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INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES INCOME TAX RATE RECONCILIATION
Year ended December 31, | 2023 | 2022 | 2021
(millions of Canadian dollars) |  |  |
Earnings before income taxes | 7,879 | 4,542 | 7,729
Canadian federal statutory income tax rate | 15 | % | 15 | % | 15 | %
Expected federal taxes at statutory rate | 1,182 | 681 | 1,159
Increase/(decrease) resulting from: |  |  |
Provincial and state income taxes 1 | 411 | 108 | 228
Foreign and other statutory rate differentials 2 | 187 | 295 | 134
Effects of rate-regulated accounting 3 | (106) | (122) | (139)
Write-off of regulatory deferrals 3,4 | 115 | — | —
Part VI.1 tax, net of federal Part I deduction 3,5 | 66 | 76 | 73
US Minimum Tax 6 | 100 | 107 | —
Non-taxable portion of gain on sale of investmen t 3,7 | — | — | (23)
Valuation allowance 3 | (12) | 6 | 5
Accounting impairment of non-deductible goodwill 3,8 | — | 370 | —
Noncontrolling interests 3,9 | 19 | 9 | (17)
Investment and production tax credits | (47) | — | —
Other 3 | (94) | 74 | (5)
Income tax expense | 1,821 | 1,604 | 1,415
Effective income tax rate | 23.1 | % | 35.3 | % | 18.3 | %
1 The change in provincial and state income taxes from 2022 to 2023 reflects the decrease in earnings from Canadian operations and changes to the state tax apportionment partially offset by a reduction in earnings from US operations before considering the 2022 non-deductible goodwill impairment. Refer to Note 15 - Goodwill. 2 The change in foreign and other statutory rate differentials from 2022 to 2023 reflects the decrease in earnings from US operations before considering the 2022 non-deductible goodwill impairment. Refer to Note 15 - Goodwill. 3 The provincial and state tax component of these items is included in the Provincial and state income taxes above. 4 The amount in 2023 includes the federal tax impact of the de-recognition of rate regulated accounting for income tax relating to Southern Lights Canada and portions of the Canadian Mainline including Line 9 and L3R. Refer to Note 7 - Regulatory Matters. 5 Part VI.1 tax is a tax levied on preferred share dividends paid in Canada. 6 There was no US Minimum Tax in 2021 as a result of tax losses from bonus tax depreciation. 7 The amount in 2021 relates to the federal impact of the gain on sale of the investment in Noverco. 8 The amount in 2022 relates to the federal impact of the non-deductible goodwill impairment relating to the Gas Transmission reporting unit. Refer to Note 15 - Goodwill. 9 The amount includes the federal tax impact of impairment to Chapman Ranch in 2023 and Magic Valley in 2022 attributable to noncontrolling interests. Refer to Note 11 - Property, Plant and Equipment. COMPONENTS OF PRETAX EARNINGS AND INCOME TAXES
Year ended December 31, | 2023 | 2022 | 2021
(millions of Canadian dollars) |  |  |
Earnings before income taxes |  |  |
Canada | 2,233 |  | 583 |  | 3,399 |
US | 4,620 |  | 2,865 |  | 3,336 |
Other | 1,026 |  | 1,094 |  | 994 |
| 7,879 |  | 4,542 |  | 7,729 |
Current income taxes |  |  |
Canada | 100 |  | 360 |  | 162 |
US | 191 |  | 201 |  | 80 |
Other | 110 |  | 86 |  | 82 |
| 401 |  | 647 |  | 324 |
Deferred income taxes |  |  |
Canada | 456 |  | (358) |  | 344 |
US | 974 |  | 1,309 |  | 741 |
Other | (10) |  | 6 |  | 6 |
| 1,420 |  | 957 |  | 1,091 |
Income tax expense | 1,821 |  | 1,604 |  | 1,415 |
COMPONENTS OF DEFERRED INCOME TAXES Deferred income tax assets and liabilities are recognized for the future tax consequences of differences between carrying amounts of assets and liabilities and their respective tax bases. Major components of deferred income tax assets and liabilities are as follows:
December 31, | 2023 | 2022
(millions of Canadian dollars) |  |
Deferred income tax liabilities |  |
Property, plant and equipment | (9,202) |  | (9,096) |
Investments | (7,765) |  | (7,099) |
Regulatory assets | (1,338) |  | (1,291) |
Other | (52) |  | (46) |
Total deferred income tax liabilities | (18,357) |  | (17,532) |
