HAWAIIAN ELECTRIC INDUSTRIES INCHE
HAWAIIAN ELECTRIC INDUSTRIES INC Income Taxes Disclosure
Note 13 · Income taxes | ||
The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis beginning with the year ended December 31, 2025.
The following table presents required disclosure pursuant to ASU 2023-09 for the year ended December 31, 2025. The components of income taxes attributable to income (loss) from continuing operations were as follows:
| HEI consolidated | Hawaiian Electric consolidated | |||||||||||||
Year ended December 31 | 2025 | 2025 | ||||||||||||
| (in thousands) | ||||||||||||||
US Income from continuing operations before income tax expense | $ | 166,929 | $ | 220,588 | ||||||||||
| Current tax expense (benefit) | ||||||||||||||
| US federal | $ | 44,092 | $ | 44,958 | ||||||||||
| US state | 7,186 | 10,317 | ||||||||||||
Total current tax expense | $ | 51,278 | $ | 55,275 | ||||||||||
| Deferred tax expense (benefit) | ||||||||||||||
| US federal | (13,533) | (8,692) | ||||||||||||
| US federal deferred tax credits | — | — | ||||||||||||
| US state | 2,903 | 2,450 | ||||||||||||
| US state deferred tax credits | — | — | ||||||||||||
Total deferred tax benefit | $ | (10,630) | $ | (6,242) | ||||||||||
Total income tax expense | ||||||||||||||
| US federal | $ | 30,559 | $ | 36,266 | ||||||||||
| US federal deferred tax credits | — | — | ||||||||||||
| US state | 10,089 | 12,767 | ||||||||||||
| US state deferred tax credits | — | — | ||||||||||||
Total income tax expense | $ | 40,648 | $ | 49,033 | ||||||||||
The following table presents the required disclosures prior to our adoption of ASU 2023-09. The components of income taxes attributable to income (loss) from continuing operations for common stock were as follows:
| HEI consolidated | Hawaiian Electric consolidated | |||||||||||||||||||||||||
| Years ended December 31 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Federal | ||||||||||||||||||||||||||
| Current | $ | 13,220 | $ | 22,206 | $ | 34,216 | $ | 40,365 | ||||||||||||||||||
| Deferred | (376,141) | 1,951 | (373,316) | (3,444) | ||||||||||||||||||||||
Deferred tax credits, net | — | 52 | — | 22 | ||||||||||||||||||||||
| (362,921) | 24,209 | (339,100) | 36,943 | |||||||||||||||||||||||
| State | ||||||||||||||||||||||||||
| Current | 2,009 | 2,924 | 7,864 | 9,367 | ||||||||||||||||||||||
| Deferred | (110,050) | 7,401 | (108,311) | 4,883 | ||||||||||||||||||||||
Deferred tax credits, net | — | — | — | — | ||||||||||||||||||||||
| (108,041) | 10,325 | (100,447) | 14,250 | |||||||||||||||||||||||
| Total | $ | (470,962) | $ | 34,534 | $ | (439,547) | $ | 51,193 | ||||||||||||||||||
A reconciliation of the amount of income taxes computed at the federal statutory rate to the amount provided in the consolidated statements of income after the adoption of ASU 2023-09 is as follows:
| HEI consolidated | Hawaiian Electric consolidated | ||||||||||||||||||||||
Year ended December 31 | 2025 | 2025 | |||||||||||||||||||||
Amount | Percentage | Amount | Percentage | ||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||
| US federal statutory income tax rate | $ | 35,055 | 21.0 | % | $ | 46,323 | 21.0 | % | |||||||||||||||
State of Hawaii income taxes, net of federal effect | 7,858 | 4.7 | % | 9,917 | 4.5 | % | |||||||||||||||||
Federal tax credits | |||||||||||||||||||||||
Investment tax credits | 5,221 | 3.2 | % | — | — | % | |||||||||||||||||
Other federal tax credits | (87) | (0.1 | %) | (87) | — | % | |||||||||||||||||
| Changes in valuation allowances | (633) | (0.4 | %) | — | — | % | |||||||||||||||||
| Nontaxable and nondeductible items | 1,549 | 0.9 | % | 553 | 0.3 | % | |||||||||||||||||
| Changes in unrecognized tax benefits | 18 | — | % | 18 | — | % | |||||||||||||||||
| Other Adjustments | |||||||||||||||||||||||
| Net deferred tax asset (liability) adjustment related to the Tax Act | (5,565) | (3.2 | %) | (5,565) | (2.6 | %) | |||||||||||||||||
| Other | (2,768) | (1.7 | %) | (2,126) | (1.0 | %) | |||||||||||||||||
| Total income taxes | $ | 40,648 | 24.4 | % | $ | 49,033 | 22.2 | % | |||||||||||||||
A reconciliation of the amount of income taxes computed at the federal statutory rate to the amount provided in the consolidated statements of income for years prior to the adoption of ASU 2023-09 is as follows:
| HEI consolidated | Hawaiian Electric consolidated | ||||||||||||||||||||||
