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Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Significant Accounting Policies [Line Items] |
Significant Accounting Policies | Significant Accounting Policies Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, NorthStar Clean Energy, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances. Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates. Cash and Cash Equivalents and Restricted Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less. Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars. These amounts are classified as current assets since they relate to payments that could or will occur within one year. Contingencies: CMS Energy and Consumers record estimated loss contingencies on their consolidated financial statements when it is probable that a loss has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. Unless regulatory accounting applies, CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed. Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings. Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers may enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons: •they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) •they qualify for the normal purchases and sales exception •they cannot be net settled due in part to the absence of an active market for the commodity Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives and changes in the fair value of FTRs are deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 5, Fair Value Measurements. EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards, forward equity sales, and convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method. Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 13, Earnings Per Share—CMS Energy. Impairment of Long-lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur that indicate the carrying amount of an asset may not be recoverable or that there has been a decline in value that may be other than temporary. CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses. CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary. Investment Tax Credits: CMS Energy and its subsidiaries use the flow-through method of accounting for investment tax credits. Under the flow-through method, the credit is recognized as a reduction to income tax expense when the related plant, property, and equipment is placed into service. For its regulated utility assets, Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment. Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets. CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets. CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value. MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements. Property Taxes: Property taxes are based on the taxable value of CMS Energy’s and Consumers’ real and personal property assessed by local taxing authorities. CMS Energy and Consumers record property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of CMS Energy’s and Consumers’ accrued property tax that will be recognized over future governmental fiscal periods. Other: For additional accounting policies, see: •Note 2, Regulatory Matters •Note 7, Plant, Property, and Equipment •Note 8, Leases •Note 9, Asset Retirement Obligations •Note 10, Retirement Benefits •Note 12, Income Taxes •Note 13, Earnings Per Share—CMS Energy •Note 14, Revenue •Note 18, Variable Interest Entities
Income Taxes | Income Taxes CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement. Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:
In Millions, Except Tax Rate
Years Ended December 31 |  | 2023 |  | 2022 | 2021
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  |  |  | $ | 954 |  |  |  |  | $ | 902 |  |  | $ | 823 |
Income tax expense at statutory rate |  |  |  | 200 |  |  |  |  | 189 |  |  | 173 |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect 1 |  |  |  | 31 |  |  |  |  | 51 |  |  | 39 |
Renewable energy tax credits |  |  |  | (58) |  |  |  |  | (51) |  |  | (44) |
TCJA excess deferred taxes 2 |  |  |  | (40) |  |  |  |  | (65) |  |  | (50) |
Taxes attributable to noncontrolling interests |  |  |  | 17 |  |  |  |  | 5 |  |  | 5 |
Accelerated flow-through of regulatory tax benefits 3 |  |  |  | — |  |  |  |  | (39) |  |  | (28) |
Other, net |  |  |  | (3) |  |  |  |  | 3 |  |  | — |
Income tax expense |  |  |  | $ | 147 |  |  |  |  | $ | 93 |  |  | $ | 95 |
Effective tax rate |  |  |  | 15.4 | % |  |  |  | 10.3 | % |  | 11.5 | %
