Company: SREA
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0001032208-25-000065
Chunk: 278

Company: SEMPRA
Filing Date: 2025-11-05
Form: 10-Q
Item: Item 8
Chunk 278
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. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. Items subject to flow-through treatment include:▪repairs expenditures related to certain utility plant fixed assets ▪the equity component of AFUDC, which is non-taxable ▪cost of removal related to certain utility plant assets ▪utility self-developed software expenditures▪depreciation related to certain utility plant assets▪state income taxes AFUDC related to equity recorded for regulated construction projects at Sempra Infrastructure has similar flow-through treatment.

47

The OBBBA was signed into law on July 4, 2025. The OBBBA includes revisions to tax credits and other incentives for energy and climate initiatives of the Inflation Reduction Act enacted in 2022 and extends or revises key provisions of the TCJA, among other changes. Effective January 1, 2025, we have adopted the provisions of OBBBA, which include immediate expensing of domestic research and experimental expenditures, including utility self-developed software expenditures, under the new Internal Revenue Code Section 174A. This change supersedes prior rules requiring five-year amortization of domestic research and experimental expenditures under the TCJA. In accordance with IRS transitional guidance (Revenue Procedure 2025-28), we plan to elect to accelerate deductions for domestic unamortized utility self-developed software expenditures incurred in tax years 2022-2024, with remaining balances deductible over 2025 and 2026. As a result, Sempra, SDG&E and SoCalGas recorded an income tax benefit of $73 million, $26 million and $47 million, respectively, in the three months and nine months ended September 30, 2025. We will continue to monitor guidance issued by the U.S. Department of the Treasury and the IRS.In connection with classifying SI Partners and Ecogas as held for sale, which we discuss in Note 6, we recognized income tax expense of $514 million and $552 million in the three months and nine months ended September 30, 2025, respectively. We have previously included unrecognized income tax benefits in our annual tabular reconciliation related to our investment in SI Partners. As a result of the held for sale classification and the anticipated closing of the sale, we believe it is reasonably possible that a decrease of up to $150 million in unrecognized income tax benefits related to outside basis differences and Mexico tax liabilities will