Company: MSEX
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001174947-25-000251
Chunk: 204

Company: MIDDLESEX WATER CO
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1A
Chunk 204
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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 differences in basis recorded in GAAP financial statements and
amounts recorded in the income tax returns. The deferred tax assets and liabilities are recorded utilizing the statutorily enacted tax
rates expected to be in effect at the time the assets are realized and/or the liabilities settled. An offsetting valuation allowance is
recorded when it is more 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