Constellation Energy CorpCEG
Constellation Energy Corp Income Taxes Disclosure
Income Taxes
__________
Income (Loss) Before Income Taxes
Income (loss) before income taxes is comprised of the following components:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 3,458 | $ | 4,433 | $ | 2,137 | |||||||||||
| Foreign | 53 | 83 | 310 | ||||||||||||||
| Total Income (loss) before income taxes | $ | 3,511 | $ | 4,516 | $ | 2,447 | |||||||||||
Components of Income Tax Expense or Benefit
Income taxes are comprised of the following components:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | |||||||||||||||||
| Current | $ | 764 | $ | 451 | $ | 392 | |||||||||||
| Deferred | 238 | 229 | 302 | ||||||||||||||
| ITC amortization | (15) | (14) | (15) | ||||||||||||||
| State | |||||||||||||||||
| Current | 136 | 127 | 142 | ||||||||||||||
| Deferred | 50 | (39) | (34) | ||||||||||||||
| Foreign | |||||||||||||||||
| Current | 14 | (25) | 72 | ||||||||||||||
| Deferred | — | 45 | — | ||||||||||||||
| Total Income tax (benefit) expense | $ | 1,187 | $ | 774 | $ | 859 | |||||||||||
Income Taxes Paid
Income taxes (net of refunds) paid during the year was comprised of the following components:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 341 | $ | 242 | $ | 315 | |||||||||||
| State | |||||||||||||||||
| Illinois | 16 | 24 | 19 | ||||||||||||||
| Maryland | 11 | 24 | 7 | ||||||||||||||
| Other state | 91 | 141 | 41 | ||||||||||||||
| Foreign | |||||||||||||||||
| United Kingdom | (20) | — | 61 | ||||||||||||||
| Other foreign | 7 | 5 | 23 | ||||||||||||||
| Total income taxes paid (net of refunds) | $ | 446 | $ | 436 | $ | 466 | |||||||||||
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, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| U.S. federal statutory income tax | 21.0 | % | $ | 737 | 21.0 | % | $ | 948 | 21.0 | % | $ | 514 | |||||||||||||||||||||||
| (Decrease) increase due to: | |||||||||||||||||||||||||||||||||||
State income taxes, net of federal income tax benefit(a)(b) | 4.2 | 147 | 1.5 | 69 | 3.5 | 86 | |||||||||||||||||||||||||||||
Foreign tax effects | 0.1 | 2 | 0.1 | 3 | 0.5 | 12 | |||||||||||||||||||||||||||||
Tax credits | |||||||||||||||||||||||||||||||||||
| PTC | (2.1) | (74) | (9.4) | (425) | — | — | |||||||||||||||||||||||||||||
| Amortization of ITC, including deferred taxes on basis differences | (0.3) | (12) | (0.2) | (11) | (0.5) | (12) | |||||||||||||||||||||||||||||
| Other | (0.3) | (8) | (0.4) | (16) | (0.6) | (15) | |||||||||||||||||||||||||||||
Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Share-based payment awards | (1.2) | (44) | (0.4) | (17) | (0.3) | (7) | |||||||||||||||||||||||||||||
| Excess officers compensation | 1.5 | 51 | 0.7 | 34 | 0.8 | 20 | |||||||||||||||||||||||||||||
| Other | 1.0 | 38 | 0.2 | 10 | 0.4 | 9 | |||||||||||||||||||||||||||||
Other adjustments | |||||||||||||||||||||||||||||||||||
| Qualified NDT fund income and losses | 9.9 | 350 | 4.0 | 179 | 10.3 | 252 | |||||||||||||||||||||||||||||
Effective income tax(c)(d) | 33.8 | % | $ | 1,187 | 17.1 | % | $ | 774 | 35.1 | % | $ | 859 | |||||||||||||||||||||||
_________
(a)Includes $21 million, ($42) million and ($4) million related to state rate changes and certain state tax positions in 2025, 2024, and 2023, respectively.
(b)In 2025, state taxes in Massachusetts, New York, Pennsylvania, and New Jersey made up the majority (greater than 50%) of the tax effect in this category. In 2024, state taxes in Maryland, Illinois, Massachusetts, California, New Jersey, New York, Pennsylvania, and Connecticut made up the majority (greater than 50%) of the tax effect in this category. In 2023, state taxes in Maryland, Pennsylvania, New Jersey, and California made up the majority (greater than 50%) of the tax effect in this category.
