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Taxes on Income | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Taxes on Income | Taxes on Income Registrant records deferred income taxes for temporary differences pursuant to the accounting guidance that addresses items recognized for income tax purposes in a different period from when these items are reported in the financial statements. These items include differences in net asset basis (primarily related to differences in depreciation lives and methods, and differences in capitalization methods) and the treatment of certain regulatory balancing accounts and construction contributions and advances. The accounting guidance for income taxes requires that rate-regulated enterprises record deferred income taxes and offsetting regulatory liabilities and assets for temporary differences where the rate regulator has prescribed flow-through treatment for ratemaking purposes (Note 3). Deferred investment tax credits (“ITC”) are amortized ratably to deferred tax expense over the remaining lives of the property that gave rise to these credits. GSWC is included in both AWR’s consolidated federal income tax and its combined California state franchise tax returns. The impact of California’s unitary apportionment on the amount of AWR’s California income tax liability is a function of both the profitability of AWR’s non-California activities and the proportion of AWR’s California sales to its total sales. GSWC’s income tax expense is computed as if GSWC were autonomous and separately files its income tax returns, which is consistent with the method adopted by the CPUC in setting GSWC’s customer rates. On November 15, 2021, the Infrastructure Investment and Jobs Act (“IIJA”) was signed into federal law. Among its significant provisions, IIJA restores, on a retroactive basis to January 1, 2021, the provision that treats contributions in aid of construction provided to regulated water utilities as non-taxable, which TCJA had repealed. Further, IIJA broadens the provision to also treat government grants for water infrastructure as non-taxable. The significant components of the deferred tax assets and liabilities as reflected in the balance sheets at December 31, 2021 and 2020 are:
|  | AWR |  | GSWC
|  | December 31, |  | December 31,
(dollars in thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Deferred tax assets: |  |  |  |  |  |  |  |
Regulatory-liability-related (1) |  | $ | 32,220 |  |  | $ | 32,640 |  |  | $ | 30,410 |  |  | $ | 30,782 |
Contributions and advances |  | 6,850 |  |  | 6,390 |  |  | 7,227 |  |  | 6,771 |
Other |  | 5,324 |  |  | 6,092 |  |  | 5,689 |  |  | 6,663 |
Total deferred tax assets |  | $ | 44,394 |  |  | $ | 45,122 |  |  | $ | 43,326 |  |  | $ | 44,216 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed assets |  | $ | (150,290) |  |  | $ | (146,688) |  |  | $ | (144,719) |  |  | $ | (141,422) |
Regulatory-asset-related: depreciation and other |  | (25,914) |  |  | (22,205) |  |  | (24,858) |  |  | (21,060) |
Balancing and memorandum accounts (non-flow-through) |  | (8,480) |  |  | (7,401) |  |  | (6,063) |  |  | (6,315) |
Total deferred tax liabilities |  | (184,684) |  |  | (176,294) |  |  | (175,640) |  |  | (168,797) |
Accumulated deferred income taxes, net |  | $ | (140,290) |  |  | $ | (131,172) |  |  | $ | (132,314) |  |  | $ | (124,581) |
(1) Primarily represents the gross-up portion of the deferred income tax (on the excess-deferred-tax regulatory liability) brought about by TCJA’s reduction in the federal income tax rate. The current and deferred components of income tax expense are as follows:
|  | AWR
|  | Year Ended December 31,
(dollars in thousands) |  | 2021 |  | 2020 |  | 2019
Current |  |  |  |  |  |
Federal |  | $ | 19,592 |  |  | $ | 19,240 |  |  | $ | 12,507 |
State |  | 7,270 |  |  | 6,714 |  |  | 5,540 |
Total current tax expense |  | $ | 26,862 |  |  | $ | 25,954 |  |  | $ | 18,047 |
Deferred |  |  |  |  |  |
Federal |  | $ | 2,802 |  |  | $ | 1,814 |  |  | $ | 6,407 |
State |  | 759 |  |  | 429 |  |  | 216 |
Total deferred tax (benefit) expense |  | 3,561 |  |  | 2,243 |  |  | 6,623 |
Total income tax expense |  | $ | 30,423 |  |  | $ | 28,197 |  |  | $ | 24,670 |
|  | GSWC
|  | Year Ended December 31,
(dollars in thousands) |  | 2021 |  | 2020 |  | 2019
Current |  |  |  |  |  |
