XCEL ENERGY INCXEL

XCEL ENERGY INC Income Taxes Disclosure

10-KFiled Feb 25, 20266 min read
Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense.
Effective income tax reconciliation for years ended Dec. 31:
(Millions of Dollars)202520242023
Income before income taxes (domestic)$1,773 $1,534 $1,625 
Federal statutory rate impact372 322 341 
(Decreases) increases in tax from:
Tax credits
PTCs (a)
(569)(663)(455)
Other(14)(16)(17)
Regulatory adjustments (b)
Plant related excess deferred taxes(87)(87)(83)
AFUDC equity(58)(34)(19)
Other29 14 17 
State income taxes, net of federal tax effect (c)
78 58 73 
Other4 4 (3)
Income tax benefit$(245)$(402)$(146)
202520242023
Federal statutory rate21.0 %21.0 %21.0 %
(Decreases) increases in tax from:
Tax credits
PTCs (a)
(32.3)(43.2)(28.1)
Other(0.8)(1.1)(1.1)
Regulatory adjustments (b)
Plant related excess deferred taxes(4.9)(5.6)(5.1)
AFUDC equity(3.2)(2.2)(1.2)
Other1.6 0.9 1.0 
State income taxes, net of federal tax effect (c)
4.4 3.8 4.5 
Other0.4 0.2 — 
Effective income tax rate(13.8)%(26.2)%(9.0)%
(a)Wind, Solar and Nuclear PTCs (net of transfer discounts) are generally credited to customers (reduction to revenue) and do not materially impact earnings.
(b)Regulatory adjustments primarily relate to the credit of plant related excess deferred taxes to customers for tax rate increases as well as the capitalization of AFUDC equity for book purposes only. Income tax benefits associated with the credit of excess deferred taxes are offset by corresponding revenue reductions.
(c)State and local income taxes are primarily made up of the following jurisdictions: Minnesota, Colorado
Components of income tax expense for years ended Dec. 31:
(Millions of Dollars)202520242023
Current federal tax (benefit) expense$(6)$36 $113 
Current state tax expense2 28 16 
Current change in unrecognized tax expense (benefit)1 2 (21)
Deferred federal tax benefit(333)(510)(331)
Deferred state tax expense96 46 75 
Deferred change in unrecognized tax (benefit) expense(1)— 7 
Deferred ITCs(4)(4)(5)
Total income tax benefit$(245)$(402)$(146)
Components of deferred income tax expense as of Dec. 31:
(Millions of Dollars)202520242023
Deferred tax expense excluding items below$685 $434 $129 
Adjustments to deferred income taxes for tax credit cash transfers(652)(689)(190)
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities(269)(201)(188)
Tax expense allocated to other comprehensive income and other(2)(8)— 
Deferred tax benefit$(238)$(464)$(249)
Components of net deferred tax liability as of Dec. 31:
(Millions of Dollars)2025
2024(a)
Deferred tax liabilities:
Differences between book and tax bases of property$7,587 $7,008 
Regulatory assets500 559 
Operating lease assets232 282 
Pension expense171 155 
Other98 93 
Total deferred tax liabilities$8,588 $8,097 
Deferred tax assets:
Tax credit carryforward$1,546 $1,589 
Regulatory liabilities663 744 
Operating lease liabilities231 282 
Other employee benefits116 102 
Deferred ITCs10 11 
NOL carryforward1 1 
NOL and tax credit valuation allowances(74)(73)
Other91 122 
Total deferred tax assets2,584 2,778 
Net deferred tax liability$6,004 $5,319 
(a)Prior periods have been reclassified to conform to current year presentation.
Cash received (paid) for income taxes for the years ended Dec. 31:
(Millions of Dollars)202520242023
Cash received for income taxes: federal, net (a)
$671 $633 $104 
Cash paid for income taxes: state(30)(45)(12)
Total$641 $588 $92 
(a)Includes proceeds from tax credit transfers.
Other Income Tax Matters — NOL amounts represent the tax loss that is carried forward and tax credits represent the deferred tax asset. NOL and tax credit carryforwards as of Dec. 31:
(Millions of Dollars)20252024
Federal tax credit carryforwards$1,474 $1,519 
Valuation allowances for federal credit carryforwards(10)(14)
State NOL carryforwards8 9 
Valuation allowances for state NOL carryforwards(5)(2)
State tax credit carryforwards, net of federal detriment (a)
71 70 
Valuation allowances for state credit carryforwards, net of federal benefit (b)
