Company: EAI
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000065984-25-000012
Chunk: 554

Company: ENTERGY ARKANSAS, LLC
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7
Chunk 554
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 ($10.2)Income Tax AuditsEntergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2019.  All state taxing authorities’ examinations are complete for years before 2016.  Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.2016-2018 IRS AuditThe IRS completed its examination of the 2016 through 2018 tax years and issued a Revenue Agent Report (RAR) for each federal filer under audit in November 2023.  Entergy agreed to all adjustments contained in the RARs.  Entergy and the Registrant Subsidiaries recorded all the material effects resulting from the RARs in the fourth quarter of 2023.Utility RestructuringsIn 2017, Entergy New Orleans undertook an internal restructuring, and in 2018, Entergy Arkansas and Entergy Mississippi also participated in internal restructurings under which these three Utility operating companies joined Entergy Louisiana as wholly-owned subsidiaries of Entergy Utility Holding Company, LLC.  The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes, which resulted in recognition of a gain for income tax purposes and a corresponding increase in the tax basis of assets, in accordance with the Internal Revenue Code and Treasury Regulations.  Entergy determined that there was uncertainty regarding the treatment of certain aspects of the restructurings and recorded provisions for uncertain tax positions which are now considered to be effectively settled in accordance with accounting standards.  The reversal of such provisions for uncertain tax positions results in a reduction of income tax expense of $156 million for Entergy Arkansas, $1 million for Entergy Mississippi, and $6 million for Entergy New Orleans.The IRS also required Entergy New Orleans to reverse a tax gain associated with the 2017 restructuring that had been previously recognized, allowing Entergy New Orleans to reduce its tax expense by $39 million.After the restructuring, Entergy Arkansas adopted a new method of accounting for income tax purposes in which its nuclear decommissioning costs are treated as production costs of electricity includable in cost of goods sold, which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return that was treated as an unrecognized tax benefit.  In conjunction with