ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (In thousands of dollars, except per share amounts)
The Company is not a primary beneficiary of IEP as it does not have both (1) the power to direct the activities that most significantly impact IEP’s economic performance, and (2) the obligation to absorb losses or the right to receive benefits that could be significant to IEP. Therefore, the Company is not required to consolidate IEP in its financial statements. The Company reconsiders whether it is the primary beneficiary on an ongoing basis. The Company’s maximum risk of loss is limited to $5,125, which represents the long-term portion of the Convertible Note Investment.
Note 8 – Income Taxes
Income tax benefit for the years ended December 31, is comprised of the following:
Years Ended December 31,
2025
2024
2023
Current: Federal
$
- $
- $
1,913
State
6,623 6,623
5,920 5,920
11,487 13,400
Deferred: Federal
1,521
(4,583) (23,173) (27,756)
(103,617)
State
(4,699) (3,178)
23,772
(79,845) (66,445)
Total income tax expense/(benefit)
$
3,445 $
(21,836) $
The statutory Federal tax rate is 21% for 2025, 2024, and 2023. For states with a corporate net income tax, the state corporate net income tax rates range from 2.25% to 9.50% for the years presented. The Company’s effective income tax rate for 2025, 2024, and 2023 was 0.6%, (3.8)%, and (15.4)%, respectively. The Company remains subject to examination by federal and state tax authorities for the tax years of 2022 through 2025. The differences between income taxes expected at the federal statutory rate and the reported income tax benefit are described below: Year Ended December 31, 2025 Amount Percentage US Federal statutory tax rate $ 130,166 21.0% State and local income tax, net of Federal income tax effect (a) 2,336 0.4% Changes in valuation allowances 108 0.0% Nontaxable or nondeductible items 7,948 1.3% Changes in unrecognized tax benefits 1,294 0.2% Other adjustments: Plant basis differences (114,892) (18.6%) Amortization of excess deferred income taxes (6,476) (1.0%) Release of income tax reserve regulatory liability (b) (10,218) (1.6%) Other (6,821) (1.1%) Actual income tax expense $ 3,445 0.6% (a) Pennsylvania accounts for the majority of state and local income tax, net of federal income tax effect. (b) Release of income tax reserve regulatory liability of ($22,575) of which ($12,357) is included in state and local income tax, net of federal income tax effect.
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