Company: EAI
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000065984-25-000012
Chunk: 367

Company: ENTERGY ARKANSAS, LLC
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7
Chunk 367
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aries are closely monitoring any potential effects associated with such federal tax incentives to assess the expected future effects on their results of operations, cash flows, and financial condition.  Entergy Arkansas has accrued approximately $5 million of solar production tax credits associated with the Walnut Bend Solar facility, the Driver Solar facility, and the West Memphis Solar facility in 2024.  As the value of such credits is expected to be provided to customers, a regulatory liability has been recorded for all credits recognized in 2024.

In April 2023 the IRS issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized and provides procedures for taxpayers to obtain automatic consent to change their method of accounting.  Entergy adopted this new method of income tax accounting beginning with the 2023 federal income tax return utilizing the safe harbor method in accordance with Revenue Procedure 2023-15.  The additional temporary deductions taken using the new method resulted in the recognition of deferred tax liabilities of $14.2 million for Entergy, $7.6 million for Entergy Louisiana, and $6.6 million for Entergy New Orleans.

Entergy Arkansas, Entergy Louisiana, and System Energy have the potential to generate zero-emission nuclear power production tax credits for electricity generated by their respective nuclear power facilities.  Based on guidance provided by the U.S. Treasury and the IRS, the nuclear production tax credits will be calculated by multiplying the kWh of qualifying electricity by $0.003, with the value of the credits decreasing ratably, or phasing out, once the annual gross receipts from the sale of nuclear power exceed a certain threshold.  If certain prevailing wage requirements are satisfied, the calculation of the credit, as described in the preceding sentence, is multiplied by a factor of five.  Additional guidance is needed from the U.S. Treasury and/or the IRS to determine how the value of these credits will be calculated for power generated from nuclear facilities of rate-regulated utilities.  Due to the uncertainty of value, if any, of credits Entergy Arkansas, Entergy Louisiana, or System Energy may receive, such credits have not been recognized for the nuclear power produced in 2024.  Depending on the specifics of the expected additional guidance from the U.S. Treasury and/or the IRS, Entergy Arkansas, Entergy Louisiana, or System Energy may not recognize any production tax credits for their nuclear facilities, or