CHESAPEAKE UTILITIES CORPCPK
CHESAPEAKE UTILITIES CORP Income Taxes Disclosure
INCOME TAXES
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We file a consolidated federal income tax return. Income tax expense allocated to our subsidiaries is based upon their respective taxable incomes and tax credits. State income tax returns are filed on a separate company basis in most states where we have operations and/or are required to file. Our federal and state corporate income tax returns for tax years after 2022 are subject to examination.
For federal income tax purposes, we have investment tax credits of $9.0 million, which begin to expire in 2044. For state income tax purposes, we have NOL carryforwards in various states of $192.1 million and $99.3 million as of December 31, 2025 and 2024, respectively, almost all of which will expire in 2040. We have not recorded a valuation allowance to reduce the future benefit of the investment tax credits or NOL carryforwards because we believe they will be fully utilized prior to expiration.
Tax Law Changes
On December 22, 2017, the TCJA was signed into law. Substantially all of the provisions of the TCJA were effective for taxable years beginning on or after January 1, 2018. The provisions that significantly impacted us include the reduction of the corporate federal income tax rate from 35 percent to 21 percent. Our federal income tax expense for periods beginning on January 1, 2018 are based on the new federal corporate income tax rate. The TCJA included changes to the Internal Revenue Code, which materially impacted our 2017 financial statements. ASC 740, Income Taxes, requires recognition of the effects of changes in tax laws in the period in which the law is enacted. ASC 740 requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. During 2018, we completed the assessment of the impact of accounting for certain effects of the TCJA. At the date of enactment in 2017, we re-measured deferred income taxes based upon the new corporate tax rate. See Note 17, Rates and Other Regulatory Activities, for further discussion of TCJA’s impact on our regulated businesses.
See Note 2, Summary of Significant Accounting Policies, for more information on tax law updates.
The following tables provide: (a) the components of income tax expense in 2025, 2024, and 2023; (b) the reconciliation between the statutory federal income tax rate and the Company's effective income tax rate for 2025, 2024, and 2023; and (c) the components of accumulated deferred income tax assets and liabilities at December 31, 2025 and 2024.
| For the Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current Income Tax Expense | |||||||||||||||||
| Federal | $ | 10.1 | $ | 3.7 | $ | 14.7 | |||||||||||
| State | 13.9 | 2.7 | 5.5 | ||||||||||||||
| Other | (0.5) | (0.4) | — | ||||||||||||||
| Total current income tax expense | 23.5 | 6.0 | 20.2 | ||||||||||||||
| Deferred Income Tax Expense | |||||||||||||||||
| Federal | 29.4 | 29.3 | 7.8 | ||||||||||||||
| State | (0.2) | 7.9 | 0.1 | ||||||||||||||
| Total deferred income tax expense | 29.2 | 37.2 | 7.9 | ||||||||||||||
| Total Income Tax Expense | $ | 52.7 | $ | 43.2 | $ | 28.1 | |||||||||||
The Company has elected to retrospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures, or ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory rate of 21.0 percent to the Company's effective rate for the year ended December 31, 2025, and as previously disclosed for the years ended December 31, 2024 and 2023 in accordance with the guidance in ASU No. 2023-09:
| For the Year Ended December 31, | ||||||||||||||||||||||||||
| (dollars in millions) | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Reconciliation of Effective Income Tax Rate | ||||||||||||||||||||||||||
| Income before income taxes | $ | 193.0 | $ | 161.8 | $ | 115.3 | ||||||||||||||||||||
| U.S. federal tax at statutory rate | 40.5 | 21.0 | % | 34.0 | 21.0 | % | 24.2 | 21.0 | % | |||||||||||||||||
| Reconciling Items: | ||||||||||||||||||||||||||
| State and local income taxes, net of federal income tax effect | 10.8 | 5.6 | % | 8.4 | 5.2 | % | 4.4 | 3.8 | % | |||||||||||||||||
| Effects of changes in tax laws or rates enacted in the current period | — | — | % | — | — | % | (2.5) | (2.1) | % | |||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||
| Other | 1.4 | 0.7 | % | 0.8 | 0.5 | % | 2.0 | 1.7 | % | |||||||||||||||||
| Income Taxes and Effective Income Tax Rate | $ | 52.7 | 27.3 | % | $ | 43.2 | 26.7 | % | $ | 28.1 | 24.4 | % | ||||||||||||||
| As of December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Deferred Income Taxes | |||||||||||
| Deferred income tax liabilities: | |||||||||||
| Property, plant and equipment | $ | 318.8 | $ | 289.7 | |||||||
| Acquisition adjustment | 4.9 | 5.2 | |||||||||
| Deferred gas costs | 4.7 | 2.5 | |||||||||
| Natural gas conversion costs | 4.4 | 4.6 | |||||||||
| Storm reserve liability | 5.8 | 5.8 | |||||||||
| Intangible assets | 16.0 | 6.4 | |||||||||
| Other | 6.5 | 8.4 | |||||||||
| Total deferred income tax liabilities | 361.1 | 322.6 | |||||||||
| Deferred income tax assets: | |||||||||||
| Pension and other employee benefits | 6.5 | 5.1 | |||||||||
| Net operating loss carryforwards | 9.0 | 1.1 | |||||||||
| Investment tax credits | 9.0 | — | |||||||||
| Accrued expenses | 4.6 | 4.0 | |||||||||
| Regulatory asset | 7.6 | 6.0 | |||||||||
| Other | 11.1 | 10.3 | |||||||||
| Total deferred income tax assets | 47.8 | 26.5 | |||||||||
| Deferred Income Taxes | $ | 313.3 | $ | 296.1 | |||||||
Cash payments of U.S. federal and state income taxes, net of refunds, were as follows:
| For the Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Net cash paid for income taxes consisted of the following: | |||||||||||||||||
| Cash payments of federal income taxes, net | $ | 8.5 | $ | 1.6 | $ | 19.0 | |||||||||||
| Cash payments of state and local income taxes, net | |||||||||||||||||
| Aggregated state and local jurisdictions: | 0.3 | 0.3 | 0.9 | ||||||||||||||
| Disaggregated state and local jurisdictions: | |||||||||||||||||
| Delaware | 3.8 | 3.0 | 0.4 | ||||||||||||||
| Florida | 2.9 | 2.7 | 0.9 | ||||||||||||||
| Maryland | 0.5 | 1.8 | 0.7 | ||||||||||||||
| Total cash payments of U.S. federal and state income taxes (net of refunds) | $ | 16.0 | $ | 9.4 | $ | 21.9 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
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.