| Years ended December 31 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Amount at the federal statutory income tax rate | $ | (376,235) | $ | 38,283 | $ | (349,423) | $ | 51,899 | |||||||||||||||
| Increase (decrease) resulting from: | |||||||||||||||||||||||
State income taxes, net of federal income tax benefit | (85,483) | 7,989 | (79,487) | 11,097 | |||||||||||||||||||
Net deferred tax asset (liability) adjustment related to the Tax Act | (6,200) | (7,316) | (6,200) | (7,316) | |||||||||||||||||||
Tax credits, net | (2,987) | (2,251) | (2,987) | (2,251) | |||||||||||||||||||
| Other, net | (57) | (2,171) | (1,450) | (2,236) | |||||||||||||||||||
| Total | $ | (470,962) | $ | 34,534 | $ | (439,547) | $ | 51,193 | |||||||||||||||
| Effective income tax rate (%) | 26.3 | 18.9 | 26.4 | 20.7 | |||||||||||||||||||
The tax effects of book and tax basis differences that give rise to deferred tax assets and liabilities were as follows:
| HEI consolidated | Hawaiian Electric consolidated | ||||||||||||||||||||||
| December 31 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Deferred tax assets | |||||||||||||||||||||||
Wildfire tort-related claims | $ | 483,749 | $ | 483,749 | $ | 483,749 | $ | 483,749 | |||||||||||||||
Regulatory liabilities, excluding amounts attributable to property, plant and equipment | 73,204 | 76,765 | 73,204 | 76,765 | |||||||||||||||||||
Lease liabilities | 150,477 | 130,556 | 148,736 | 128,610 | |||||||||||||||||||
| Retirement benefits | 61,819 | 45,879 | 57,077 | 40,568 | |||||||||||||||||||
| Revenue taxes | 45,769 | 48,379 | 45,769 | 48,379 | |||||||||||||||||||
Capital loss carryforward | 66,068 | 66,430 | — | — | |||||||||||||||||||
Other1 | 36,015 | 35,827 | 23,384 | 22,387 | |||||||||||||||||||
Total deferred income tax assets | 917,101 | 887,585 | 831,919 | 800,458 | |||||||||||||||||||
Valuation allowances | (73,118) | (73,459) | — | — | |||||||||||||||||||
Total deferred income tax assets, net | 843,983 | 814,126 | 831,919 | 800,458 | |||||||||||||||||||
| Deferred tax liabilities | |||||||||||||||||||||||
| Property, plant and equipment related | 545,969 | 542,109 | 541,279 | 532,257 | |||||||||||||||||||
Lease right-of-use assets | 150,400 | 130,483 | 148,736 | 128,610 | |||||||||||||||||||
Regulatory assets, excluding amounts attributable to property, plant and equipment | 21,575 | 21,678 | 21,575 | 21,678 | |||||||||||||||||||
| Other | 53,186 | 47,148 | 52,979 | 46,330 | |||||||||||||||||||
Total deferred income tax liabilities | 771,130 | 741,418 | 764,569 | 728,875 | |||||||||||||||||||
Net deferred income tax asset (liability) | $ | 72,853 | $ | 72,708 | $ | 67,350 | $ | 71,583 | |||||||||||||||
1 As of December 31, 2025 and 2024, HEI consolidated has deferred tax assets of $2.0 million and $3.8 million, respectively, relating to the benefit of state tax credit carryforwards of $2.6 million and $5.2 million, respectively. These state tax credit carryforwards primarily relate to the West Loch PV project that do not expire.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. Based upon historical taxable income and projections for future taxable income, management believes it is more likely than not the Company and the Utilities will realize substantially all of the benefits of the deferred tax assets, excluding the capital loss from the sale of ASB. As of December 31, 2025 and 2024, valuation allowances for deferred tax benefits were $73.1 million and $73.5 million, respectively, recorded on HEI consolidated related to the capital loss from the sale of ASB and the book/tax difference in equity basis of retained ASB stock. Since capital losses can only be offset against capital gains, the Company believes that it is more likely than not that the tax benefit from ASB's capital loss will not be realized. This is due to the lack of expected capital gains and no tax strategies in place to generate capital gains before the loss expires. As a result, a valuation allowance was established. The Utilities are included in the consolidated federal
and Hawaii income tax returns of HEI and are subject to the provisions of HEI’s tax sharing agreement, which determines each subsidiary’s (or subgroup’s) income tax return liabilities and refunds on a standalone basis as if it filed a separate return (or subgroup consolidated return).