(c)The change in effective tax rate in 2025 is primarily due to the inclusion of nuclear PTCs, which are not taxable, and higher income from Qualified NDT funds.
(d)Amounts may not recalculate due to rounding.
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, 2025 and 2024 are presented below:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Plant basis differences | $ | (3,321) | $ | (3,138) | |||||||
Accrual-based contracts | (35) | (30) | |||||||||
| Derivatives and other financial instruments | 1,090 | 700 | |||||||||
| Deferred pension and postretirement obligation | (359) | (336) | |||||||||
| Nuclear decommissioning activities | (187) | (256) | |||||||||
Tax loss carryforward | 23 | 19 | |||||||||
Tax loss carryforward valuation allowances | (3) | (3) | |||||||||
| Investment in partnerships | (283) | (204) | |||||||||
| Other, net | (160) | 242 | |||||||||
| Deferred income tax liabilities (net) | (3,235) | (3,006) | |||||||||
| Unamortized ITCs | (309) | (325) | |||||||||
| Total deferred income tax liabilities (net) and unamortized ITCs | $ | (3,544) | $ | (3,331) | |||||||
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, 2025:
| December 31, 2025 | |||||
| Federal | |||||
| Federal general business credits carryforwards and other carryforwards | $ | — | |||
| State | |||||
State net operating losses (NOL) and other carryforwards | 393 | ||||
| Deferred taxes on state tax attributes (net) | 17 | ||||
| Valuation allowance on state tax attributes | (3) | ||||
| Foreign | |||||
Foreign NOL and other carryforwards | 20 | ||||
| Deferred taxes on foreign tax attributes (net) | 5 | ||||
As of December 31, 2025, NOL carryforwards consisted primarily of NOL in ten states, totaling $17M in deferred tax assets with the majority to expire between 2030 and 2032. A portion of state NOLs is offset with a valuation allowance to address potential limitation on NOL usage prior to expiration.
Unrecognized Tax Benefits
Our unrecognized tax benefits were not material as of and for the years ended December 31, 2025, 2024, and 2023, 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, 2025, 2024, and 2023.
Description of tax years open to assessment by major jurisdiction
| Major Jurisdiction | Open Years(a) | ||||
| Federal consolidated income tax returns | 2010-2024 | ||||
| Illinois unitary corporate income tax returns | 2012-2024 | ||||
Texas combined corporate income tax returns | 2021-2024 | ||||
| New Jersey combined corporate income tax returns | 2021-2024 | ||||
Maryland separate corporate income tax returns | 2022-2024 | ||||
Massachusetts combined corporate income tax returns | 2022-2024 | ||||
| New York combined corporate income tax returns | 2022-2024 | ||||
| Pennsylvania separate corporate income tax returns | 2022-2024 | ||||
California combined corporate income tax returns | 2010-2024 | ||||
(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
One Big Beautiful Bill Act
In July 2025, Congress passed the OBBBA which, among other things, included certain changes in tax law. See Note 3 — Regulatory Matters for additional information.
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, 2025 and 2024, respectively, our Consolidated Balance Sheets reflect $43 million and $39 million in Other deferred credits and other liabilities, respectively, for tax liabilities where we maintain contractual responsibility to Exelon.
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. In February 2024, we executed an amendment to the TMA that modified the timing of Exelon's payment of amounts due to us. During 2025 and 2024, we received payments for tax attributes utilized by Exelon related to the 2024 and 2023 tax years of $145 million and $174 million, respectively. As of December 31, 2025 and 2024, respectively, we had $175 million and $138 million in Accounts receivable, net and $21 million and $201 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.
IRS Notice 2026. In February 2026, the IRS issued Notice 2026‑7 (the “Notice”), which provides guidance on the implementation of the corporate alternative minimum tax (CAMT). The Notice permits taxpayers to deduct repair and maintenance costs under tax law principles in determining adjusted financial statement income and applies retroactively to previously filed tax returns. As a result of this Notice, Exelon amended its 2023 and 2024 tax returns to reflect less CAMT and thus lower utilization of previously refunded tax attributes.
We received a demand letter from Exelon on February 19, 2026, and expect to remit to Exelon $235 million under the TMA related to prior periods. This payment is due within 45 days of our receipt of the demand letter. We will increase our receivable for the $235 million in the first quarter of 2026 as we expect Exelon to pay us as it utilizes these tax attributes in future periods.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 25, 2022 | |
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.