Northwest Natural Holding CoNWN
Northwest Natural Holding Co Income Taxes Disclosure
INCOME TAX
The following tables provide a reconciliation between income taxes calculated at the statutory federal tax rate and the provision for income taxes reflected in the NW Holdings and NW Natural statements of comprehensive income or loss for December 31:
| NW Holdings | |||||||||||||||||||||||||||||||||||
| in thousands | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 32,482 | 21.0 | % | $ | 23,088 | 21.0 | % | $ | 26,508 | 21.0 | % | |||||||||||||||||||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect (a) | 11,240 | 7.3 | % | 9,931 | 9.0 | % | 10,875 | 8.6 | % | ||||||||||||||||||||||||||
| Tax Credits | (747) | (0.5) | % | (102) | (0.1) | % | (140) | (0.1) | % | ||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Nondeductible compensation (Sec. 162(m)) | 1,685 | 1.1 | % | 780 | 0.7 | % | 385 | 0.3 | % | ||||||||||||||||||||||||||
| Other nontaxable or nondeductible items | (960) | (0.6) | % | (444) | (0.4) | % | (1,290) | (1.0) | % | ||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Differences required to be flowed-through by regulatory commissions | (2,341) | (1.5) | % | (2,182) | (2.0) | % | (3,976) | (3.1) | % | ||||||||||||||||||||||||||
| Total provision for income taxes and Effective Tax Rate | $ | 41,359 | 26.7 | % | $ | 31,071 | 28.3 | % | $ | 32,362 | 25.6 | % | |||||||||||||||||||||||
| (a) State taxes in Oregon made up the majority (greater than 50 percent) of the tax effect in this category. | |||||||||||||||||||||||||||||||||||
| NW Natural | |||||||||||||||||||||||||||||||||||
| in thousands | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 36,024 | 21.0 | % | $ | 25,964 | 21.0 | % | $ | 29,486 | 21.0 | % | |||||||||||||||||||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect (a) | 13,546 | 7.9 | % | 10,611 | 8.6 | % | 11,510 | 8.2 | % | ||||||||||||||||||||||||||
| Tax Credits | (747) | (0.4) | % | (102) | (0.1) | % | (140) | (0.1) | % | ||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Nondeductible compensation (Sec. 162(m)) | 1,655 | 1.0 | % | 780 | 0.6 | % | 385 | 0.3 | % | ||||||||||||||||||||||||||
| Other nontaxable or nondeductible items | (848) | (0.5) | % | (457) | (0.3) | % | (1,597) | (1.2) | % | ||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Differences required to be flowed-through by regulatory commissions | (2,308) | (1.3) | % | (2,178) | (1.8) | % | (3,972) | (2.8) | % | ||||||||||||||||||||||||||
| Total provision for income taxes and Effective Tax Rate | $ | 47,322 | 27.6 | % | $ | 34,618 | 28.0 | % | $ | 35,672 | 25.4 | % | |||||||||||||||||||||||
| (a) State taxes in Oregon made up the majority (greater than 50 percent) of the tax effect in this category. | |||||||||||||||||||||||||||||||||||
The NW Holdings and NW Natural effective income tax rates for 2025 compared to 2024 decreased 1.6 and 0.4 percentage points at NW Holdings and NW Natural, respectively. At NW Holdings and NW Natural, the increase in income tax expense is primarily due to higher pre-tax income in the current period compared to the prior year, and the lower effective tax rate is primarily the result of state income tax expense growing at a different rate than pretax income.
The NW Holdings and NW Natural effective income tax rates for 2024 compared to 2023 increased 2.7 and 2.6 percentage points at NW Holdings and NW Natural, respectively. The increase in effective tax rate is primarily related to lower regulatory flow-through. The decrease in income tax expense is primarily due to lower pre-tax income in the current period compared to the prior year.