The following is a reconciliation of the Company’s liability for unrecognized tax benefits for 2025, 2024 and 2023.
| HEI consolidated | Hawaiian Electric consolidated | ||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Unrecognized tax benefits, January 1 | $ | 12.5 | $ | 27.7 | $ | 30.6 | $ | 5.2 | $ | 15.6 | $ | 11.7 | |||||||||||||||||||||||
| Additions based on tax positions taken during the year | — | 0.7 | 0.5 | — | — | 0.3 | |||||||||||||||||||||||||||||
| Reductions based on tax positions taken during the year | — | (0.1) | — | — | — | — | |||||||||||||||||||||||||||||
| Additions for tax positions of prior years | 0.2 | 1.5 | 3.8 | 0.2 | 1.5 | 3.7 | |||||||||||||||||||||||||||||
| Reductions for tax positions of prior years | (3.3) | (4.6) | (7.2) | — | (0.6) | (0.1) | |||||||||||||||||||||||||||||
| Lapses of statute of limitations | — | (1.9) | — | — | (0.5) | — | |||||||||||||||||||||||||||||
| Settlement | — | (10.8) | — | — | (10.8) | — | |||||||||||||||||||||||||||||
| Unrecognized tax benefits, December 31 | $ | 9.4 | $ | 12.5 | $ | 27.7 | $ | 5.4 | $ | 5.2 | $ | 15.6 | |||||||||||||||||||||||
The Company currently has no open Internal Revenue Service income tax audits. The Company was notified on January 12, 2026, that its Hawaii State income tax returns for tax years 2022 through 2024 were selected for audit.
At December 31, 2025 and 2024, there were $5.4 million and $5.2 million of unrecognized tax benefits, respectively, that, if recognized, would affect the Company’s and Utilities’ annual effective tax rate.
Based on information currently available, the Company and the Utilities believe these accruals have adequately provided for potential income tax issues with federal and state tax authorities, and that the ultimate resolution of tax issues for all open tax periods will not have a material adverse effect on its results of operations, financial condition or liquidity.
Tax years post 2021 remains open under Federal and Hawaii statues of limitations.
HEI consolidated. The Company recognizes interest accrued related to unrecognized tax benefits in “Interest expense, net” and penalties, if any, in operating expenses. In 2025, 2024 and 2023, the Company recognized approximately $0.8 million, $0.3 million and $1.3 million, respectively, in interest expense. The Company had $3.1 million and $2.3 million of interest accrued as of December 31, 2025 and 2024, respectively.
Hawaiian Electric consolidated. The Utilities recognize interest accrued related to unrecognized tax benefits in “Interest expense and other charges, net” and penalties, if any, in operating expenses. In 2025, 2024 and 2023, the Utilities recognized approximately $0.1 million, $0.3 million and $0.1 million in interest expense, respectively. The Utilities had $0.2 million and $0.1 million of interest accrued as of December 31, 2025 and 2024, respectively.
As of December 31, 2025, the disclosures above present the Company’s and the Utilities’ accruals for potential tax liabilities, which involve management’s judgment regarding the likelihood of the benefits being sustained under governmental review.
Tax developments. In 2025, federal tax legislation, commonly referred to as the One Big Beautiful Bill Act, which includes a broad range of tax reform provisions, was signed into law in the United States on July 4, 2025. The Company recognized the impacts of the 2025 provisions including the timing of deductions for research and experimentation costs. The Company will continue to assess the legislation’s impact on future reporting periods but the legislation is not expected to have a material impact on the Company’s financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 23, 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.