Consumers |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  |  |  | $ | 1,028 |  |  |  |  | $ | 1,085 |  |  | $ | 1,024 |
Income tax expense at statutory rate |  |  |  | 216 |  |  |  |  | 228 |  |  | 215 |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect 1 |  |  |  | 36 |  |  |  |  | 59 |  |  | 54 |
Renewable energy tax credits |  |  |  | (46) |  |  |  |  | (46) |  |  | (37) |
TCJA excess deferred taxes 2 |  |  |  | (40) |  |  |  |  | (65) |  |  | (50) |
Accelerated flow-through of regulatory tax benefits 3 |  |  |  | — |  |  |  |  | (39) |  |  | (28) |
Other, net |  |  |  | (5) |  |  |  |  | 3 |  |  | 2 |
Income tax expense |  |  |  | $ | 161 |  |  |  |  | $ | 140 |  |  | $ | 156 |
Effective tax rate |  |  |  | 15.7 | % |  |  |  | 12.9 | % |  | 15.2 | %
1 CMS Energy initiated a plan to divest immaterial business activities in a non‑Michigan jurisdiction and will no longer have a taxable presence within that jurisdiction after 2023. As a result of these actions, CMS Energy reversed a $13 million non‑Michigan reserve, all of which was recognized at Consumers. 2 In 2020, the MPSC authorized Consumers to accelerate the amortization of the gas portion of its regulatory liability associated with unprotected, non-property-related excess deferred income taxes resulting from the TCJA. This portion of the regulatory liability was fully amortized in 2022. 3 In 2020, the MPSC authorized Consumers to accelerate the amortization of income tax benefits associated with the cost to remove gas plant assets. These tax benefits were fully amortized in 2022. Presented in the following table are the significant components of income tax expense on continuing operations:
In Millions
Years Ended December 31 | 2023 | 2022 | 2021
CMS Energy, including Consumers |  |  |  |  |  |
Current income taxes |  |  |  |  |  |
Federal |  | $ | 5 |  |  | $ | 6 |  |  | $ | (1) |
State and local |  | 1 |  |  | — |  |  | 1 |
|  | $ | 6 |  |  | $ | 6 |  |  | $ | — |
Deferred income taxes |  |  |  |  |  |
Federal |  | 107 |  |  | 4 |  |  | 49 |
State and local |  | 38 |  |  | 65 |  |  | 49 |
|  | $ | 145 |  |  | $ | 69 |  |  | $ | 98 |
Deferred income tax credit |  | (4) |  |  | 18 |  |  | (3) |
Tax expense |  | $ | 147 |  |  | $ | 93 |  |  | $ | 95 |
Consumers |  |  |  |  |  |
Current income taxes |  |  |  |  |  |
Federal |  | $ | 3 |  |  | $ | (2) |  |  | $ | (13) |
State and local |  | 2 |  |  | 8 |  |  | 15 |
|  | $ | 5 |  |  | $ | 6 |  |  | $ | 2 |
Deferred income taxes |  |  |  |  |  |
Federal |  | 117 |  |  | 50 |  |  | 103 |
State and local |  | 43 |  |  | 66 |  |  | 54 |
|  | $ | 160 |  |  | $ | 116 |  |  | $ | 157 |
Deferred income tax credit |  | (4) |  |  | 18 |  |  | (3) |
Tax expense |  | $ | 161 |  |  | $ | 140 |  |  | $ | 156 |
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
In Millions
December 31 | 2023 | 2022
CMS Energy, including Consumers |  |  |  |
Deferred income tax assets |  |  |  |
Tax loss and credit carryforwards |  | $ | 428 |  |  | $ | 385 |
Net regulatory tax liability |  | 305 |  |  | 318 |
Reserves and accruals |  | 28 |  |  | 35 |
Total deferred income tax assets |  | $ | 761 |  |  | $ | 738 |
Valuation allowance |  | (2) |  |  | (2) |
Total deferred income tax assets, net of valuation allowance |  | $ | 759 |  |  | $ | 736 |
Deferred income tax liabilities |  |  |  |
Plant, property, and equipment |  | $ | (2,520) |  |  | $ | (2,515) |
Employee benefits |  | (473) |  |  | (433) |
Gas inventory |  | (66) |  |  | (53) |
Securitized costs |  | (194) |  |  | (39) |
Other |  | (121) |  |  | (103) |
Total deferred income tax liabilities |  | $ | (3,374) |  |  | $ | (3,143) |
Total net deferred income tax liabilities |  | $ | (2,615) |  |  | $ | (2,407) |
Consumers |  |  |  |
Deferred income tax assets |  |  |  |
Net regulatory tax liability |  | $ | 305 |  |  | $ | 318 |
Tax loss and credit carryforwards |  | 175 |  |  | 145 |
Reserves and accruals |  | 27 |  |  | 28 |
Total deferred income tax assets |  | $ | 507 |  |  | $ | 491 |
Deferred income tax liabilities |  |  |  |
Plant, property, and equipment |  | $ | (2,498) |  |  | $ | (2,458) |
Employee benefits |  | (459) |  |  | (423) |
Gas inventory |  | (66) |  |  | (53) |
Securitized costs |  | (194) |  |  | (39) |
Other |  | (79) |  |  | (103) |
Total deferred income tax liabilities |  | $ | (3,296) |  |  | $ | (3,076) |
Total net deferred income tax liabilities |  | $ | (2,789) |  |  | $ | (2,585) |
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 on CMS Energy’s and Consumers’ consolidated financial statements. Presented in the following table are the tax loss and credit carryforwards at December 31, 2023:
In Millions
|  | Tax Attribute | Expiration
CMS Energy, including Consumers |  |  |  |  |
State net operating loss carryforwards |  |  |  | $ | 69 |  | 2030 – 2033
Local net operating loss carryforwards |  |  |  | 3 |  | 2024 – 2040
General business credits |  |  |  | 356 |  | 2035 – 2043
Total tax attributes |  |  |  | $ | 428 |  |
Consumers |  |  |  |  |
State net operating loss carryforwards |  |  |  | $ | 53 |  | 2030 – 2033
General business credits |  |  |  | 122 |  | 2035 – 2043
Total tax attributes |  |  |  | $ | 175 |  |
CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward. CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year. Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:
In Millions
Years Ended December 31 | 2023 | 2022 | 2021
CMS Energy, including Consumers |  |  |  |  |  |
Balance at beginning of period |  | $ | 28 |  |  | $ | 27 |  |  | $ | 25 |
Additions for current-year tax positions |  | 1 |  |  | 1 |  |  | 2 |
Additions for prior-year tax positions |  | — |  |  | 1 |  |  | — |
Reductions for prior-year tax positions |  | (3) |  |  | (1) |  |  | — |
Balance at end of period |  | $ | 26 |  |  | $ | 28 |  |  | $ | 27 |
Consumers |  |  |  |  |  |
Balance at beginning of period |  | $ | 36 |  |  | $ | 34 |  |  | $ | 31 |
Additions for current-year tax positions |  | 1 |  |  | 3 |  |  | 3 |
Additions for prior-year tax positions |  | 2 |  |  | 1 |  |  | — |
Reductions for prior-year tax positions |  | (3) |  |  | (2) |  |  | — |
Balance at end of period |  | $ | 36 |  |  | $ | 36 |  |  | $ | 34 |
If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years. One uncertain tax benefit relates to the methodology of state apportionment for Consumers’ electricity sales to MISO. The Michigan Tax Tribunal heard oral arguments on this methodology during 2022. A final conclusion is not anticipated in the next 12 months. CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for each of the years ended December 31, 2023, 2022, or 2021. The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2020 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax returns for 2013-2016 and 2019 and subsequent years remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2023 were adequate for all years.
Consumers Energy Company |
Significant Accounting Policies [Line Items] |
Significant Accounting Policies | Significant Accounting Policies Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, NorthStar Clean Energy, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances. Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates. Cash and Cash Equivalents and Restricted Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less. Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars. These amounts are classified as current assets since they relate to payments that could or will occur within one year. Contingencies: CMS Energy and Consumers record estimated loss contingencies on their consolidated financial statements when it is probable that a loss has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. Unless regulatory accounting applies, CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed. Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings. Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers may enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons: •they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) •they qualify for the normal purchases and sales exception •they cannot be net settled due in part to the absence of an active market for the commodity Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives and changes in the fair value of FTRs are deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 5, Fair Value Measurements. EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards, forward equity sales, and convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method. Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 13, Earnings Per Share—CMS Energy. Impairment of Long-lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur that indicate the carrying amount of an asset may not be recoverable or that there has been a decline in value that may be other than temporary. CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses. CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary. Investment Tax Credits: CMS Energy and its subsidiaries use the flow-through method of accounting for investment tax credits. Under the flow-through method, the credit is recognized as a reduction to income tax expense when the related plant, property, and equipment is placed into service. For its regulated utility assets, Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment. Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets. CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets. CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value. MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements. Property Taxes: Property taxes are based on the taxable value of CMS Energy’s and Consumers’ real and personal property assessed by local taxing authorities. CMS Energy and Consumers record property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of CMS Energy’s and Consumers’ accrued property tax that will be recognized over future governmental fiscal periods. Other: For additional accounting policies, see: •Note 2, Regulatory Matters •Note 7, Plant, Property, and Equipment •Note 8, Leases •Note 9, Asset Retirement Obligations •Note 10, Retirement Benefits •Note 12, Income Taxes •Note 13, Earnings Per Share—CMS Energy •Note 14, Revenue •Note 18, Variable Interest Entities
Income Taxes | Income Taxes CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement. Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:
In Millions, Except Tax Rate
Years Ended December 31 |  | 2023 |  | 2022 | 2021
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  |  |  | $ | 954 |  |  |  |  | $ | 902 |  |  | $ | 823 |
Income tax expense at statutory rate |  |  |  | 200 |  |  |  |  | 189 |  |  | 173 |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect 1 |  |  |  | 31 |  |  |  |  | 51 |  |  | 39 |
Renewable energy tax credits |  |  |  | (58) |  |  |  |  | (51) |  |  | (44) |
TCJA excess deferred taxes 2 |  |  |  | (40) |  |  |  |  | (65) |  |  | (50) |
Taxes attributable to noncontrolling interests |  |  |  | 17 |  |  |  |  | 5 |  |  | 5 |
Accelerated flow-through of regulatory tax benefits 3 |  |  |  | — |  |  |  |  | (39) |  |  | (28) |
Other, net |  |  |  | (3) |  |  |  |  | 3 |  |  | — |
Income tax expense |  |  |  | $ | 147 |  |  |  |  | $ | 93 |  |  | $ | 95 |
Effective tax rate |  |  |  | 15.4 | % |  |  |  | 10.3 | % |  | 11.5 | %
Consumers |  |  |  |  |  |  |  |  |  |
Income from continuing operations before income taxes |  |  |  | $ | 1,028 |  |  |  |  | $ | 1,085 |  |  | $ | 1,024 |
Income tax expense at statutory rate |  |  |  | 216 |  |  |  |  | 228 |  |  | 215 |
Increase (decrease) in income taxes from: |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal effect 1 |  |  |  | 36 |  |  |  |  | 59 |  |  | 54 |
Renewable energy tax credits |  |  |  | (46) |  |  |  |  | (46) |  |  | (37) |
TCJA excess deferred taxes 2 |  |  |  | (40) |  |  |  |  | (65) |  |  | (50) |
Accelerated flow-through of regulatory tax benefits 3 |  |  |  | — |  |  |  |  | (39) |  |  | (28) |
Other, net |  |  |  | (5) |  |  |  |  | 3 |  |  | 2 |
Income tax expense |  |  |  | $ | 161 |  |  |  |  | $ | 140 |  |  | $ | 156 |
Effective tax rate |  |  |  | 15.7 | % |  |  |  | 12.9 | % |  | 15.2 | %
1 CMS Energy initiated a plan to divest immaterial business activities in a non‑Michigan jurisdiction and will no longer have a taxable presence within that jurisdiction after 2023. As a result of these actions, CMS Energy reversed a $13 million non‑Michigan reserve, all of which was recognized at Consumers. 2 In 2020, the MPSC authorized Consumers to accelerate the amortization of the gas portion of its regulatory liability associated with unprotected, non-property-related excess deferred income taxes resulting from the TCJA. This portion of the regulatory liability was fully amortized in 2022. 3 In 2020, the MPSC authorized Consumers to accelerate the amortization of income tax benefits associated with the cost to remove gas plant assets. These tax benefits were fully amortized in 2022. Presented in the following table are the significant components of income tax expense on continuing operations:
In Millions
Years Ended December 31 | 2023 | 2022 | 2021
CMS Energy, including Consumers |  |  |  |  |  |
Current income taxes |  |  |  |  |  |
Federal |  | $ | 5 |  |  | $ | 6 |  |  | $ | (1) |
State and local |  | 1 |  |  | — |  |  | 1 |
|  | $ | 6 |  |  | $ | 6 |  |  | $ | — |
Deferred income taxes |  |  |  |  |  |
Federal |  | 107 |  |  | 4 |  |  | 49 |
State and local |  | 38 |  |  | 65 |  |  | 49 |
|  | $ | 145 |  |  | $ | 69 |  |  | $ | 98 |
Deferred income tax credit |  | (4) |  |  | 18 |  |  | (3) |
Tax expense |  | $ | 147 |  |  | $ | 93 |  |  | $ | 95 |
Consumers |  |  |  |  |  |
Current income taxes |  |  |  |  |  |
Federal |  | $ | 3 |  |  | $ | (2) |  |  | $ | (13) |
