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v3.23.3

Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Taxes [Abstract] |
Income Taxes | Note 3 – Income Taxes Income tax (benefit) expense differs from the amount computed by applying the statutory rate on book income subject to tax for the following reasons:
|  | (Thousands of Dollars)
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Income Tax at Statutory Rate |  | $ | 9,590 |  |  | $ | 6,521 |  |  | $ | 7,204 |
Tax Effect of: |  |  |  |  |  |  |  |  |  |  |  |
Utility Plant Related |  |  | (1,106 | ) |  |  | (1,290 | ) |  |  | (1,356 | )
Tangible Property Repairs |  |  | (6,767 | ) |  |  | (12,281 | ) |  |  | (11,298 | )
State Income Taxes – Net |  |  | 1,296 |  |  |  | 1,499 |  |  |  | 1,364 |
Other |  |  | 227 |  |  |  | 63 |  |  |  | (33 | )
Total Income Tax Expense (Benefit) |  | $ | 3,240 |  |  | $ | (5,488 | ) |  | $ | (4,119 | )
Income tax expense (benefit) is comprised of the following:
|  | (Thousands of Dollars)
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |
Federal |  | $ | 425 |  |  | $ | (8,247 | ) |  | $ | (4,281 | )
State |  |  | 1,381 |  |  |  | 1,467 |  |  |  | 2,598 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 1,242 |  |  |  | 933 |  |  |  | (1,490 | )
State |  |  | 260 |  |  |  | 431 |  |  |  | (871 | )
Investment Tax Credits |  |  | (68 | ) |  |  | (72 | ) |  |  | (75 | )
Total Income Tax (Benefit) Expense |  | $ | 3,240 |  |  | $ | (5,488 | ) |  | $ | (4,119 | )
As part of Middlesex’s March 2018 base water rate settlement with the NJBPU, Middlesex received approval for regulatory accounting treatment of income tax benefits associated with the adoption of tangible property regulations issued by the IRS (fully amortized as of March 31, 2022) as well as prospective recognition of the income tax benefits for the immediate deduction of repair costs on tangible property. This results in significant reductions in the Company’s effective income tax rate, current income tax expense (benefit) and deferred income tax expense (benefit). Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. The components of the net deferred tax liability are as follows:
|  | (Thousands of Dollars)
|  | December 31,
|  | 2022 |  | 2021
Utility Plant Related |  | $ | 72,996 |  |  | $ | 65,107 |
Customer Advances |  |  | (3,568 | ) |  |  | (3,595 | )
Employee Benefits |  |  | 7,380 |  |  |  | 7,091 |
Investment Tax Credits |  |  | 304 |  |  |  | 373 |
Other |  |  | 671 |  |  |  | 524 |
Total Accumulated Deferred Income Taxes |  | $ | 77,783 |  |  | $ | 69,500 |
The Company’s federal income tax returns for the tax years 2014 through 2017 were selected for examination by the IRS, which included the tax year in which the Company had adopted the final IRS tangible property regulations and changed its accounting method for the tax treatment of expenditures that qualified as deductible repairs. As a result of the audit examination, the Company agreed to certain modifications of its accounting method for expenditures that qualify as deductible repairs. In 2019, the Company paid $2.7 million in income taxes and $0.1 million in interest in connection with the conclusion of the 2014 through 2017 federal income tax return audits. The statutory review period for 2018 and prior federal income tax returns has now closed, and as such, in the third quarter of 2022 the Company reversed the December 31, 2021 income tax reserve provision and interest expense liability of $0.5 million and $0.2 million, respectively. The statutory review periods for federal income tax returns for the years prior to 2019 have been closed. There are no unrecognized tax benefits resulting from prior period tax positions.

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