NEW JERSEY RESOURCES CORPNJR
NEW JERSEY RESOURCES CORP Income Taxes Disclosure
12. INCOME TAXES
The income tax provision from operations for the fiscal years ended September 30, consists of the following:
| (Thousands) | 2025 | 2024 | 2023 | ||||||||
| Current: | |||||||||||
| Federal | $ | 17,157 | $ | 691 | $ | 13,393 | |||||
| State | (874) | (682) | 7,716 | ||||||||
| Deferred: | |||||||||||
| Federal | 54,449 | 66,623 | 36,825 | ||||||||
| State | 26,502 | 18,531 | (8,381) | ||||||||
| Investment/production tax credits | (278) | (257) | (278) | ||||||||
| Income tax provision | $ | 96,956 | $ | 84,906 | $ | 49,275 | |||||
As of September 30, the temporary differences, which give rise to deferred tax assets (liabilities), consist of the following:
| (Thousands) | 2025 | 2024 | ||||||
| Deferred tax assets | ||||||||
Investment tax credits (1) | $ | 150,182 | $ | 192,238 | ||||
| State net operating losses | 28,136 | 38,762 | ||||||
| Deferred revenue | 14,085 | 14,107 | ||||||
| Fair value of derivatives | 3,020 | 5,397 | ||||||
| Impairment of equity method investment | 14,004 | 14,004 | ||||||
| Postemployment benefits | 2,841 | 855 | ||||||
| Incentive compensation | 7,611 | 10,142 | ||||||
| Amortization of intangibles | 5,543 | 6,248 | ||||||
| Overrecovered natural gas costs | 2,975 | 9,072 | ||||||
| Allowance for doubtful accounts | 4,978 | 3,744 | ||||||
| Other | 7,919 | 7,226 | ||||||
| Total deferred tax assets | 241,294 | 301,795 | ||||||
| Less: Valuation allowance | (5,454) | (5,621) | ||||||
| Total deferred tax assets net of valuation allowance | $ | 235,840 | $ | 296,174 | ||||
| Deferred tax liabilities | ||||||||
| Property-related items | $ | (588,101) | $ | (563,403) | ||||
| Remediation costs | (20,953) | (21,656) | ||||||
| Investments in equity investees | (30,044) | (28,704) | ||||||
| Conservation incentive program | (6,344) | (14,379) | ||||||
| Other | (7,989) | (6,065) | ||||||
| Total deferred tax liabilities | $ | (653,431) | $ | (634,207) | ||||
| Total net deferred tax liabilities | $ | (417,591) | $ | (338,033) | ||||
(1)Includes approximately $0.5M and $0.7M for NJNG for fiscal 2025 and 2024, respectively, which is being amortized over the life of the related assets.
A reconciliation of the U.S. federal statutory rate to the effective rate from operations for the fiscal years ended September 30, is as follows:
| (Thousands) | 2025 | 2024 | 2023 | ||||||||
| Statutory income tax expense | $ | 90,842 | $ | 78,683 | $ | 65,940 | |||||
| Change resulting from: | |||||||||||
| Investment/production tax credits | (278) | (257) | (278) | ||||||||
| Cost of removal of assets placed in service prior to 1981 | (6,527) | (5,644) | (4,758) | ||||||||
| AFUDC equity | (2,094) | (1,444) | (1,499) | ||||||||
| State income taxes, net of federal benefit | 20,078 | 14,517 | 13,293 | ||||||||
| Valuation allowance | (167) | (126) | (16,494) | ||||||||
| Tax Act - utility excess deferred income taxes amortized | (3,573) | (3,573) | (3,573) | ||||||||
| Other | (1,325) | 2,750 | (3,356) | ||||||||
| Income tax provision | $ | 96,956 | $ | 84,906 | $ | 49,275 | |||||
| Effective income tax rate | 22.4 | % | 22.7 | % | 15.7 | % | |||||
The Company and one or more of its subsidiaries files or expects to file income and/or franchise tax returns in the U.S. federal jurisdiction and in the states of Connecticut, Delaware, Florida, Georgia, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and West Virginia. The Company neither files in, nor believes it has a filing requirement in, any foreign jurisdictions.
