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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

(15) INCOME TAXES

 

Transfers of Production Tax Credits

 

In August 2022, President Biden signed H.R. 5376 into law, commonly known as the IRA of 2022, or IRA. The IRA contains a tax credit transferability provision that allows us to transfer (e.g. sell) PTCs produced after December 31, 2022, to third parties. In June 2024, under this transferability provision, we entered into an agreement with a third party to sell $16.9 million of our 2023 generated PTCs. In January 2025, we entered into a similar agreement with a third party to sell $17.0 million of our 2024 generated PTCs.

 

We expect to continue to explore the ability to efficiently monetize our tax credits through third party transferability agreements.

 

IRS Revenue Procedure 2023-15

 

On April 14, 2023, the IRS released Revenue Procedure 2023-15 “Amounts paid to improve tangible property.” The Revenue Procedure provides a safe harbor method of accounting that taxpayers may use to determine whether costs to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized. The Revenue Procedure may be adopted in tax years ending after May 1, 2023. We intend to elect the safe harbor for tax year 2024. We do not expect the Revenue Procedure to have a material impact on our tax repairs deduction.

 

Income Tax (Expense) Benefit

 

Income tax (expense) benefit from continuing operations for the years ended December 31 was:

 

2024

 

2023

 

2022

 

 

(in millions)

 

Current:

 

 

 

 

 

 

Federal

$

16.5

 

$

0.8

 

$

0.5

 

State

 

(0.8

)

 

(1.0

)

 

(0.1

)

Current income tax benefit (expense)

 

15.7

 

 

(0.2

)

 

0.4

 

Deferred:

 

 

 

 

 

 

Federal

 

(47.2

)

 

(30.9

)

 

(23.2

)

State

 

(4.8

)

 

5.5

 

 

(2.4

)

Deferred income tax (expense)

 

(52.0

)

 

(25.4

)

 

(25.6

)

 

 

 

 

 

 

 

Income tax (expense)

$

(36.3

)

$

(25.6

)

$

(25.2

)

 

 

Effective Tax Rates

 

The effective tax rate differs from the federal statutory rate for the years ended December 31, as follows:

 

2024

 

2023

 

2022

 

Federal statutory rate

 

21.0

%

 

21.0

%

 

21.0

%

State income tax (net of federal tax effect) (a)

 

1.3

 

 

(0.8

)

 

0.5

 

Non-controlling interest (b)

 

(0.7

)

 

(1.0

)

 

(0.9

)

Tax credits

 

(5.6

)

 

(6.2

)

 

(7.7

)

Flow-through adjustments (c)

 

(2.2

)

 

(1.7

)

 

(1.4

)

Amortization of excess deferred income taxes (d)

 

(2.4

)

 

(3.0

)

 

(2.5

)

Other

 

(0.1

)

 

0.2

 

 

(0.5

)

Effective Tax Rate

 

11.3

%

 

8.5

%

 

8.5

%

 

(a)
For the year ended December 31, 2023, we recognized an $8.2 million tax benefit from a Nebraska income tax rate decrease.
(b)
The effective tax rate reflects the income attributable to the non-controlling interest in Black Hills Colorado IPP for which a tax provision was not recorded.
(c)
Flow-through adjustments related primarily to accounting method changes for tax purposes that allow us to take a current tax deduction for repair costs and certain indirect costs. We recorded a deferred income tax liability in recognition of the temporary difference created between book and tax treatment and flowed the tax benefit through to tax expense. A regulatory asset was established to reflect the recovery of future increases in taxes payable from customers as the temporary differences reverse. As a result of this regulatory treatment, we continue to record tax benefits consistent with the flow-through method.
(d)
Primarily TCJA - see Note 2 for additional information.

 

Deferred Tax Assets and Liabilities

 

The temporary differences, which gave rise to the net deferred tax liability, for the years ended December 31 were as follows:

 

2024

 

2023

 

 

(in millions)

 

Deferred tax assets:

 

 

 

 

Regulatory liabilities

$

70.9

 

$

74.0

 

State tax credits

 

8.4

 

 

22.8

 

Federal NOL

 

114.9

 

 

146.6

 

State NOL

 

12.7

 

 

16.5

 

Partnership

 

11.6

 

 

12.2

 

Credit Carryovers

 

110.5

 

 

110.1

 

Other deferred tax assets

 

35.4

 

 

33.7

 

Less: Valuation allowance

 

(1.3

)

 

(15.4

)

Total deferred tax assets

 

363.1

 

 

400.5

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

Accelerated depreciation, amortization, and other property-related differences

 

(729.2

)

 

(686.2

)

Regulatory assets

 

(49.5

)

 

(65.6

)

Goodwill

 

(75.9

)

 

(67.8

)

State deferred tax liability

 

(88.7

)

 

(84.5

)

Other deferred tax liabilities

 

(44.9

)

 

(44.4

)

Total deferred tax liabilities

 

(988.2

)

 

(948.5

)

 

 

 

 

Net deferred tax liability

$

(625.1

)

$

(548.0

)

 

 

Net Operating Loss and Tax Credit Carryforwards

 

At December 31, 2024, we have federal NOL and state NOL and tax credit carryforwards that will expire at various dates as follows:

 

Amounts

 

Expiration Dates

 

(in millions)

 

 

Federal NOL Carryforward

$

547.2

 

No expiration

Federal Tax Credit Carryforward

$

110.5

 

2030-2044

 

 

 

State NOL Carryforward (a)

$

242.6

 

2025-2042

State Tax Credit Carryforward

$

8.4

 

2025-2038

 

(a)
The carryforward balance is reflected on the basis of apportioned tax losses to jurisdictions imposing state income taxes.

 

As of December 31, 2024, we had a $0.3 million valuation allowance against the state NOL carryforwards. Our 2024 analysis of the ability to utilize such NOLs resulted in no increase in the valuation allowance. If the valuation allowance is adjusted due to higher or lower than anticipated utilization of the NOLs, the offsetting amount will affect tax expense. The valuation allowance was reduced by $0.7 million for previously reserved expiring NOL.

 

Refer to Notes 1 and 3 for a discussion of valuation allowances recorded in 2024 related to the expected transfer of renewable tax credits to other corporate taxpayers.

 

As of December 31, 2024, we did not have a valuation allowance against the state ITC carryforwards. The valuation allowance was reduced by $14.4 million for a previously reserved expiring state ITC.

 

Unrecognized Tax Benefits

 

The following table reconciles the total amounts of unrecognized tax benefits, without interest, at the beginning and end of the period included in Other deferred credits and other liabilities on the accompanying Consolidated Balance Sheets:

 

Changes in Uncertain Tax Positions:

2024

 

2023

 

2022

 

 

(in millions)

 

Beginning balance

$

13.7

 

$

11.9

 

$

10.6

 

Additions for prior year tax positions

 

0.6

 

 

—

 

 

-

 

Reductions for prior year tax positions

 

(8.1

)

 

(0.3

)

 

(0.8

)

Additions for current year tax positions

 

1.6

 

 

2.1

 

 

2.1

 

Ending balance

$

7.8

 

$

13.7

 

$

11.9

 

 

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is approximately $7.5 million.

 

We recognized no interest expense associated with income taxes for the years ended December 31, 2024, 2023, and 2022. We had no accrued interest (before tax effect) associated with income taxes at December 31, 2024, and 2023.

 

As of December 31, 2024, we do not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease on or before December 31, 2025. In 2024, we released all uncertain tax positions for tax repairs of gas transmission and distribution property due to a change in a method of accounting provided by Revenue Procedure 2023-15.