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INCOME TAXES | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8: INCOME TAXES The differences between the Company’s provisions for Income Taxes and the provisions calculated at the statutory federal tax rate, expressed in percentages, are shown in the following table:
|  | For the Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |
Statutory Federal Income Tax Rate |  |  | 21 | % |  |  | 21 | %
Income Tax Effects of: |  |  |  |  |  |
State Income Taxes, net |  |  | 6 |  |  |  | 6 |
Utility Plant Differences |  |  | (6 | ) |  |  | (5 | )
Other, net |  |  | 1 |  |  | - |
Effective Income Tax Rate |  |  | 22 | % |  |  | 22 | %
Under the Company’s Tax Sharing Agreement (the Agreement) which was approved upon the formation of Unitil as a public utility holding company, the Company files consolidated Federal and State tax returns and Unitil Corporation and each of its utility operating subsidiaries recognize the results of their operations in its tax returns as if it were a stand-alone taxpayer. The Agreement provides that the Company will account for income taxes in compliance with U.S. GAAP and regulatory accounting principles. The Company has evaluated its tax positions at September 30, 2024 in accordance with the FASB Codification, and has concluded that no adjustment for recognition, de-recognition, settlement or foreseeable future events to any tax liabilities or assets as defined by the FASB Codification is required. The Company remains subject to examination by Maine, Massachusetts, and New Hampshire tax authorities for the tax periods ended December 31, 2023; December 31, 2022; and December 31, 2021. Income tax filings for the year ended December 31, 2023 have been filed with the Internal Revenue Service (IRS). The remaining filings will be filed by November 15, 2024 with the Massachusetts Department of Revenue, the Maine Revenue Service, and the New Hampshire Department of Revenue Administration. In the Company’s federal tax returns for the year ended December 31, 2023 which were filed with the IRS in October 2024, the Company generated federal Net Operating Loss Carryforward (NOLC) assets of $2.9 million. As of December 31, 2023, the Company has approximately $7.3 million of the NOLC asset and $1.7 million of federal tax credits available to offset current taxes payable. In addition, at December 31, 2023, the Company had $1.3 million of cumulative state tax credit carryforwards to offset future income taxes payable. If unused, the Company’s state tax credit carryforwards will begin to expire in 2027. On April 14, 2023, the IRS issued Revenue Procedure 2023-15 that provides a safe harbor method of accounting that taxpayers may use to determine whether to deduct or capitalize expenditures to repair, maintain, replace, or improve natural gas transmission and distribution property. Under the revenue procedure, the method of accounting will depend on the property’s classification as linear transmission property, linear distribution property, or non-linear property. The revenue procedure may be adopted in tax years ending after May 1, 2023. The Company has elected a change in its tax accounting method on the 2023 consolidated tax return. A 481(a) adjustment was calculated and resulted in an additional $9.4 million in tax expense on the 2023 consolidated tax return. In August 20 22, the Inflation Reduction Act of 2022 (IRA) was signed into law. The IRA included new taxes on corporations, including the Corporate Alternative Minimum Tax (AMT) and the Excise Tax on Repurchase of Corporate Stock. The AMT is equal to 15% of a corporation’s adjusted financial statement income (AFSI). The AMT applies to companies that have a 3 year average AFSI of greater than $1 billion. The IRA also extended and modified certain renewable energy related credits. The Company has evaluated the provisions and determined that they do not have a material effect on the Company’s financial statements as of September 30, 2024. In December 2017, the Tax Cuts and Jobs Act (TCJA), which included a reduction to the corporate federal income tax rate to 21% effective January 1, 2018, was signed into law. In accordance with FASB Codification Topic 740, the Company revalued its Accumulated Deferred Income Taxes (ADIT) at the new 21% tax rate at which the ADIT will be reversed in future periods. Based on communications received by the Company from its state regulators in rate cases and other regulatory proceedings in the first quarter of 2018 and as prescribed in the TCJA, FERC guidance and IRS normalization rules, the benefit of protected excess ADIT amounts will be subject to flow back to customers in future utility rates according to the Average Rate Assumption Method (ARAM). ARAM reconciles excess ADIT at the reversal rate of the underlying book/tax temporary timing differences. The Company estimates the ARAM flow back period for protected and unprotected excess ADIT to be between fifteen and twenty years over the remaining life of the related utility plant. Subject to regulatory approval, the Company expects to flow back to customers a net $47.1 million of protected excess ADIT created as a result of the lowering of the statutory tax rate by the TCJA over periods estimated to be fifteen to twenty years. As of September 30, 2024, the Company flowed back $11.5 million to customers in its Massachusetts, Maine, New Hampshire, and federal jurisdictions.

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