v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

(15) INCOME TAXES

 

Transfers of Production Tax Credits

 

In August 2022, H.R. 5376, commonly known as the IRA of 2022, or IRA, was enacted. 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 and January 2025, under this transferability provision, we entered into agreements with a third party to sell 2023 generated PTCs for $16.0 million and 2024 generated PTCs for $16.0 million. In January 2026, we entered into a similar agreement to sell 2025 generated PTCs for $15.3 million.

 

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

 

One Big Beautiful Bill Act

 

In July 2025, H.R. 1, commonly referred to as the OBBBA, was enacted. The OBBBA is a legislative package designed to permanently extend certain expiring provisions of the TCJA and deliver additional tax relief for individuals and businesses. The OBBBA introduced changes to federal energy policies by rolling back several clean energy provisions and codified restrictions related to prohibited foreign entities, termination and restrictions on clean energy PTCs, and extension and modification of clean fuel production. The OBBBA does not repeal tax credit transferability provisions enacted under the IRA and continues to permit the execution of our transferability agreements as originally agreed upon, but restricts credit transfers to prohibited foreign entities.

 

Additionally, on August 15, 2025, the IRS issued Notice 2025-42, which provides guidance on the beginning of construction requirements for applicable wind and solar. These requirements are critical for determining eligibility for energy-related tax credits, particularly considering the OBBBA’s modifications to clean energy incentives. Projects must meet specific criteria—such as physical work of a significant nature—to be considered as having begun construction. This determination affects whether a project qualifies under pre-OBBBA or post-OBBBA credit regimes, which may differ in value, availability, or restrictions.

 

We do not anticipate material impacts to our pre-OBBBA in-service clean energy generation facilities as a result of the OBBBA. Further, we do not anticipate impacts to the execution of Colorado Electric’s Clean Energy Plan. However, we continue to monitor IRS guidance and legislative developments to ensure compliance and optimize the timing and structure of future clean energy investments.

 

Income Tax (Expense) Benefit

 

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

 

2025

 

2024

 

2023

 

 

(in millions)

 

Current:

 

 

 

 

 

 

Federal

$

12.4

 

$

16.5

 

$

0.8

 

State

 

(1.8

)

 

(0.8

)

 

(1.0

)

Current income tax benefit (expense)

 

10.6

 

 

15.7

 

 

(0.2

)

Deferred:

 

 

 

 

 

 

Federal

 

(52.8

)

 

(47.2

)

 

(30.9

)

State

 

(1.5

)

 

(4.8

)

 

5.5

 

Deferred income tax (expense)

 

(54.3

)

 

(52.0

)

 

(25.4

)

Income tax (expense)

$

(43.7

)

$

(36.3

)

$

(25.6

)

 

 

Effective Tax Rates

 

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

 

2025

 

2024

 

2023

 

(dollars in millions)

 

Income before income taxes

$

343.5

 

 

 

$

320.0

 

 

 

$

301.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Federal statutory rate

$

72.1

 

 

21.0

%

$

67.2

 

 

21.0

%

$

63.3

 

 

21.0

%

State and local income taxes, net of federal income tax effect (a)

 

2.8

 

 

0.8

%

 

4.7

 

 

1.5

%

 

(3.4

)

 

(1.1

)%

Tax credits

 

 

 

 

 

 

 

 

 

 

 

 

Energy-related tax credits, net of transferability discount

 

(15.3

)

 

(4.5

)%

 

(15.0

)

 

(4.7

)%

 

(16.9

)

 

(5.6

)%

Other

 

(2.2

)

 

(0.7

)%

 

(2.8

)

 

(0.9

)%

 

(2.7

)

 

(0.9

)%

Nontaxable or Nondeductible Items

 

3.2

 

 

0.9

%

 

1.9

 

 

0.6

%

 

1.9

 

 

0.6

%

Changes in Unrecognized Tax Benefits

 

1.6

 

 

0.5

%

 

0.9

 

 

0.3

%

 

0.9

 

 

0.3

%

Regulatory

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of excess deferred income taxes (b)

 

(5.3

)

 

(1.5

)%

 

(7.7

)

 

(2.4

)%

 

(8.8

)

 

(2.9

)%

Flow-through adjustments (c)

 

(5.0

)

 

(1.5

)%

 

(7.0

)

 

(2.2

)%

 

(5.3

)

 

(1.8

)%

Other

 

(2.0

)

 

(0.6

)%

 

(0.6

)

 

(0.2

)%

 

0.2

 

 

0.1

%

Other

 

(6.2

)

 

(1.7

)%

 

(5.3

)

 

(1.7

)%

 

(3.6

)

 

(1.2

)%

Effective Tax Rate

$

43.7

 

 

12.7

%

$

36.3

 

 

11.3

%

$

25.6

 

 

8.5

%

 

(a)
State taxes in Colorado made up the majority (greater than 50 percent) of the tax effect in this category. The state effective tax rate contains the tax expense attributable to multiple statutory state rate changes in the Company's state jurisdictions. For the year ended December 31, 2023, we recognized an $8.2 million tax benefit from a Nebraska income tax rate decrease.
(b)
Primarily TCJA - see Note 2 for additional information.
(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.