Deferred income tax assets |  |
Financial instruments | 271 |  | 456 |
Loss carryforwards | 1,745 |  | 2,259 |
Other | 1,798 |  | 1,723 |
Total deferred income tax assets | 3,814 |  | 4,438 |
Less valuation allowance | (147) |  | (215) |
Total deferred income tax assets, net | 3,667 |  | 4,223 |
Net deferred income tax liabilities | (14,690) |  | (13,309) |
Presented as follows: |  |
Total deferred income tax assets | 341 |  | 472 |
Total deferred income tax liabilities | (15,031) |  | (13,781) |
Net deferred income tax liabilities | (14,690) |  | (13,309) |
A valuation allowance has been established for certain loss and credit carryforwards, and outside basis temporary differences on investments that reduce deferred income tax assets to an amount that will more likely than not be realized. As at December 31, 2023, we recognized the benefit of unused tax loss carryforwards of $1.3 billion (2022 - $2.1 billion) in Canada which expire in 2030 and beyond. As at December 31, 2023, we recognized the benefit of unused tax loss carryforwards of $6.4 billion (2022 - $8.1 billion) in the US. Unused tax loss carryforwards of $0.1 billion (2022 - $0.2 billion) begin to expire in 2024, and unused tax loss carryforwards of $6.3 billion (2022 - $7.9 billion) have no expiration. We have not provided for deferred income taxes on the difference between the carrying value of substantially all of our foreign subsidiaries and their corresponding tax basis as the earnings of those subsidiaries are intended to be permanently reinvested in their operations. As such, these investments are not anticipated to give rise to income taxes in the foreseeable future. The difference between the carrying values of the investments and their tax bases is largely a result of unremitted earnings and currency translation adjustments. The unremitted earnings and currency translation adjustment for which no deferred taxes have been recognized in respect of foreign subsidiaries were $6.6 billion and $8.0 billion for the periods ended December 31, 2023 and 2022, respectively. If such earnings are remitted, in the form of dividends or otherwise, we may be subject to income taxes and foreign withholding taxes. The determination of the amount of unrecognized deferred income tax liabilities applicable to such amounts is not practicable. Enbridge and certain of our subsidiaries are subject to taxation in Canada, the US and other foreign jurisdictions. The material jurisdictions in which we are subject to potential examinations include the US (Federal) and Canada (Federal, Alberta and Québec). We are open to examination by Canadian tax authorities for the 2016 to 2023 tax years and by US tax authorities for the 2020 to 2023 tax years. We are currently under examination for income tax matters in Canada for the 2017 to 2020 tax years. We are not currently under examination for income tax matters in any other material jurisdiction where we are subject to income tax. UNRECOGNIZED TAX BENEFITS
Year ended December 31, | 2023 | 2022
(millions of Canadian dollars) |  |
Unrecognized tax benefits at beginning of year | 55 |  | 76 |
Gross decreases for tax positions of prior year | (2) |  | (17) |
Change in translation of foreign currency | (1) |  | 1 |
Lapses of statute of limitations | (7) |  | (5) |
Unrecognized tax benefits at end of year | 45 |  | 55 |
The unrecognized tax benefits as at December 31, 2023, if recognized, would impact our effective income tax rate. We do not anticipate further adjustments to the unrecognized tax benefits during the next 12 months that would have a material impact on our consolidated financial statements. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income taxes. Interest and penalties included in income taxes for both years ended December 31, 2023 and 2022 were a $1 million expense. As at December 31, 2023 and 2022, interest and penalties of $14 million and $13 million, respectively, have been accrued.

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