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Income Tax | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Tax | Income Tax The components of income tax are as follows:
| Con Edison |  | CECONY
(Millions of Dollars) | 2019 |  |  | 2018 |  | 2017 |  | 2019 |  | 2018 |  | 2017
State |  |  |  |  |  |  |  |  |  |  |
Current | $(12) |  | $(10) |  | $(2) |  | $22 |  | $6 |  | $37
Deferred | 96 |  | 107 |  | 103 |  | 68 |  | 82 |  | 75
Federal |  |  |  |  |  |  |  |  |  |  |
Current | — |  |  | 3 |  | (11) |  | 185 |  | (34) |  | 73
Deferred | 219 |  | 310 |  | 391 |  | 63 |  | 275 |  | 504
Amortization of investment tax credits | (7) |  | (9) |  | (9) |  | (3) |  | (3) |  | (4)
Total income tax expense | $296 |  | $401 |  | $472 |  | $335 |  | $326 |  | $685
The tax effects of temporary differences, which gave rise to deferred tax assets and liabilities, are as follows:
| Con Edison | CECONY
(Millions of Dollars) | 2019 | 2018 |  | 2019 |  | 2018 |
Deferred tax liabilities: |  |  |  |
Property basis differences | $7,699 | $7,402 | $6,640 | $6,446
Regulatory assets: |  |  |  |
Unrecognized pension and other postretirement costs | 712 | 627 | 674 | 591
Environmental remediation costs | 205 | 227 | 181 | 200
Deferred storm costs | 22 | 21 | — |  | — |
Other regulatory assets | 376 | 273 | 355 | 252
Operating lease right-of-use asset | 231 | — |  | 169 | — |
Equity investments | 104 | 102 | — |  | — |
Total deferred tax liabilities | $9,349 | $8,652 | $8,019 | $7,489
Deferred tax assets: |  |  |  |
Accrued pension and other postretirement costs | $291 | $248 | $222 | $180
Regulatory liabilities: |  |  |  |
Future income tax | 678 | 702 | 638 | 662
Other regulatory liabilities | 702 | 632 | 622 | 554
Superfund and other environmental costs | 206 | 218 | 183 | 194
Asset retirement obligations | 135 | 114 | 102 | 82
Operating lease liabilities | 231 | — |  | 170 | — |
Loss carryforwards | 108 | 229 | — |  | — |
Tax credits carryforward | 896 | 817 | — |  | — |
Valuation allowance | (40) | (33) | — |  | — |
Other | 56 | 53 | 103 | 102
Total deferred tax assets | 3,263 | 2,980 | 2,040 | 1,774
Net deferred tax liabilities | $6,086 | $5,672 | $5,979 | $5,715
Unamortized investment tax credits | 141 | 148 | 21 | 24
Net deferred tax liabilities and unamortized investment tax credits | $6,227 | $5,820 | $6,000 | $5,739
Upon enactment of the TCJA in December 2017, the Companies re-measured their deferred tax assets and liabilities based upon the TCJA’s 21 percent corporate federal income tax rate. As a result, Con Edison, decreased its net deferred tax liabilities by $5,312 million (including $4,781 million for CECONY), recognized $259 million in net income, decreased its regulatory asset for future income tax by $1,250 million (including $1,182 million for CECONY), decreased the regulatory asset for revenue taxes by $90 million (including $86 million for CECONY), and accrued a regulatory liability for future income tax of $3,713 million (including $3,513 million for CECONY). Since the Companies were in a net regulatory liability position with respect to these income tax matters, the Companies netted the regulatory asset for future income tax against the regulatory liability for future income tax. Under the rate normalization requirements continued by the TCJA, $2,684 million of the net regulatory liability (including $2,542 million for CECONY) related to certain accelerated tax depreciation benefits is to be amortized over the remaining lives of the related assets. The remainder of the net regulatory liability is to be refunded (or credited) to customers as determined by the NYSPSC or NJBPU, as applicable. See “Other Regulatory Matters” in Note B. The amount recognized in net income included $269 million for the Clean Energy Businesses, $11 million for Con Edison Transmission and $(21) million for the parent company. The re-measurement had no impact on the Companies’ cash flows for 2017. At December 31, 2017, the Companies recorded provisional income tax amounts in its accounting for certain effects of the provisions of the TCJA as allowed under SEC Staff Accounting Bulletin 118 (SAB 118). SAB 118 allowed a one year period for companies to finalize the provisional amounts recorded as of December 31, 2017. In August 2018, the Internal Revenue Service (IRS) and U.S. Department of Treasury issued proposed regulations (which were finalized in December 2019), that clarified provisions in the TCJA on the allowance for additional first-year depreciation for qualified property of regulated public utilities placed in service in the fourth quarter of 2017. Under this guidance, which Con Edison elected to adopt the Utilities deducted $477 million in additional depreciation in Con Edison’s 2017 federal income tax return. The additional depreciation increased Con Edison’s 2017 federal net operating loss (NOL) carryover to $563 million (CECONY’s 2017 federal NOL carryover of $153 million was applied in full to CECONY's 2018 tax liability), which required a re-measurement of deferred tax assets and liabilities associated with the filing of its 2017 federal income tax return. As a result, Con Edison decreased its net deferred tax liabilities by $13 million (including $50 million for CECONY), recognized $42 million in income tax expense at the parent company related to re-measuring the 2017 federal NOL carryover to 2018, decreased the regulatory asset for revenue taxes by $1 million (entirely attributable to CECONY) and accrued a regulatory liability for future income tax of $54 million (including $49 million for CECONY). The Companies completed their assessment in the fourth quarter of 2018 and no further adjustments to the provisional amounts were recorded. Reconciliation of the difference between income tax expense and the amount computed by applying the prevailing statutory income tax rate to income before income taxes is as follows:
