Company: SREA
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001032208-25-000027
Chunk: 26

Company: SEMPRA
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 1
Chunk 26
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EFIT) AND EFFECTIVE INCOME TAX RATES(Dollars in millions)Three months ended March 31,20252024Sempra:Income tax expense$57 $172 Income before income taxes and equity earnings$651 $705 Equity earnings, before income tax(1)141 134 Pretax income$792 $839 Effective income tax rate7 %21 %SDG&E:Income tax expense$14 $40 Income before income taxes$295 $263 Effective income tax rate5 %15 %SoCalGas:Income tax expense$38 $43 Income before income taxes$481 $402 Effective income tax rate8 %11 %(1)    We discuss how we recognize equity earnings in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.

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Sempra, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR. For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability that will be flowed through to customers in the future, which impacts the ETR. 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.

NOTE 2. NEW ACCOUNTING STANDARDS

We describe below recent accounting pronouncements that have had or may have a significant effect on our results of operations, financial condition, cash flows