AVISTA CORP Income Taxes Disclosure
NOTE 13. ACCOUNTING FOR INCOME TAXES
Income Tax Expense
Income tax expense consisted of the following for the years ended December 31 (dollars in millions):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current income tax expense: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
20 |
|
|
$ |
5 |
|
|
$ |
1 |
|
State |
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
Total current income tax expense |
|
|
22 |
|
|
|
8 |
|
|
|
3 |
|
Deferred income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
2 |
|
|
|
(5 |
) |
|
|
(37 |
) |
Total deferred income tax expense (benefit) |
|
|
2 |
|
|
|
(5 |
) |
|
|
(37 |
) |
Total income tax expense (benefit) |
|
$ |
24 |
|
|
$ |
3 |
|
|
$ |
(34 |
) |
A reconciliation of federal income taxes derived from the statutory federal tax rate of 21 percent applied to income before income taxes is as follows for the years ended December 31 (dollars in millions):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
Income from continuing operations before income tax expense (benefit) |
|
$ |
217 |
|
|
N/A |
|
|
$ |
183 |
|
|
N/A |
|
|
$ |
137 |
|
|
N/A |
|
|||
U.S. federal statutory tax rate |
|
|
46 |
|
|
|
21.0 |
% |
|
|
38 |
|
|
|
21.0 |
% |
|
|
29 |
|
|
|
21.0 |
% |
State income taxes, net of federal income tax effect (1) |
|
|
1 |
|
|
|
0.5 |
|
|
|
2 |
|
|
|
0.9 |
|
|
|
2 |
|
|
|
1.5 |
|
Research and development tax credits |
|
|
(1 |
) |
|
|
(0.5 |
) |
|
|
(1 |
) |
|
|
(0.6 |
) |
|
|
(3 |
) |
|
|
(1.7 |
) |
Other adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Flow through related to deduction of meters and mixed service costs (2) |
|
|
(7 |
) |
|
|
(3.2 |
) |
|
|
(23 |
) |
|
|
(12.4 |
) |
|
|
(48 |
) |
|
|
(34.9 |
) |
Excess deferred tax amortization |
|
|
(11 |
) |
|
|
(4.9 |
) |
|
|
(11 |
) |
|
|
(6.0 |
) |
|
|
(12 |
) |
|
|
(8.9 |
) |
CARES Act tax benefit amortization |
|
|
(2 |
) |
|
|
(0.9 |
) |
|
|
(1 |
) |
|
|
(0.6 |
) |
|
|
(1 |
) |
|
|
(0.7 |
) |
Other |
|
|
(2 |
) |
|
|
(0.9 |
) |
|
|
(1 |
) |
|
|
(0.8 |
) |
|
|
(1 |
) |
|
|
(0.7 |
) |
Total other adjustments |
|
|
(22 |
) |
|
|
(9.9 |
) |
|
|
(36 |
) |
|
|
(19.8 |
) |
|
|
(62 |
) |
|
|
(45.2 |
) |
Effective tax rate |
|
$ |
24 |
|
|
|
11.1 |
% |
|
$ |
3 |
|
|
|
1.5 |
% |
|
$ |
(34 |
) |
|
|
(24.4 |
)% |
In July 2025, OBBB was signed into law, which includes significant changes to the U.S. tax code and related laws. The Company has evaluated the potential impact of OBBB on our consolidated financial statements in accordance with ASC 740 and, as of December 31, 2025, has determined the impact to the effective tax rate is not material.
Cash Paid for Income Taxes
Income taxes paid (net of refunds) consisted of the following for the years ended December 31 (dollars in millions):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Federal |
|
$ |
26 |
|
|
$ |
9 |
|
|
$ |
— |
|
State |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Total income taxes paid (net of refunds) |
|
$ |
28 |
|
|
$ |
11 |
|
|
$ |
2 |
|
State income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions for the years ended December 31 (dollars in millions):
|
|
2025 |
|
2024 |
|
|
2023 |
|
||
Alaska |
|
* |
|
$ |
1 |
|
|
$ |
1 |
|
Oregon |
|
* |
|
|
1 |
|
|
|
1 |
|
*Jurisdiction below the threshold for the period presented.
Deferred 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 and tax credit carryforwards. The total net deferred income tax liability consisted of the following as of December 31 (dollars in millions):
|
|
2025 |
|
|
2024 |
|
||
Deferred income tax assets: |
|
|
|
|
|
|
||
Regulatory liabilities |
|
$ |
194 |
|
|
$ |
194 |
|
Tax credits and net operating loss carryforwards |
|
|
29 |
|
|
|
36 |
|
Provisions for pensions |
|
|
14 |
|
|
|
16 |
|
Other |
|
|
56 |
|
|
|
49 |
|
Total gross deferred income tax assets |
|
|
293 |
|
|
|
295 |
|
Valuation allowances for deferred tax assets |
|
|
(8 |
) |
|
|
(8 |
) |
Total deferred income tax assets after valuation allowances |
|
|
285 |
|
|
|
287 |
|
Deferred income tax liabilities: |
|
|
|
|
|
|
||
Utility property, plant, and equipment |
|
|
780 |
|
|
|
759 |
|
Regulatory assets |
|
|
255 |
|
|
|
252 |
|
Other |
|
|
31 |
|
|
|
27 |
|
Total gross deferred income tax liabilities |
|
|
1,066 |
|
|
|
1,038 |
|
Uncertain tax benefits for deferred tax liabilities |
|
|
(3 |
) |
|
|
— |
|
Total deferred income tax liabilities |
|
|
1,063 |
|
|
|
1,038 |
|
Net long-term deferred income tax liability |
|
$ |
778 |
|
|
$ |
751 |
|
The realization of deferred income tax assets is dependent upon the ability to generate taxable income in future periods. The Company evaluated available evidence supporting the realization of its deferred income tax assets and determined it is more likely than not that deferred income tax assets will be realized.
As of December 31, 2025, the Company had $22 million of state tax credit carryforwards. Of the total amount, the Company believes that it is more likely than not that it will only be able to utilize $14 million of the state tax credits. As such, the Company has recorded a valuation allowance of $8 million against the state tax credit carryforwards and reflected the net amount of $14 million as an asset as of December 31, 2025. State tax credits expire from 2026 to 2039.
Uncertain Tax Positions
The Company recognizes tax positions that meet the more-likely-than-not threshold as the largest amount of the tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a tax authority that has full knowledge of all relevant information. The change in unrecognized tax benefits is as follows (dollars in millions):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Unrecognized tax benefits at January 1 |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
— |
|
Gross increases - tax positions in prior period |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
Gross increases - tax positions in current period |
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
Unrecognized tax benefits at December 31 |
|
$ |
4 |
|
|
$ |
1 |
|
|
$ |
— |
|
The Company's unrecognized tax benefits include approximately $1 million related to tax positions as of December 31, 2025 and 2024 that, if recognized, would impact the annual effective tax rate.
Status of Internal Revenue Service (IRS) and State Examinations
The Company and its eligible subsidiaries file consolidated federal income tax returns. All tax years after 2021 are open for an IRS tax examination.
The Company files state income tax returns in certain jurisdictions, including Idaho, Oregon, Montana and Alaska. Subsidiaries are charged or credited with the tax effects of their operations on a stand-alone basis.
All tax years after 2021 are open for examination in Idaho, Oregon, Montana and Alaska.
The Company believes open tax years for federal or state income taxes will not result in adjustments that would be significant to the consolidated financial statements.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.