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Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of “Income Before Income Taxes” are as follows (in millions):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
U.S. | $ | 1,739 |  |  | $ | 1,976 |  |  | $ | 1,466 |
Foreign | 767 |  |  | 185 |  |  | 172 |
Total Income Before Income Taxes | $ | 2,506 |  |  | $ | 2,161 |  |  | $ | 1,638 |
Components of the income tax provision applicable for federal, foreign and state taxes are as follows (in millions):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Current tax expense (benefit) |  |  |  |  |
Federal | $ | (22 | ) |  | $ | (137 | ) |  | $ | (148 | )
State | (45 | ) |  | (16 | ) |  | (28 | )
Foreign | 249 |  |  | 18 |  |  | 6 |
Total | 182 |  |  | (135 | ) |  | (170 | )
Deferred tax expense (benefit) |  |  |  |  |  |  |  |
Federal | 425 |  |  | 2,022 |  |  | 998 |
State | 55 |  |  | 4 |  |  | 51 |
Foreign | (75 | ) |  | 47 |  |  | 38 |
Total | 405 |  |  | 2,073 |  |  | 1,087 |
Total tax provision | $ | 587 |  |  | $ | 1,938 |  |  | $ | 917 |
We are subject to taxation in Canada and Mexico. In Canada we recognized income tax expense of $168 million, $58 million and $38 million at December 31, 2018, 2017, and 2016, respectively. In Mexico we recognized income tax expense of $6 million, $7 million and $6 million at December 31, 2018, 2017, and 2016, respectively. The difference between the statutory federal income tax rate and our effective income tax rate is summarized as follows (in millions, except percentages):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Federal income tax | $ | 526 |  |  | 21.0 | % |  | $ | 756 |  |  | 35.0 | % |  | $ | 573 |  |  | 35.0 | %
Increase (decrease) as a result of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State deferred tax rate change | (7 | ) |  | (0.3 | )% |  | 10 |  |  | 0.5 | % |  | 11 |  |  | 0.7 | %
Taxes on foreign earnings, net of federal benefit | 131 |  |  | 5.2 | % |  | 42 |  |  | 1.9 | % |  | 28 |  |  | 1.7 | %
Net effects of noncontrolling interests | (65 | ) |  | (2.6 | )% |  | (14 | ) |  | (0.7 | )% |  | (4 | ) |  | (0.3 | )%
State income tax, net of federal benefit | 46 |  |  | 1.8 | % |  | 38 |  |  | 1.8 | % |  | 26 |  |  | 1.6 | %
Dividend received deduction | (31 | ) |  | (1.2 | )% |  | (56 | ) |  | (2.6 | )% |  | (48 | ) |  | (2.9 | )%
Adjustments to uncertain tax positions | (47 | ) |  | (1.9 | )% |  | (12 | ) |  | (0.6 | )% |  | (23 | ) |  | (1.4 | )%
Valuation allowance on investment and tax credits | 14 |  |  | 0.5 | % |  | 13 |  |  | 0.6 | % |  | 34 |  |  | 2.1 | %
Impact of the 2017 Tax Reform | — |  |  | — | % |  | 1,240 |  |  | 57.4 | % |  | — |  |  | — | %
Nondeductible goodwill | 58 |  |  | 2.3 | % |  | — |  |  | — | % |  | 301 |  |  | 18.5 | %
General business credit | (64 | ) |  | (2.6 | )% |  | (95 | ) |  | (4.4 | )% |  | — |  |  | — | %
Other | 26 |  |  | 1.2 | % |  | 16 |  |  | 0.8 | % |  | 19 |  |  | 1.1 | %
Total | $ | 587 |  |  | 23.4 | % |  | $ | 1,938 |  |  | 89.7 | % |  | $ | 917 |  |  | 56.1 | %
Deferred tax assets and liabilities result from the following (in millions):
| December 31,
| 2018 |  | 2017
Deferred tax assets |  |  |
Employee benefits | $ | 238 |  |  | $ | 251 |
Accrued expenses | 76 |  |  | 73 |
Net operating loss, capital loss and tax credit carryforwards | 1,526 |  |  | 1,113 |
Derivative instruments and interest rate and currency swaps | 9 |  |  | 12 |
Debt fair value adjustment | 33 |  |  | 37 |
Investments | 177 |  |  | 968 |
Other | — |  |  | 6 |
Valuation allowances | (178 | ) |  | (171 | )
Total deferred tax assets | 1,881 |  |  | 2,289 |
Deferred tax liabilities |  |  |  |  |
Property, plant and equipment | 270 |  |  | 225 |
Other | 45 |  |  | 20 |
Total deferred tax liabilities | 315 |  |  | 245 |
Net deferred tax assets | $ | 1,566 |  |  | $ | 2,044 |
Deferred Tax Assets and Valuation Allowances: The step-up in tax basis from the merger transactions that occurred in November 2014 resulted in a deferred tax asset, primarily related to our investment in KMP. As book earnings from our investment in KMP are projected to exceed taxable income (primarily as a result of the partnership’s tax depreciation in excess of book depreciation), the deferred tax asset related to our investment in KMP is expected to be fully realized. We increased our valuation allowances in 2018 by $7 million, primarily due to a $17 million increase for capital loss carryover as a result of the TMPL Sale, a $6 million decrease for foreign operating losses and a $4 million utilization of foreign tax credits. We have deferred tax assets of $1,249 million related to net operating loss carryovers, $260 million related to general business, alternative minimum, and foreign tax credits, $17 million related to capital losses, and $140 million of valuation allowances related to these deferred tax assets at December 31, 2018. As of December 31, 2017, we had deferred tax assets of $935 million related to net operating loss carryovers, $178 million related to general business, alternative minimum and foreign tax credits and $133 million of valuation allowances related to these deferred tax assets. We expect to generate taxable income and begin to utilize federal net operating loss carryforwards and tax credits in 2022. Our alternative minimum tax credit carryforwards decreased by $8 million in 2018 as a result of a federal audit settlement. In 2017, our decision to elect to forgo bonus depreciation on property placed in service in that year allowed us to utilize $137 million of minimum tax credits. Section 168(k)(4) of the Internal Revenue Code allows for corporate taxpayers with minimum tax credit carryforwards to forgo bonus depreciation and accelerate their use of the credits to reduce tax liability in that same tax year if the amount of the allowable credit exceeds the taxpayer’s tax liability. We received an income tax refund of $145 million in 2018 related to the 2017 