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Income Taxes | 6 Months Ended
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Jun. 30, 2019
Income Taxes |
Income Taxes | 5. Income Taxes Our income tax expense was $115 million and $230 million for the three and six months ended June 30, 2019, respectively, compared to $110 million and $226 million for the three and six months ended June 30, 2018, respectively. Our effective income tax rate was 23.3% and 24.0% for the three and six months ended June 30, 2019, respectively, compared with 18.1% and 20.2% for the three and six months ended June 30, 2018, respectively. We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant. The increase in our effective income tax rate when comparing the three and six months ended June 30, 2019 with the prior year periods is due to a $33 million income tax benefit related to the settlement of various tax audits during 2018 and a $52 million impairment charge in the first quarter of 2019 which was not deductible for tax purposes. The differences between federal income taxes computed at the federal statutory rate and reported income taxes for the three and six months ended June 30, 2019 were primarily due to the unfavorable impact of state and local income taxes offset, in part, by the favorable impact of federal tax credits and excess tax benefits related to equity-based compensation. The six months ended June 30, 2019 was also unfavorably impacted by an impairment as discussed below. The differences between federal income taxes computed at the federal statutory rate and reported income taxes for the three and six months ended June 30, 2018 were primarily due to the favorable impact of tax audit settlements and federal tax credits offset, in part, by the unfavorable impact of state and local income taxes. The six months ended June 30, 2018 was also favorably impacted by excess tax benefits related to equity-based compensation. Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties and a refined coal facility. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments and the coal facility’s refinement processes qualify for federal tax credits that we expect to realize through 2030 under Sections 42 and 45D, and through the end of 2019 under Section 45, respectively, of the Internal Revenue Code. We account for our investments in these entities using the equity method of accounting, recognizing our share of each entity’s results of operations and other reductions in the value of our investments in equity in net losses of unconsolidated entities, in our Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2019, we recognized $12 million and $21 million of net losses and a reduction in our income tax expense of $18 million and $33 million, respectively, primarily due to tax credits realized from these investments. In addition, during the three and six months ended June 30, 2019, we recognized interest expense of $2 million and $4 million, respectively, associated with our investments in low-income housing properties. During the three and six months ended June 30, 2018, we recognized $6 million and $12 million of net losses and a reduction in our income tax expense of $12 million and $22 million, respectively, primarily due to tax credits realized from these investments. Interest expense associated with our investments in low-income housing properties was not material for the three and six months ended June 30, 2018. See Note 14 for additional information related to these unconsolidated variable interest entities. Tax Audit Settlements — We are currently under audit by the IRS and various state and local taxing authorities and our audits are in various stages of completion. In June 2018, we settled various tax audits, which resulted in a reduction in our income tax expense of $33 million. Equity-Based Compensation — During the three and six months ended June 30, 2019, we recognized a reduction in income tax expense of $5 million and $17 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $1 million and $12 million, respectively, for the comparable prior year periods. Tax Implications of Impairment — We recognized a $52 million impairment charge in the first quarter of 2019 which was not deductible for tax purposes. See Note 10 for additional information.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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