The provision for current and deferred income taxes consists of the following at December 31:
| NW Holdings | NW Natural | |||||||||||||||||||||||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||||
| Federal | $ | 413 | $ | 10,489 | $ | 13,496 | $ | 3,349 | $ | 15,996 | $ | 20,512 | ||||||||||||||||||||||||||
| State | 5,473 | 9,216 | 9,901 | 5,946 | 11,078 | 12,304 | ||||||||||||||||||||||||||||||||
| Total current income taxes | 5,886 | 19,705 | 23,397 | 9,295 | 27,074 | 32,816 | ||||||||||||||||||||||||||||||||
| Deferred | ||||||||||||||||||||||||||||||||||||||
| Federal | 26,720 | 8,012 | 5,100 | 26,827 | 5,191 | 591 | ||||||||||||||||||||||||||||||||
| State | 8,753 | 3,354 | 3,865 | 11,200 | 2,353 | 2,265 | ||||||||||||||||||||||||||||||||
| Total deferred income taxes | 35,473 | 11,366 | 8,965 | 38,027 | 7,544 | 2,856 | ||||||||||||||||||||||||||||||||
| Income tax provision | $ | 41,359 | $ | 31,071 | $ | 32,362 | $ | 47,322 | $ | 34,618 | $ | 35,672 | ||||||||||||||||||||||||||
The following table summarizes the tax effect of significant items comprising NW Holdings and NW Natural's deferred income tax balances recorded at December 31:
| NW Holdings | NW Natural | |||||||||||||||||||||||||
| In thousands | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Deferred tax liabilities: | ||||||||||||||||||||||||||
| Plant and property | $ | 391,216 | $ | 370,072 | $ | 379,653 | $ | 357,944 | ||||||||||||||||||
| Leases receivable | 33,647 | 34,477 | 33,647 | 34,477 | ||||||||||||||||||||||
| Pension and postretirement obligations | 29,550 | 26,116 | 29,550 | 26,116 | ||||||||||||||||||||||
| Income tax regulatory asset | 11,697 | 11,768 | 11,357 | 11,768 | ||||||||||||||||||||||
| Lease right of use assets | 20,513 | 20,542 | 19,960 | 20,407 | ||||||||||||||||||||||
| Other intangible assets | 7,465 | 3,388 | — | — | ||||||||||||||||||||||
| Other | 12,957 | — | 14,188 | — | ||||||||||||||||||||||
| Total deferred income tax liabilities | 507,045 | 466,363 | 488,355 | 450,712 | ||||||||||||||||||||||
| Deferred income tax assets: | ||||||||||||||||||||||||||
| Income tax regulatory liability | 44,135 | 45,570 | 43,900 | 45,320 | ||||||||||||||||||||||
| Lease liabilities | 20,575 | 20,585 | 20,017 | 20,449 | ||||||||||||||||||||||
| Net operating losses and credits carried forward | 6,692 | 105 | 169 | 44 | ||||||||||||||||||||||
| Other | 5,457 | 4,716 | ||||||||||||||||||||||||
| Total deferred income tax assets | 71,402 | 71,717 | 64,086 | 70,529 | ||||||||||||||||||||||
| Deferred investment tax credits | 1,824 | 2,503 | 1,824 | 2,503 | ||||||||||||||||||||||
| Total net deferred income tax liabilities | $ | 437,467 | $ | 397,149 | $ | 426,093 | $ | 382,686 | ||||||||||||||||||
At December 31, 2025 and 2024, regulatory income tax assets of $3.6 million and $5.8 million, respectively, were recorded by NW Natural, a portion of which is recorded in current assets. These regulatory income tax assets primarily represent future rate recovery of deferred tax liabilities, resulting from differences in NWN Gas Utility plant financial statement and tax bases and NWN Gas Utility plant removal costs, which were previously flowed through for rate making purposes and to take into account the additional future taxes, which will be generated by that recovery. These deferred tax liabilities, and the associated regulatory income tax assets, are currently being recovered through customer rates. At December 31, 2025 and 2024, regulatory income tax assets of $7.8 million and $6.0 million, respectively, were recorded by NW Natural, representing future recovery of deferred tax liabilities resulting from the equity portion of AFUDC.
At December 31, 2025 and 2024, deferred tax assets of $43.6 million and $44.9 million, respectively, were recorded by NW Natural representing the future income tax benefit associated with the excess deferred income tax regulatory liability recorded as a result of the lower federal corporate income tax rate provided for by the TCJA. At December 31, 2025 and 2024, regulatory liability balances representing the benefit of the change in deferred taxes as a result of the TCJA of $164.6 million and $169.5 million, respectively, were recorded by NW Natural.
NW Holdings and NW Natural assess the available positive and negative evidence to estimate if sufficient taxable income will be generated to utilize their respective existing deferred tax assets. Based upon this assessment, NW Holdings and NW Natural determined that it is more likely than not that all of their respective deferred tax assets recorded as of December 31, 2025 will be realized.
The Company estimates it has net operating loss (NOL) carryforwards of $24.8 million for federal taxes and $22.3 million for state taxes at December 31, 2025. The federal NOLs do not expire and we anticipate fully utilizing the state NOL carryforward
balances before they begin to expire in 2036. California alternative minimum tax (AMT) credits of $56 thousand are also available. The AMT credits do not expire.
Uncertain tax positions are accounted for in accordance with accounting standards that require an assessment of the anticipated settlement outcome of material uncertain tax positions taken in a prior year, or planned to be taken in the current year. Until such positions are sustained, the uncertain tax benefits resulting from such positions would not be recognized. No reserves for uncertain tax positions were recorded as of December 31, 2025, 2024, or 2023.
The federal income tax returns for tax years 2021 and earlier are closed by statute. The IRS Compliance Assurance Process (CAP) examination of the 2022 and 2023 tax years have been completed. There were no material changes to these returns as filed. The 2024 and 2025 tax years are currently under IRS CAP examination. The 2026 CAP application has been filed. Under the CAP program, NW Holdings and NW Natural work with the IRS to identify and resolve material tax matters before the tax return is filed each year.
As of December 31, 2025, income tax years 2021 through 2024 remain open for examination by the states of California and Texas. Income tax years 2022 through 2024 are open for examination by the states of Arizona, Idaho, Nebraska, and Oregon. Income tax year 2024 is open for examination by the state of Florida.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
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.