Company: MSEX
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001174947-25-000251
Chunk: 1216

Company: MIDDLESEX WATER CO
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7A
Chunk 1216
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 likely than not that some or all of the deferred income tax assets won’t be realized. Any significant changes
to the estimates and judgments with respect to the interpretations, timing or deductibility could result in a material change to earnings
and cash flows.

Occasionally, federal and state taxing authorities
determine that it is necessary to make certain changes to the income tax laws. These changes may include but are not limited to changes
in the tax rates and/or the treatment of certain items of income or expense. Accounting guidance requires that the Company reflect the
effect of changes in tax laws or tax rates at the date of enactment. Additionally, the Company is required to re-measure its deferred
tax assets and liabilities as of the date of enactment. For non-regulated entities, the effects of changes in tax laws or tax rates are
required to be included in income from continuing operations for the period that includes the enactment date. For regulated entities,
if as the result of an action by a regulator it is probable that the future increase or decrease in taxes payable for items such as changes
in tax laws or rates will be recovered from or returned to customers through future rates, an asset or liability shall be recognized for
that probable increase or decrease in future revenue. Accounting guidance also requires that regulatory liabilities and/or assets be considered
a temporary difference for which a related deferred tax asset and/or liability shall be recognized.

Accounting guidance requires that we establish
reserves for uncertain tax positions, if any, when it is more likely than not that the positions will not be sustained when challenged
by taxing authorities. Any changes to the estimates and judgments with respect to the interpretations, timing or deductibility could result
in a change to earnings and cash flows.

Interest and penalties related to unrecognized
tax benefits, if any, are recognized within interest charges and other expense, respectively. 

Note 4 - Commitments and Contingent Liabilities

Water Supply – Middlesex’s
agreement with the New Jersey Water Supply Authority (NJWSA) for the purchase of untreated water expires November 30, 2048. NJSWA provides
for an average purchase of 27.0 million gallons a day (mgd), with a peak up to 47.0 mgd. Pricing is set annually by the NJWSA through
a public rate making process. The agreement has provisions for additional pricing in the event Middlesex overdrafts or exceeds certain
monthly and annual thresholds.

Middlesex also has an agreement with a non-affiliated