(64)(58)
(a)State tax credit carryforwards are net of federal detriment of $19 million as of Dec. 31, 2025 and 2024.
(b)Valuation allowances for state tax credit carryforwards were net of federal benefit of $17 million and $16 million as of Dec. 31, 2025 and 2024, respectively.
Federal carryforward periods expire between 2038 and 2045. State carryforward periods, not including those with indefinite carryforward periods, expire between 2026 and 2038.
Unrecognized Tax Benefits
Federal Audit — In 2023 the IRS issued its Revenue Agent’s Report related to the federal tax loss carryback claim. The Company materially agreed with the report and re-recognized the related benefit in 2023.
Statute of limitations applicable to Xcel Energy’s consolidated federal income tax returns expire as follows:
Tax YearExpiration
2022September 2026
Additionally, the statute of limitations related to federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns.
State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions and various other state income-based tax returns.
As of Dec. 31, 2025, Xcel Energy’s earliest open tax years (subject to examination by state taxing authorities in its major operating jurisdictions) were as follows:
StateTax Year(s)Expiration
Colorado2014 - 2016March 2026
Colorado2021October 2026
Minnesota2021June 2026
Texas2020June 2028
Texas2021June 2029
Texas2022August 2027
Texas2023November 2028
Wisconsin2021October 2026
•In 2025, Minnesota began an audit of tax years 2021-2023. As of Dec. 31, 2025, no material adjustments have been proposed.
•In 2021, Texas began an audit of tax years 2016 - 2019. As of Dec. 31, 2025, no material adjustments have been proposed.
•In 2021, Wisconsin began an audit of tax years 2016-2019. As of Dec. 31, 2025, no material adjustments have been proposed.
•No other state income tax audits are in progress for its major operating jurisdictions as of Dec. 31, 2025.
Unrecognized tax benefit balance may include permanent tax positions, which if recognized would affect the ETR. In addition, the unrecognized tax benefit balance may include temporary tax positions for which deductibility is highly certain, but for which there is uncertainty about the timing. A change in the period of deductibility would not affect the ETR but would accelerate the payment to the taxing authority.
Unrecognized tax benefits - permanent vs. temporary:
(Millions of Dollars)Dec. 31, 2025Dec. 31, 2024
Unrecognized tax benefit — Permanent tax positions$43 $43 
Unrecognized tax benefit — Temporary tax positions— — 
Total unrecognized tax benefit$43 $43 
Changes in unrecognized tax benefits:
(Millions of Dollars)202520242023
Balance at Jan. 1$43 $41 $67 
Additions based on tax positions related to the current year 3 5 5 
Additions for tax positions of prior years2 2 1 
Reductions for tax positions of prior years(5)(3)(29)
Reductions for tax positions related to settlements with taxing authorities— — (1)
Reductions for tax positions related to statute of limitations— (2)(2)
Balance at Dec. 31$43 $43 $41 
Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:
(Millions of Dollars)Dec. 31, 2025Dec. 31, 2024
NOL and tax credit carryforwards$(33)$(35)
Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.
Interest payable related to unrecognized tax benefits:
(Millions of Dollars)202520242023
Payable for interest related to unrecognized tax benefits at Jan. 1$(2)$(1)$(4)
Interest (expense) benefit related to unrecognized tax benefits(2)(1)3 
Payable for interest related to unrecognized tax benefits at Dec. 31$(4)$(2)$(1)
Penalties accrued related to unrecognized tax benefits as of Dec. 31, 2025 were not material. No penalties were accrued related to unrecognized tax benefits as of Dec. 31, 2024 or 2023.

Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Feb 27, 2025
2023Feb 21, 2024
2022Feb 23, 2023
2020Feb 17, 2021
2019Feb 21, 2020
2018Feb 22, 2019
2017Feb 23, 2018
2016Feb 24, 2017
2015Feb 19, 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.

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