Federal |  | $ | 13,698 |  |  | $ | 14,674 |  |  | $ | 9,616 |
State |  | 6,089 |  |  | 5,849 |  |  | 5,480 |
Total current tax expense |  | $ | 19,787 |  |  | $ | 20,523 |  |  | $ | 15,096 |
Deferred |  |  |  |  |  |
Federal |  | $ | 2,251 |  |  | $ | 949 |  |  | $ | 4,924 |
State |  | 57 |  |  | 232 |  |  | 157 |
Total deferred tax (benefit) expense |  | 2,308 |  |  | 1,181 |  |  | 5,081 |
Total income tax expense |  | $ | 22,095 |  |  | $ | 21,704 |  |  | $ | 20,177 |
The differences between AWR’s and GSWC’s effective tax rates and the federal statutory rate are mostly attributable to (i) state taxes; (ii) permanent differences including the excess tax benefits from share-based payments, which are reflected in the income statements and reduced income tax expense; (iii) continuing amortization of the excess deferred income tax liability, and (iv) differences between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation expenses). As a regulated utility, GSWC treats certain temporary differences as flow-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdictional ratemaking. Flow-through items either increase or decrease tax expense and thus impact the ETR. The reconciliations of the effective tax rates to the federal statutory rate are as follows:
|  | AWR
|  | Year Ended December 31,
(dollars in thousands) |  | 2021 |  | 2020 |  | 2019
Federal taxes on pretax income at statutory rate |  | $ | 26,202 |  |  | $ | 24,071 |  |  | $ | 22,872 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |
State income tax, net of federal benefit |  | 6,425 |  |  | 5,764 |  |  | 4,758 |
Excess deferred tax amortization |  | (1,356) |  |  | (1,550) |  |  | (1,579) |
Flow-through on fixed assets |  | 1,069 |  |  | 1,056 |  |  | 1,244 |
Flow-through on removal costs |  | (1,962) |  |  | (1,031) |  |  | (1,582) |
Investment tax credit |  | (71) |  |  | (71) |  |  | (71) |
Other – net |  | 116 |  |  | (42) |  |  | (972) |
Total income tax expense from operations |  | $ | 30,423 |  |  | $ | 28,197 |  |  | $ | 24,670 |
Pretax income from operations |  | $ | 124,770 |  |  | $ | 114,622 |  |  | $ | 109,012 |
Effective income tax rate |  | 24.4 | % |  | 24.6 | % |  | 22.6 | %
.
|  | GSWC
|  | Year Ended December 31,
(dollars in thousands) |  | 2021 |  | 2020 |  | 2019
Federal taxes on pretax income at statutory rate |  | $ | 19,175 |  |  | $ | 18,202 |  |  | $ | 18,236 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |
State income tax, net of federal benefit |  | 4,923 |  |  | 4,920 |  |  | 4,656 |
Excess deferred tax amortization |  | (1,184) |  |  | (1,477) |  |  | (1,579) |
Flow-through on fixed assets |  | 1,008 |  |  | 1,042 |  |  | 1,244 |
Flow-through on removal costs |  | (1,954) |  |  | (1,026) |  |  | (1,582) |
Investment tax credit |  | (71) |  |  | (71) |  |  | (71) |
Other – net |  | 198 |  |  | 114 |  |  | (727) |
Total income tax expense from operations |  | $ | 22,095 |  |  | $ | 21,704 |  |  | $ | 20,177 |
Pretax income from operations |  | $ | 91,310 |  |  | $ | 86,675 |  |  | $ | 86,840 |
Effective income tax rate |  | 24.2 | % |  | 25.0 | % |  | 23.2 | %
AWR and GSWC had no unrecognized tax benefits at December 31, 2021, 2020 and 2019. Registrant’s policy is to classify interest on income tax over/underpayments in interest income/expense and penalties in “other operating expenses.” Registrant did not have any material interest receivables/payables from/to taxing authorities as of December 31, 2021 and 2020, nor did it recognize any material interest income/expense or accrue any material tax-related penalties during the years ended December 31, 2021, 2020 and 2019. Registrant files federal, California and various other state income tax returns. AWR's 2018—2020 tax years remain subject to examination by the Internal Revenue Service. AWR filed refund claims with the California Franchise Tax Board ("FTB") for the 2005 through 2008 and 2011 through 2016 tax years in connection with the matters reflected on prior federal refund claims along with other state tax items. The FTB continues to review the claims, and the 2009, 2010, and 2017—2020 tax years remain subject to examination by the FTB.

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- 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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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