State and local |  | 2 |  |  | 8 |  |  | 15 |
|  | $ | 5 |  |  | $ | 6 |  |  | $ | 2 |
Deferred income taxes |  |  |  |  |  |
Federal |  | 117 |  |  | 50 |  |  | 103 |
State and local |  | 43 |  |  | 66 |  |  | 54 |
|  | $ | 160 |  |  | $ | 116 |  |  | $ | 157 |
Deferred income tax credit |  | (4) |  |  | 18 |  |  | (3) |
Tax expense |  | $ | 161 |  |  | $ | 140 |  |  | $ | 156 |
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
In Millions
December 31 | 2023 | 2022
CMS Energy, including Consumers |  |  |  |
Deferred income tax assets |  |  |  |
Tax loss and credit carryforwards |  | $ | 428 |  |  | $ | 385 |
Net regulatory tax liability |  | 305 |  |  | 318 |
Reserves and accruals |  | 28 |  |  | 35 |
Total deferred income tax assets |  | $ | 761 |  |  | $ | 738 |
Valuation allowance |  | (2) |  |  | (2) |
Total deferred income tax assets, net of valuation allowance |  | $ | 759 |  |  | $ | 736 |
Deferred income tax liabilities |  |  |  |
Plant, property, and equipment |  | $ | (2,520) |  |  | $ | (2,515) |
Employee benefits |  | (473) |  |  | (433) |
Gas inventory |  | (66) |  |  | (53) |
Securitized costs |  | (194) |  |  | (39) |
Other |  | (121) |  |  | (103) |
Total deferred income tax liabilities |  | $ | (3,374) |  |  | $ | (3,143) |
Total net deferred income tax liabilities |  | $ | (2,615) |  |  | $ | (2,407) |
Consumers |  |  |  |
Deferred income tax assets |  |  |  |
Net regulatory tax liability |  | $ | 305 |  |  | $ | 318 |
Tax loss and credit carryforwards |  | 175 |  |  | 145 |
Reserves and accruals |  | 27 |  |  | 28 |
Total deferred income tax assets |  | $ | 507 |  |  | $ | 491 |
Deferred income tax liabilities |  |  |  |
Plant, property, and equipment |  | $ | (2,498) |  |  | $ | (2,458) |
Employee benefits |  | (459) |  |  | (423) |
Gas inventory |  | (66) |  |  | (53) |
Securitized costs |  | (194) |  |  | (39) |
Other |  | (79) |  |  | (103) |
Total deferred income tax liabilities |  | $ | (3,296) |  |  | $ | (3,076) |
Total net deferred income tax liabilities |  | $ | (2,789) |  |  | $ | (2,585) |
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 on CMS Energy’s and Consumers’ consolidated financial statements. Presented in the following table are the tax loss and credit carryforwards at December 31, 2023:
In Millions
|  | Tax Attribute | Expiration
CMS Energy, including Consumers |  |  |  |  |
State net operating loss carryforwards |  |  |  | $ | 69 |  | 2030 – 2033
Local net operating loss carryforwards |  |  |  | 3 |  | 2024 – 2040
General business credits |  |  |  | 356 |  | 2035 – 2043
Total tax attributes |  |  |  | $ | 428 |  |
Consumers |  |  |  |  |
State net operating loss carryforwards |  |  |  | $ | 53 |  | 2030 – 2033
General business credits |  |  |  | 122 |  | 2035 – 2043
Total tax attributes |  |  |  | $ | 175 |  |
CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward. CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year. Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:
In Millions
Years Ended December 31 | 2023 | 2022 | 2021
CMS Energy, including Consumers |  |  |  |  |  |
Balance at beginning of period |  | $ | 28 |  |  | $ | 27 |  |  | $ | 25 |
Additions for current-year tax positions |  | 1 |  |  | 1 |  |  | 2 |
Additions for prior-year tax positions |  | — |  |  | 1 |  |  | — |
Reductions for prior-year tax positions |  | (3) |  |  | (1) |  |  | — |
Balance at end of period |  | $ | 26 |  |  | $ | 28 |  |  | $ | 27 |
Consumers |  |  |  |  |  |
Balance at beginning of period |  | $ | 36 |  |  | $ | 34 |  |  | $ | 31 |
Additions for current-year tax positions |  | 1 |  |  | 3 |  |  | 3 |
Additions for prior-year tax positions |  | 2 |  |  | 1 |  |  | — |
Reductions for prior-year tax positions |  | (3) |  |  | (2) |  |  | — |
Balance at end of period |  | $ | 36 |  |  | $ | 36 |  |  | $ | 34 |
If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years. One uncertain tax benefit relates to the methodology of state apportionment for Consumers’ electricity sales to MISO. The Michigan Tax Tribunal heard oral arguments on this methodology during 2022. A final conclusion is not anticipated in the next 12 months. CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for each of the years ended December 31, 2023, 2022, or 2021. The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2020 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax returns for 2013-2016 and 2019 and subsequent years remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2023 were adequate for all years.

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