Company: MSEX
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001174947-25-000251
Chunk: 1011

Company: MIDDLESEX WATER CO
Filing Date: 2025-02-28
Form: 10-K
Item: Item 6
Chunk 1011
---
3 
    2022
  
    Current: 

    Federal 
    $1,554  
    $2,952  
    $425 
  
    State 
     1,126  
     1,066  
     1,381 
  
    Deferred: 

    Federal 
     3,802  
     (3,261) 
     1,242 
  
    State 
     482  
     348  
     260 
  
    Investment Tax Credits 
     (59) 
     (64) 
     (68)
  
    Total Income Tax Expense 
    $6,905  
    $1,041  
    $3,240 

As part of Middlesex’s March 2018 general
rate case settlement with the NJBPU, Middlesex received approval for regulatory accounting treatment of income tax benefits associated
with the adoption of tangible property regulations issued by the IRS (fully amortized as of March 31, 2022) as well as prospective recognition
of the income tax benefits for the immediate deduction of repair costs on tangible property. This results in significant reductions in
the Company’s effective income tax rate, current income tax expense and deferred income tax expense (benefit).

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. The components
of the net deferred tax liability are as follows:

    (In Thousands)

    December 31,

    2024 
    2023
  
    Utility Plant Related 
    $95,877  
    $84,330 
  
    Customer Advances 
     (3,525) 
     (3,546)
  
    Employee Benefits 
     7,888  
     7,100 
  
    Investment Tax Credits 
     181  
     240 
  
    Other 
     814  
     612 
  
    Total Accumulated Deferred Income Taxes 
    $101,235  
    $88,736 

52 

The determination of our provision for income
taxes requires the use of estimates and the interpretation and application of tax laws. Judgment is required in assessing the deductibility
and recoverability of certain tax benefits. We use the asset and liability method to determine and record deferred tax assets and liabilities,
representing future tax benefits and taxes payable, which result from the