SOUTHWEST AIRLINES CO

For the period ended Dec 31, 2023. Filed Feb 6, 2024.

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FY2023 · Filed Feb 6, 2024

LUV$46.32+0.0%Stored close · as of Nov 10, 2026

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Contents

15. Income Taxes

INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and liabilities as of December 31, 2023 and 2022, are as follows:

(in millions)	2023	2022
DEFERRED TAX LIABILITIES:
Accelerated depreciation	$3,595	$3,279
Prepaid insurance	258	238
Operating lease right-of-use assets	276	311
Other	91	154
Total deferred tax liabilities	4,220	3,982
DEFERRED TAX ASSETS:
Accrued employee benefits	757	424
Loyalty program and flight credit liability	599	659
Operating lease liabilities	279	313
Net operating losses and tax credits (a)	309	310
Other	232	291
Total deferred tax assets	2,176	1,997
Net deferred tax liability	$2,044	$1,985

(a) As of December 31, 2023 and 2022, the Company had approximately $36 million and $43 million, respectively, of state net operating loss carryforwards (tax effected) to reduce future state taxable income. These state net operating loss carryforwards will expire in years 2025 through 2041 if unused. As of December 31, 2023 and 2022, the Company had $268 million and $275 million, respectively, of federal net operating loss carryforwards (tax effected) that may be carried forward indefinitely.

The provision (benefit) for income taxes is composed of the following:

(in millions)	2023	2022	2021
CURRENT:
Federal	$(10)	$(36)	$337
State	19	(3)	33
Change in federal statutory rate	—	—	(2)
Total current	9	(39)	368
DEFERRED:
Federal	140	208	(43)
State	19	20	23
Total deferred	159	228	(20)
Income tax provision (benefit)	$168	$189	$348

The effective tax rate on Income (loss) before income taxes differed from the federal income tax statutory rate for the following reasons:

(in millions)	2023	2022	2021
Tax at statutory U.S. tax rates	$133	$153	$278
State income taxes, net of federal benefit	30	12	45
Change in federal statutory tax rate	—	—	(2)
Convertible debt repurchases	—	31	21
DOT settlement	22	—	—
Federal tax credits	(19)	(13)	(2)
Other, net	2	6	8
Total income tax provision (benefit)	$168	$189	$348

The only periods subject to examination for the Company’s federal tax return are tax years 2020-2023. The Company is also subject to various examinations from state and local income tax jurisdictions in the ordinary course of business. These examinations are not expected to have a material effect on the financial results of the Company.

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