Increase in reserve due to settlement

  


|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Con Edison | CECONY |
| (% of Pre-tax income) | 2022 | 2021 | 2022 | 2021 |
| STATUTORY TAX RATE |  |  |  |  |
| Federal | 21  | % | 21  | % | 21  | % | 21  | % |
| Changes in computed taxes resulting from: |  |  |  |  |
| State income tax, net of federal income tax benefit | 6  |  | 4  |  | 5  |  | 5  |  |
| Amortization of excess deferred federal income taxes | (9) |  | (14) |  | (12) |  | (13) |  |
| Taxes attributable to non-controlling interest | 1  |  | 2  |  | —  |  | —  |  |
| Cost of removal | 1  |  | 2  |  | 2  |  | 2  |  |
| Other plant-related items | (1) |  | (1) |  | (1) |  | (1) |  |
| Renewable energy credits | (2) |  | (3) |  | —  |  | —  |  |
|  |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
|  |  |  |  |  |
| Reserve for uncertain tax positions | 1  |  | —  |  | —  |  | —  |  |
| Research and development credits | (1) |  | —  |  | (1) |  |  |
|  |  |  |  |  |
| Effective tax rate | 17  | % | 11  | % | 14  | % | 14  | % |

  
In April 2021, New York State passed a law that increased the corporate franchise tax rate on business income from 6.5% to 7.25%, retroactive to January 1, 2021, for taxpayers with taxable income greater than $5 million. The law also reinstated the business capital tax at 0.1875%, not to exceed an annual maximum tax liability of $5 million per taxpayer. New York State requires a corporate franchise taxpayer to calculate and pay the highest amount of tax under the three alternative methods: a tax on business income; a tax on business capital; or a fixed dollar minimum. The provisions to increase the corporate franchise tax rate and reinstate a business capital tax are scheduled to expire after 2023 and are not expected to have a material impact on the Companies’ financial position, results of operations or liquidity.   
Uncertain Tax PositionsAs a result of an unfavorable settlement reached at appeals with the IRS in the second quarter of 2022, the Clean Energy Businesses increased its reserve for uncertain tax positions for prior years by $5 million. At June 30, 2022, the estimated liability for uncertain tax positions for Con Edison was $22 million ($6 million for CECONY). Con Edison reasonably expects to resolve within the next twelve months approximately $18 million of various federal and state uncertainties due to the expected completion of ongoing tax examinations, of which the entire amount, if recognized, would reduce Con Edison's effective tax rate. The amount related to CECONY is $4 million, which, if recognized, would reduce CECONY’s effective tax rate. The total amount of unrecognized tax benefits, if recognized, that would reduce Con Edison’s effective tax rate is $22 million, with $6 million attributable to CECONY.  
The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. For the six months ended June 30, 2022 and 2021, the Companies recognized an immaterial amount of interest expense and no penalties for uncertain tax positions in their consolidated income statements. At June 30, 2022 and December 31, 2021, the Companies recognized an immaterial amount of accrued interest on their consolidated balance sheets.  
  
Note K – Revenue RecognitionThe following table presents, for the three and six months ended June 30, 2022 and 2021, revenue from contracts with customers as defined in Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers," as well as additional revenue from sources other than contracts with customers, disaggregated by major source.   
  
  
  
38                             
