Constellation Energy Corp
For the period ended Dec 31, 2024. Filed Feb 18, 2025.
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FY2024 · Filed Feb 18, 2025
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13. Income Taxes
- Income Taxes
Components of Income Tax Expense or Benefit
Income taxes are comprised of the following components:
| For the Years Ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Federal | |||
| Current | $426 | $464 | $219 |
| Deferred | 274 | 301 | (655) |
| ITC amortization | (14) | (15) | (15) |
| State | |||
| Current | 127 | 142 | 34 |
| Deferred | (39) | (33) | 29 |
| Total income tax (benefit) expense | $774 | $859 | $(388) |
Rate Reconciliation
The effective income tax rate varies from the U.S. federal statutory rate principally due to the following:
| For the Years Ended December 31, | |||||
|---|---|---|---|---|---|
| 2024 | 2023 | 2022(a) | |||
| U.S. federal statutory rate | 21.0% | 21.0% | 21.0% | ||
| (Decrease) increase due to: | |||||
| State income taxes, net of federal income tax benefit(b) | 1.5 | 3.5 | (9.2) | ||
| Qualified NDT fund income and losses | 4.0 | 10.3 | 46.3 | ||
| Amortization of ITC, including deferred taxes on basis differences | (0.2) | (0.5) | 2.2 | ||
| PTCs and other credits | (9.8) | (0.6) | 7.7 | ||
| Noncontrolling interests | 0.1 | 0.4 | (0.3) | ||
| Other | 0.6 | 1.0 | 3.9 | ||
| Effective income tax rate(c) | 17.1% | 35.1% | 71.6% | ||
(a)As there was a pre-tax loss during 2022, negative percentages represent income tax expense. Positive percentages represent income tax benefit.
(b)Includes ($42) million, ($4) million and $30 million related to state rate changes and certain state tax positions in 2024, 2023, and 2022, respectively.
(c)The change in effective tax rate in 2024 is primarily due to the increase in pre-tax book income inclusive of the nuclear PTC, which is not taxable. The change in effective tax rate in 2023 is primarily due to the impacts of higher realized NDT Income and significant pretax income in 2023 compared to pretax loss in 2022.
Tax Differences and Carryforwards
The tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred tax assets (liabilities), as of December 31, 2024 and 2023 are presented below:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Plant basis differences | $(3,138) | $(3,130) |
| Accrual-based contracts | (30) | (32) |
| Derivatives and other financial instruments | 700 | 984 |
| Deferred pension and postretirement obligation | (336) | (314) |
| Nuclear decommissioning activities | (256) | (640) |
| Tax loss carryforward, net of valuation allowances | 16 | 47 |
| Investment in partnerships | (204) | (193) |
| Other, net | 242 | 460 |
| Deferred income tax liabilities (net) | (3,006) | (2,818) |
| Unamortized ITCs | (325) | (339) |
| Total deferred income tax liabilities (net) and unamortized ITCs | $(3,331) | $(3,157) |
The following table provides our carryforwards, of which the state-related items are presented on a post-apportioned basis, and any corresponding valuation allowances as of December 31, 2024:
| Federal | December 31, 2024 |
|---|---|
| Federal general business credits carryforwards and other carryforwards | $— |
| State | |
| State net operating losses and other carryforwards | 365 |
| Deferred taxes on state tax attributes (net) | 14 |
| Valuation allowance on state tax attributes | (3) |
| Foreign | |
| Foreign net operating losses and other carryforwards | 20 |
| Deferred taxes on foreign tax attributes (net) | 5 |
Unrecognized Tax Benefits
Our unrecognized tax benefits were not material as of and for the years ended December 31,2024, 2023, and 2022, and if recognized, would not significantly impact our effective tax rate. Further, these amounts are not expected to significantly increase or decrease within the next twelve months.
Total amounts of interest and penalties recognized
Interest and penalty expenses are recorded in Interest expense, net and Other, net, respectively, in the Consolidated Statements of Operations and Comprehensive Income. There was no material interest and penalty expense related to our tax positions for the years ended December 31,2024, 2023, and 2022.
Description of tax years open to assessment by major jurisdiction
| Major Jurisdiction | Open Years(a) |
|---|---|
| Federal consolidated income tax returns | 2010-2023 |
| Illinois unitary corporate income tax returns | 2012-2023 |
| Texas combined corporate income tax returns | 2020-2023 |
| New Jersey combined corporate income tax returns | 2020-2023 |
| Maryland separate corporate income tax returns | 2021-2023 |
| Massachusetts combined corporate income tax returns | 2021-2023 |
| New York combined corporate income tax returns | 2019-2023 |
| Pennsylvania separate corporate income tax returns | 2021-2023 |
| California combined corporate income tax returns | 2010-2023 |
(a)Tax years open to assessment include years when we were consolidated by Exelon. See discussion below under the Tax Matters Agreement for responsibility of taxes of these open years.
Constellation participates in the IRS Compliance Assurance Process which provides the opportunity to resolve complex tax matters with the IRS prior to filing its federal income tax returns with a goal to achieve certainty with respect to tax matters. Constellation entered the program for the 2024 tax year.
Other Tax Matters
Tax Matters Agreement
In connection with the separation, we entered a TMA with Exelon. The TMA governs the respective rights, responsibilities, and obligations between us and Exelon after the separation with respect to tax liabilities and benefits, tax attributes, tax returns, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns.
Responsibility and Indemnification for Taxes. As a former subsidiary of Exelon, we have joint and several liability with Exelon to the IRS and certain state jurisdictions relating to the taxable periods that we were included in federal and state filings. However, the TMA specifies the portion of this tax liability for which we will bear contractual responsibility, and we and Exelon agreed to indemnify each other against any amounts for which such indemnified party is not responsible. Specifically, we will be liable for taxes due and payable in connection with tax returns that we are required to file. We will also be liable for our share of certain taxes required to be paid by Exelon with respect to taxable years or periods (or portions thereof) ending on or prior to the separation to the extent that we would have been responsible for such taxes under the Exelon tax sharing agreement then existing. As of December 31, 2024 and 2023, respectively, our Consolidated Balance Sheets reflect $39 million and $37 million in Other deferred credits and other liabilities, respectively, for tax liabilities where we maintain contractual responsibility to Exelon. There wereno payables in Accounts payable and accrued expenses for both periods.
Tax Refunds and Attributes. The TMA provides for the allocation of certain pre-closing tax attributes between us and Exelon. Tax attributes will be allocated in accordance with the principles set forth in the existing Exelon tax sharing agreement, unless otherwise required by law. Under the TMA, we will be entitled to refunds for taxes for which we are responsible. In addition, it is expected that Exelon will have tax attributes that may be used to offset Exelon’s future tax liabilities. A significant portion of such attributes were generated by our business. As of December 31, 2024 and 2023, respectively, we had $138 million and $336 million in Other accounts receivable and $201 million and $178 million in Other deferred debits and other assets for the reclassified tax attributes expected to be utilized by Exelon after separation in accordance with the terms of the TMA.
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