SOUTHWEST AIRLINES CO
For the period ended Dec 31, 2024. Filed Feb 7, 2025.
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FY2024 · Filed Feb 7, 2025
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14. 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, 2024 and 2023, are as follows:
| (in millions) | 2024 | 2023 |
|---|---|---|
| DEFERRED TAX LIABILITIES: | ||
| Accelerated depreciation | $3,351 | $3,595 |
| Prepaid insurance | 282 | 258 |
| Operating lease right-of-use assets | 314 | 276 |
| Other | 99 | 91 |
| Total deferred tax liabilities | 4,046 | 4,220 |
| DEFERRED TAX ASSETS: | ||
| Accrued employee benefits | 337 | 757 |
| Loyalty program and flight credit liability | 604 | 599 |
| Operating lease liabilities | 319 | 279 |
| Net operating losses and tax credits (a) | 352 | 309 |
| Other | 267 | 232 |
| Total deferred tax assets | 1,879 | 2,176 |
| Net deferred tax liability | $2,167 | $2,044 |
(a) As of December 31, 2024 and 2023, the Company had approximately $56 million and $36 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 2046 if unused. As of December 31, 2024 and 2023, the Company had $253 million and $268 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) | 2024 | 2023 | 2022 |
|---|---|---|---|
| CURRENT: | |||
| Federal | $— | $(10) | $(36) |
| State | 1 | 19 | (3) |
| Total current | 1 | 9 | (39) |
| DEFERRED: | |||
| Federal | 108 | 140 | 208 |
| State | 24 | 19 | 20 |
| Total deferred | 132 | 159 | 228 |
| Income tax provision (benefit) | $133 | $168 | $189 |
The effective tax rate on Income (loss) before income taxes differed from the federal income tax statutory rate for the following reasons:
| (in millions) | 2024 | 2023 | 2022 |
|---|---|---|---|
| Tax at statutory U.S. tax rates | $126 | $133 | $153 |
| State income taxes, net of federal benefit | 20 | 30 | 12 |
| Nondeductible per diem | 9 | 8 | 1 |
| Convertible debt repurchases | — | — | 31 |
| DOT settlement | (3) | 22 | — |
| Federal tax credits | (33) | (19) | (13) |
| Other, net | 14 | (6) | 5 |
| Total income tax provision (benefit) | $133 | $168 | $189 |
The only periods subject to examination for the Company’s federal tax return are tax years 2020-2024. 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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