credit utilization and 2018 audit settlement. Expiration Periods for Deferred Tax Assets: As of December 31, 2018, we have U.S. federal net operating loss carryforwards of $1.4 billion that will be carried forward indefinitely and $3.4 billion that will expire from 2019 - 2037; state losses of $3.7 billion which will expire from 2019 - 2038; and foreign losses of $112 million which will expire from 2029 - 2038. We also have $241 million of general business credits which will expire from 2019 - 2028; a capital loss carryover of $17 million which will expire in 2023; and approximately $17 million of foreign tax credits, which will expire from 2020 - 2023. Use of a portion of our U.S. federal carryforwards is subject to the limitations provided under Sections 382 and 383 of the Internal Revenue Code as well as the separate return limitation rules of Internal Revenue Service regulations. If certain substantial changes in our ownership occur, there would be an annual limitation on the amount of carryforwards that could be utilized. Unrecognized Tax Benefits: We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based not only on the technical merits of the tax position based on tax law, but also the past administrative practices and precedents of the taxing authority. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. A reconciliation of our gross unrecognized tax benefit excluding interest and penalties is as follows (in millions):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Balance at beginning of period | $ | 97 |  |  | $ | 122 |  |  | $ | 148 |
Additions based on current year tax positions | 3 |  |  | 3 |  |  | 3 |
Additions based on prior year tax positions | 7 |  |  | — |  |  | 7 |
Reductions based on prior year tax positions | — |  |  | — |  |  | (1 | )
Reductions based on settlements with taxing authority | (73 | ) |  | (22 | ) |  | (26 | )
Reductions due to lapse in statute of limitations | — |  |  | (2 | ) |  | (9 | )
Impact of the 2017 Tax Reform | — |  |  | (4 | ) |  | — |
Balance at end of period | $ | 34 |  |  | $ | 97 |  |  | $ | 122 |
We recognize interest and/or penalties related to income tax matters in income tax expense. We recognized tax benefits of $15 million, $9 million and an expense of $2 million at December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, 2017 and 2016, we had $2 million, $19 million and $28 million, respectively, of accrued interest. We had less than $1 million of accrued penalties as of December 31, 2018 and no accrued penalties as of December 31, 2017. All of the $34 million of unrecognized tax benefits, if recognized, would affect our effective tax rate in future periods. In addition, we believe it is reasonably possible that our liability for unrecognized tax benefits will decrease by approximately $21 million during the next year to approximately $13 million, primarily due to settlements with taxing authorities, partially offset by additions for state filing positions taken in prior years. We are subject to taxation, and have tax years open to examination for the periods 2015-2017 in the U.S., 2005-2017 in various states and 2007-2017 in various foreign jurisdictions. Impact of 2017 Tax Reform On December 22, 2017, the U.S. enacted the 2017 Tax Reform. Among the many provisions included in the 2017 Tax Reform is a provision to reduce the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. As of December 31, 2017, we had deferred tax assets related to our net operating loss carryforwards and tax credits, in addition to tax basis in excess of accounting basis primarily related to our investment in KMP. Prior to the 2017 Tax Reform, the value of these deferred tax assets was recorded at the previous income tax rate of 35%, which represented their expected future benefit to us. As a result of the 2017 Tax Reform, the future benefit of these deferred tax assets was re-measured at the new income tax rate of 21% and we recorded an approximate $1,240 million provisional non-cash adjustment for the year ended December 31, 2017. We determined the effects of the rate change using our best estimate of temporary book-to-tax differences. Upon final analysis and remeasurement of our deferred tax balances, the December 31, 2017 adjustment recorded accurately reflected the change in corporate income tax rates and has not been materially adjusted in subsequent periods. In addition, the 2017 Tax Reform required a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits. As of December 31, 2017, we recorded a provisional amount for this 2017 Tax Reform provision and as of December 31, 2018, completed our analysis on this provision. The 2017 Tax Reform transition tax was $2 million. The income tax rate change in the 2017 Tax Reform had an impact not only on our corporate income taxes but also resulted in us recording an approximate $144 million after-tax ($219 million pre-tax) provisional non-cash adjustment, including our share of equity investee provisional adjustments, related to our FERC regulated business for the year ended December 31, 2017. As a result of the completion of our assessment of the 2017 Tax Reform’s effect on our FERC regulated business, we decreased this non-cash provisional adjustment by approximately $27 million after-tax ($36 million pre-tax) during the year ended December 31, 2018. The 2017 Tax Reform requires a U.S. corporation to record taxes on global intangible low-tax income (GILTI) and elect an accounting policy to either recognize GILTI as a current period expense when incurred or to record deferred taxes for the temporary basis differences expected to reverse in the future as GILTI. Though we did not generate any GILTI during 2018, we have elected to recognize the GILTI tax as a period cost in the future, as applicable.

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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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