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Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
5. | Income Taxes
The components of “Income Before Income Taxes” are as follows (in millions):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
U.S. | $ | 2,482 |  |  | $ | 1,739 |  |  | $ | 1,976 |
Foreign | 683 |  |  | 767 |  |  | 185 |
Total Income Before Income Taxes | $ | 3,165 |  |  | $ | 2,506 |  |  | $ | 2,161 |
Components of the income tax provision applicable for federal, foreign and state taxes are as follows (in millions):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Current tax expense (benefit) |  |  |  |  |
Federal | $ | (2 | ) |  | $ | (22 | ) |  | $ | (137 | )
State | 10 |  |  | (45 | ) |  | (16 | )
Foreign(a) | 201 |  |  | 249 |  |  | 18 |
Total | 209 |  |  | 182 |  |  | (135 | )
Deferred tax expense (benefit) |  |  |  |  |  |  |  |
Federal | 682 |  |  | 425 |  |  | 2,022 |
State | 66 |  |  | 55 |  |  | 4 |
Foreign(a) | (31 | ) |  | (75 | ) |  | 47 |
Total | 717 |  |  | 405 |  |  | 2,073 |
Total tax provision | $ | 926 |  |  | $ | 587 |  |  | $ | 1,938 |
________
(a) | Our Canada income tax expense was $165 million, $168 million and $58 million for the years ended December 31, 2019, 2018 and 2017, 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,
| 2019 |  | 2018 |  | 2017
Federal income tax | $ | 665 |  |  | 21.0 | % |  | $ | 526 |  |  | 21.0 | % |  | $ | 756 |  |  | 35.0 | %
Increase (decrease) as a result of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxes on foreign earnings, net of federal benefit | 139 |  |  | 4.4 | % |  | 131 |  |  | 5.2 | % |  | 42 |  |  | 1.9 | %
Net effects of noncontrolling interests | (10 | ) |  | (0.3 | )% |  | (65 | ) |  | (2.6 | )% |  | (14 | ) |  | (0.7 | )%
State income tax, net of federal benefit | 68 |  |  | 2.1 | % |  | 46 |  |  | 1.8 | % |  | 38 |  |  | 1.8 | %
Dividend received deduction | (39 | ) |  | (1.1 | )% |  | (31 | ) |  | (1.2 | )% |  | (56 | ) |  | (2.6 | )%
Adjustments to uncertain tax positions | (5 | ) |  | (0.2 | )% |  | (47 | ) |  | (1.9 | )% |  | (12 | ) |  | (0.6 | )%
Impact of the 2017 Tax Reform | — |  |  | — | % |  | — |  |  | — | % |  | 1,240 |  |  | 57.4 | %
Nondeductible goodwill | 108 |  |  | 3.4 | % |  | 58 |  |  | 2.3 | % |  | — |  |  | — | %
General business credit | — |  |  | — | % |  | (64 | ) |  | (2.6 | )% |  | (95 | ) |  | (4.4 | )%
Other | — |  |  | — | % |  | 33 |  |  | 1.4 | % |  | 39 |  |  | 1.9 | %
Total | $ | 926 |  |  | 29.3 | % |  | $ | 587 |  |  | 23.4 | % |  | $ | 1,938 |  |  | 89.7 | %
Deferred tax assets and liabilities result from the following (in millions):
| December 31,
| 2019 |  | 2018
Deferred tax assets |  |  |
Employee benefits | $ | 208 |  |  | $ | 238 |
Accrued expenses | 86 |  |  | 76 |
Net operating loss, capital loss and tax credit carryforwards | 1,519 |  |  | 1,526 |
Derivative instruments and interest rate and currency swaps | 15 |  |  | 9 |
Debt fair value adjustment | 29 |  |  | 33 |
Investments | — |  |  | 177 |
Valuation allowances | (155 | ) |  | (178 | )
Total deferred tax assets | 1,702 |  |  | 1,881 |
Deferred tax liabilities |  |  |  |  |
Property, plant and equipment | 385 |  |  | 270 |
Investments | 418 |  |  | — |
Other | 42 |  |  | 45 |
Total deferred tax liabilities | 845 |  |  | 315 |
Net deferred tax assets | $ | 857 |  |  | $ | 1,566 |
Deferred Tax Assets and Valuation Allowances We have deferred tax assets of $1,261 million related to net operating loss carryovers, $258 million related to general business and foreign tax credits, and $117 million of valuation allowances related to these deferred tax assets as of December 31, 2019. As of December 31, 2018, we had 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. We expect to generate taxable income and begin to utilize federal net operating loss carryforwards and tax credits in 2023. We decreased our valuation allowances in 2019 by $23 million, primarily due to the $18 million utilization of the capital loss carryover from the capital gain generated by the KML and U.S. Cochin Sale. Expiration Periods for Deferred Tax Assets: As of December 31, 2019, we have U.S. federal net operating loss carryforwards of $1.5 billion that will be carried forward indefinitely and $3.4 billion that will expire from 2020 - 2037; state losses of $3.3 billion which will expire from 2020 - 2038; and foreign losses of $107 million which will expire from 2029 - 2038. We also have $241 million of general business credits which will expire from 2020 - 2038; and approximately $17 million of foreign tax credits, which will expire from 2020 - 2027. 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. The merger transactions that occurred in November 2014 resulted in a deferred tax asset, primarily related to our investment in KMP, the balance of which was approximately $583 million as of December 31, 2018. As earnings from our investment in KMP exceeded taxable income (primarily as a result of the partnership’s tax depreciation in excess of book depreciation), this reduced the deferred tax asset related to our investment in KMP so that it now represents a deferred tax liability of $48 million as of December 31, 2019. 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. Our gross unrecognized tax benefit balances, excluding immaterial amounts of interest and penalties, were $16 million, $34 million and $97 million as of December 31, 2019, 2018 and 2017, respectively. Reductions based on settlements with taxing authorities were $21 million, $73 million and $22 million for the years ended December 31, 2019, 2018 and 2017, respectively. All of the $16 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 increase by approximately $3 million during the next year to approximately $19 million, primarily due to additions for state filing positions taken in prior years. We are subject to taxation, and have tax years open to examination for the periods 2015-2018 in the U.S., 2005-2018 in various states and 2007-2018 in various foreign jurisdictions. Impact of 2017 Tax Reform During the year ended December 31, 2017 we recorded a provisional non-cash adjustment of $1,240 million resulting from the enactment of the 2017 Tax Reform which caused us to re-measure our 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 at the new income tax rate of 21% from the previous income tax rate of 35%. Additionally, during the year ended December 31, 2017, we recorded a provisional non-cash adjustment of approximately $144 million after-tax ($219 million pre-tax), including our share of equity investee provisional adjustments, related to our FERC regulated business. During the year ended December 31, 2018, we decreased this non-cash provisional adjustment by approximately $27 million after-tax ($36 million pre-tax).

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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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