other deductible temporary differences |  | 542 |  |  | 409 |
Total gross deferred tax asset |  | 2,115 |  |  | 1,770 |
Less: Valuation allowance |  | (913) |  |  | (672) |
Total net deferred tax asset |  | 1,202 |  |  | 1,098 |
Net deferred tax liability |  | $ | (1,125) |  |  | $ | (849) |
The Company considers undistributed earnings of certain foreign subsidiaries to be indefinitely reinvested outside of the U.S. No taxes have been recorded with respect to our indefinitely reinvested earnings in accordance with the relevant accounting guidance for income taxes. Should the earnings be remitted as dividends, the Company may be subject to additional foreign withholding and state income taxes. Under the TCJA, future distributions from foreign subsidiaries will generally be subject to a federal dividends received deduction in the U.S. As of December 31, 2024, the cumulative amount of U.S. GAAP foreign un-remitted earnings upon which additional income taxes have not been provided is approximately $1 billion. It is not practicable to estimate the amount of any additional taxes which may be payable on the undistributed earnings. Income from operations in certain countries is subject to reduced tax rates as a result of satisfying specific commitments regarding employment and capital investment. The Company's income tax benefits related to the tax status of these operations are estimated to be $28 million, $19 million and $27 million for the years ended December 31, 2024, 2023 and 2022, respectively. The per share effect of these benefits after noncontrolling interests was $0.03, $0.02 and $0.02 for each of the years ended December 31, 2024, 2023 and 2022, respectively. Included in the Company's income tax benefits is the benefit related to our operations in Vietnam, which is estimated to be $14 million, $16 million and $18 million for the years ended December 31, 2024, 2023 and 2022, respectively. The per share effect of these benefits related to our operations in Vietnam after noncontrolling interest was $0.01 for each of the years ended December 31, 2024, 2023 and 2022. The following table shows the income (loss) from continuing operations, before income taxes, net equity in earnings of affiliates and noncontrolling interests, for the periods indicated (in millions):
December 31, |  | 2024 |  | 2023 |  | 2022
U.S. |  | $ | (264) |  |  | $ | (238) |  |  | $ | 22 |
Non-U.S. |  | 1,158 |  |  | 342 |  |  | (191) |
Total |  | $ | 894 |  |  | $ | 104 |  |  | $ | (169) |
Uncertain Tax Positions — Uncertain tax positions have been classified as noncurrent income tax liabilities unless they are expected to be paid within one year. The Company's policy for interest and penalties related to income tax exposures is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations. The following table shows the total amount of gross accrued income taxes related to interest and penalties included in the Consolidated Balance Sheets for the periods indicated (in millions):
December 31, |  | 2024 |  | 2023
Interest related |  | $ | 2 |  |  | $ | 2 |
Penalties related |  | — |  |  | — |
The following table shows the expense/(benefit) related to interest and penalties on unrecognized tax benefits for the periods indicated (in millions):
December 31, |  | 2024 |  | 2023 |  | 2022
Total benefit for interest related to unrecognized tax benefits |  | $ | — |  |  | $ | — |  |  | $ | — |
Total expense for penalties related to unrecognized tax benefits |  | — |  |  | — |  |  | — |
We are potentially subject to income tax audits in numerous jurisdictions in the U.S. and internationally until the applicable statute of limitations expires. Tax audits by their nature are often complex and can require several years to complete. The following is a summary of tax years potentially subject to examination in the significant tax and business jurisdictions in which we operate:
Jurisdiction |  | Tax Years Subject to Examination
Argentina |  | 2018 - 2024
Brazil |  | 2018 - 2024
Chile |  | 2021 - 2024
Colombia |  | 2018 - 2024
Dominican Republic |  | 2021 - 2024
El Salvador |  | 2021 - 2024
Netherlands |  | 2018 - 2024
Panama |  | 2021 - 2024
United States (Federal) |  | 2021 - 2024
As of December 31, 2024, 2023 and 2022, the total amount of unrecognized tax benefits was $108 million, $107 million and $107 million, respectively. The total amount of unrecognized tax benefits that would benefit the effective tax rate as of December 31, 2024, 2023 and 2022 is $108 million, $107 million and $107 million, respectively, of which $1 million, $1 million, and $2 million, respectively, would be in the form of tax attributes that would warrant a full valuation allowance. Further, the total amount of unrecognized tax benefit that would benefit the effective tax rate as of 2024 would be reduced by approximately $34 million of tax expense related to remeasurement from 35% to 21%. The total amount of unrecognized tax benefits anticipated to result in a net increase to unrecognized tax benefits within 12 months of December 31, 2024 is estimated to be between zero and $10 million, primarily as a result of ongoing audits, including potential tax exam resolutions. The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the periods indicated (in millions):
|  | 2024 |  | 2023 |  | 2022
Balance at January 1 |  | $ | 107 |  |  | $ | 107 |  |  | $ | 122 |
Additions for current year tax positions |  | — |  |  | 1 |  |  | 4 |
Additions for tax positions of prior years |  | 2 |  |  | — |  |  | — |
Reductions for tax positions of prior years |  | — |  |  | (1) |  |  | (16) |
Settlements |  | — |  |  | — |  |  | (3) |
Lapse of statute of limitations |  | (1) |  |  | — |  |  | — |
Balance at December 31 |  | $ | 108 |  |  | $ | 107 |  |  | $ | 107 |
The Company and certain of its subsidiaries are currently under examination by the relevant taxing authorities for various tax years. The Company regularly assesses the potential outcome of these examinations in each of the taxing jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe we have appropriately accrued for our uncertain tax benefits. However, audit outcomes and the timing of audit settlements and future events that would impact our previously recorded unrecognized tax benefits and the range of anticipated increases or decreases in unrecognized tax benefits are subject to significant uncertainty. It is possible that the ultimate outcome of current or future examinations may exceed our provision for current unrecognized tax benefits in amounts that could be material, but cannot be estimated as of December 31, 2024. Our effective tax rate and net income in any given future period could therefore be materially impacted.

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