The Company’s U.S. federal income tax returns through fiscal 2021 have either been reviewed by the IRS, or the related statute of limitations has expired and all matters have been settled. U.S. federal income tax returns for periods subsequent to fiscal 2021 are open to examination by the IRS. For all periods subsequent to those ended September 30, 2021, the Company’s state income tax returns are statutorily open to examination in all applicable states with the exception of Colorado and Texas.
In March 2024, the State of New Jersey commenced an examination of the Company’s Corporate Business Tax return for NJR and certain subsidiaries for the fiscal periods ended September 30, 2019 through September 30, 2022. On January 8, 2025, this audit was completed by the State of New Jersey, and no other action is necessary.
NJR evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with uncertain tax positions. A tax benefit claimed, or expected to be claimed, on a tax return may be recognized only if it is more likely than not that the tax position will be upheld upon examination by the applicable taxing authority and is measured based on the largest tax benefit that is more than 50% likely to be realized. Interest and penalties related to unrecognized tax benefits, if any, are recognized within income tax expense, and accrued interest and penalties are recognized within other noncurrent liabilities on the Consolidated Balance Sheets.
Inflation Reduction Act
In August 2022, the President of the U.S. signed the Inflation Reduction Act, which contained provisions addressing inflation, clean energy, healthcare and taxes beginning in 2023. The Inflation Reduction Act imposed a 15% minimum tax rate on corporations with higher than $1B of annual income, along with a 1% excise tax on corporate stock repurchases. The Inflation Reduction Act raised the ITC from 26% to 30% through the end of 2032, with opportunities to increase the credit amount if certain domestic content requirements are satisfied or if the facility is located in an energy community, such as a brownfield site.
OBBBA
On July 4, 2025, the President of the U.S. signed OBBBA into law, which includes a broad range of tax reform provisions, including extending and modifying certain key provisions of the federal Tax Cuts and Jobs Act of 2017, as enacted on December 22, 2017, and expanding certain incentives under the federal Inflation Reduction Act. OBBBA also modified tax legislation affecting clean energy tax credits and accelerated the phase-out of ITCs. The Company evaluated the provisions of OBBBA and concluded it did not have a material impact on its Consolidated Financial Statements.
Other Tax Items
As of September 30, 2025 and 2024, the Company has tax credit carryforwards of approximately $149.7M and $191.6M, respectively, which each have a life of 20 years. The Company expects to utilize this entire carryforward prior to expiration, which would begin in fiscal 2036.
The impairment of the equity method investment in PennEast created net capital loss attributes totaling approximately $56.6M, which could only be utilized to offset capital gains income and carried back three years and forward five years prior to expiration. During the fourth quarter of fiscal 2023, the Company determined that the tax losses created by the impairment may qualify as an ordinary loss, rather than a capital loss. As of both September 30, 2025 and 2024, the Company had a valuation allowance of approximately $5.1M.
As of September 30, 2023, it was determined that the realization of certain deferred tax assets was more likely than not, and thus the valuation allowance previously recorded, of approximately $15.8M, was no longer required. Reversal of the valuation allowance resulted in a corresponding income tax benefit on the Consolidated Statement of Operations. As of September 30, 2025, the remaining valuation allowance of approximately $0.4M related primarily to other state income tax attributes that the Company could not conclude were realizable on a more-likely-than-not basis.
As of September 30, 2025, the Company evaluated certain tax benefits recorded in the Consolidated Financial Statements and concluded that a portion of the tax benefits are uncertain at this time. As a result, the Company recorded a reserve for uncertain tax benefits. The reserve for uncertain tax benefits is as follows:
| (Thousands) | 2025 | 2024 | ||||||
| Balance at October 1, | $ | 4,993 | $ | 4,978 | ||||
| Additions based on tax positions related to the current fiscal period | — | 15 | ||||||
| Balance at September 30, | $ | 4,993 | $ | 4,993 | ||||
As of September 30, 2025 and 2024, there are approximately $5.0M of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The tax benefits relate to fiscal tax years open to examination by the IRS and the state of Pennsylvania and may be subject to subsequent adjustment.
As of September 30, 2025 and 2024, the Company has state income tax net operating losses of approximately $476.1M and $634.7M, respectively. These state net operating losses have varying carry-forward periods dictated by the state in which they were incurred; these state carry-forward periods range from to 20 years, with the majority expiring after 2037. The Company expects to utilize this entire carryforward, other than as described below.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 20, 2025 | Showing above |
| 2021 | Nov 18, 2021 | |
| 2020 | Nov 30, 2020 | |
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.