 

Income Taxes Paid

 

Income taxes (paid) received for the years ended December 31 were as follows:

 

 

2025

 

2024

 

2023

 

 

(in millions)

 

Federal:

 

 

 

 

 

 

Direct payments (net of refunds)

$

(3.5

)

$

(0.9

)

$

—

 

Transferred Renewable Credits (net of discount)

 

16.0

 

 

16.0

 

 

—

 

Total Federal

$

12.5

 

$

15.1

 

$

—

 

 

 

 

 

 

 

State:

 

 

 

 

 

 

Arkansas (a)

$

(0.7

)

N/A

 

N/A

 

Colorado (a)

 

(0.6

)

 

(0.2

)

N/A

 

Kansas (a)

N/A

 

N/A

 

 

(0.2

)

Nebraska

 

(2.4

)

 

(0.3

)

 

(0.8

)

Other

 

—

 

 

(0.2

)

 

—

 

Total State

$

(3.7

)

$

(0.7

)

$

(1.0

)

 

 

 

 

 

 

 

Total income taxes (paid) received

$

8.8

 

$

14.4

 

$

(1.0

)

 

(a)
N/A indicates the amount of income taxes paid during the year does not meet the 5% disaggregation threshold

 

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:

 

2025

 

2024

 

 

(in millions)

 

Deferred tax assets:

 

 

 

 

Regulatory liabilities

$

68.5

 

$

70.9

 

State tax credits

 

8.1

 

 

8.4

 

Federal NOL

 

79.8

 

 

114.9

 

State NOL

 

8.1

 

 

12.4

 

Partnership

 

9.9

 

 

11.6

 

Credit Carryovers (net of discount)

 

104.1

 

 

109.5

 

Other deferred tax assets

 

40.2

 

 

35.4

 

Total deferred tax assets

 

318.7

 

 

363.1

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

Accelerated depreciation, amortization, and other property-related differences

 

(753.7

)

 

(729.2

)

Regulatory assets

 

(39.8

)

 

(49.5

)

Goodwill

 

(84.0

)

 

(75.9

)

State deferred tax liability

 

(88.9

)

 

(88.7

)

Other deferred tax liabilities

 

(50.2

)

 

(44.9

)

Total deferred tax liabilities

 

(1,016.6

)

 

(988.2

)

 

 

 

 

Net deferred tax liability

$

(697.9

)

$

(625.1

)

 

Net Operating Loss and Tax Credit Carryforwards

 

At December 31, 2025, 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

$

380.1

 

No expiration

Federal Tax Credit Carryforward (net of discount)

$

104.1

 

2030-2044

 

 

 

State NOL Carryforward (a)

$

142.3

 

2026-2044

State Tax Credit Carryforward

$

8.1

 

2030-2038

 

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

 

As of December 31, 2025, we did not have a valuation allowance against the state NOL carryforwards. Our 2025 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.

 

Refer to Notes 1 and 3 for a discussion of the expected transfer of renewable tax credits to other corporate taxpayers.

 

As of December 31, 2025, we did not have a valuation allowance against the state ITC carryforwards.

 

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:

2025

 

2024

 

2023

 

 

(in millions)

 

Beginning balance

$

7.8

 

$

13.7

 

$

11.9

 

Additions for prior year tax positions

 

0.8

 

 

0.6

 

 

—

 

Reductions for prior year tax positions

 

(0.2

)

 

(8.1

)

 

(0.3

)

Additions for current year tax positions

 

0.7

 

 

1.6

 

 

2.1

 

Ending balance

$

9.1

 

$

7.8

 

$

13.7

 

 

 

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is approximately $8.8 million.

 

We recognized interest expense of $0.4 million associated income tax for the years ended December 31, 2025. We recognized no interest expense for the tax years ended December 31, 2024 and 2023. We have accrued interest (before tax effect) associated with income taxes of $0.4 million and $0.0 million at December 31, 2025 & 2024 respectively.