Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Taxes | |
| Income Taxes | 4. Income Taxes Our effective income tax rate was 23.2% and 21.2% for the three and six months ended June 30, 2026, respectively, compared to 21.7% and 20.5% for the three and six months ended June 30, 2025, respectively. The increase in our effective income tax rate when comparing the three and six months ended June 30, 2026 and 2025 was primarily driven by a decrease in investment tax credits and an increase in pre-tax income, partially offset by the recognition of clean fuel production tax credits at our RNG facilities. We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant. Investments Qualifying for Federal Tax Credits Renewable Natural Gas — Through our Renewable Energy segment, we have invested in building landfill gas-to-energy facilities in the U.S. and Canada that produce renewable electricity and RNG. Our RNG facilities in the U.S. qualify for investment tax credits and clean fuel production tax credits, pursuant to Sections 48 and 45Z of the Internal Revenue Code, which we expect to realize through 2027 and 2029, respectively. During the three and six months ended June 30, 2026, we recognized a reduction in our income tax expense of $29 million and $53 million, respectively, due to investment tax credits from our RNG investments compared to $43 million and $89 million, respectively, for the comparable prior year periods. During the three and six months ended June 30, 2026, we recognized a reduction in our income tax expense of $9 million and $44 million, respectively, related to clean fuel production tax credits from our RNG production and sales activity, with $17 million attributable to production and sales during the first half of 2026 and $27 million attributable to 2025 operations. The timing of the recognition of these production tax credits resulted from the issuance of proposed Treasury regulations during the first quarter of 2026 that clarified the qualification of our RNG sales for the credit. Low-Income Housing — We have significant financial interests in entities established to invest in and manage low-income housing properties. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments qualify for federal tax credits that we expect to realize through 2038 pursuant to Sections 42 and 45D of the Internal Revenue Code. During the three and six months ended June 30, 2026, we recognized income tax expense of $26 million and $48 million, respectively, related to amortization under ASU 2023-02 and a reduction in our income tax expense of $35 million and $65 million, respectively, primarily due to federal tax credits realized from these investments. In addition, during the three and six months ended June 30, 2026, we recognized interest expense of $7 million and $15 million, respectively, associated with our investments in low-income housing properties. During the three and six months ended June 30, 2025, we recognized income tax expense of $25 million and $45 million, respectively, related to amortization under ASU 2023-02 and a reduction in our income tax expense of $35 million and $62 million, respectively, primarily due to federal tax credits realized from these investments. In addition, during the three and six months ended June 30, 2025, we recognized interest expense of $8 million and $17 million, respectively, associated with our investments in low-income housing properties. See Note 13 for additional information related to these unconsolidated variable interest entities. |