| Con Edison |  | CECONY
(% of Pre-tax income) | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2019 |  |  | 2018 |  |  | 2017 |
STATUTORY TAX RATE |  |  |  |  |  |  |  |  |  |  |
Federal | 21 | % |  | 21 | % |  | 35 | % |  | 21 | % |  | 21 | % |  | 35 | %
Changes in computed taxes resulting from: |  |  |  |  |  |  |  |  |  |  |
State income tax | 4 |  |  | 4 |  |  | 4 |  |  | 5 |  |  | 5 |  |  | 4 |
Taxes attributable to noncontrolling interests | (1 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Cost of removal | 1 |  |  | 1 |  |  | 1 |  |  | 1 |  |  | 1 |  |  | 1 |
Other plant-related items | (1 | ) |  | (1 | ) |  | (1 | ) |  | (1 | ) |  | (1 | ) |  | (1 | )
TCJA deferred tax re-measurement | — |  |  | 2 |  |  | (13 | ) |  | — |  |  | — |  |  | — |
Amortization of excess deferred federal income taxes | (4 | ) |  | (3 | ) |  | — |  |  | (4 | ) |  | (3 | ) |  | — |
Renewable energy credits | (2 | ) |  | (1 | ) |  | (1 | ) |  | — |  |  | — |  |  | — |
Research and development credits | (1 | ) |  | — |  |  | — |  |  | (1 | ) |  | (1 | ) |  | — |
Other | — |  |  | — |  |  | (2 | ) |  | — |  |  | (1 | ) |  | (1 | )
Effective tax rate | 17 | % |  | 23 | % |  | 23 | % |  | 21 | % |  | 21 | % |  | 38 | %
CECONY and O&R deferred as regulatory liabilities their estimated net benefits under the TCJA for the year ended December 31, 2018. CECONY’s net benefits prior to January 1, 2019 for its electric service and amortization of excess deferred federal income taxes for its electric service continued to be deferred. RECO deferred as a regulatory liability its estimated net benefits under the TCJA for the three months ended March 31, 2018. The net benefits include the revenue requirement impact of the reduction in the corporate federal income tax rate to 21 percent, the elimination for utilities of bonus depreciation and the amortization of excess deferred federal income taxes the utilities collected from customers that will not be paid to the IRS under the TCJA. See “Other Regulatory Matters” in Note B. At December 31, 2019, Con Edison had a federal net operating loss carryover of approximately $36 million from prior years, due primarily to accelerated depreciation (including bonus depreciation), comprised of its remaining 2017 federal net operating loss carryover of $13 million (which, will expire, if unused, in 2037) and its 2018 federal net operating loss carryover of $23 million (which can be carried forward indefinitely). Con Edison has $896 million in general business tax credit carryovers (primarily renewable energy tax credits), which if unused will begin to expire in 2032. A deferred tax asset for these tax attribute carryforwards was recorded, and no valuation allowance has been provided, as it is more likely than not that the deferred tax asset will be realized. At December 31, 2019, Con Edison had a 2018 New York State net operating loss of approximately $272 million from 2018, primarily as a result of accelerated tax deductions on renewable energy projects. Con Edison will carry back approximately $100 million of its 2018 net operating loss to 2015 and 2016, which will result in recovery of $9 million of income tax. The remaining 2018 New York State net operating loss of $172 million will be carried forward to future years. At December 31, Con Edison had a 2019 New York State net operating loss of approximately $453 million, primarily as a result of accelerated tax deductions on renewable energy projects. This loss will be carried forward to future years. A deferred tax asset has been recognized for these New York State net operating loss carryforwards that will begin to expire, if unused, in 2038. A valuation allowance has not been provided; as it is more likely than not that the deferred tax asset will be realized. In addition, an $18 million valuation allowance for the entire amount of its New York City net operating loss carryforward and a $22 million valuation allowance for other state net operating loss carryforwards has been provided; as it is not more likely than not that the deferred tax asset will be realized. At December 31, 2019, Con Edison had charitable contributions carryforwards of $28 million ($5 million from 2015; $7 million from 2016; $5 million from 2017; $5 million from 2018 and $6 million from 2019), if unused will begin to expire in 2020. The tax effect of the carryforwards were recorded as a deferred tax asset, and no valuation allowance has been provided, as it is more likely than not that the deferred tax asset will be realized. The Protecting Americans from Tax Hikes Act of 2015 extended bonus depreciation applying a 50 percent rate for property acquired and placed in service for years 2015 through 2017 with reduced rates of 40 percent and 30 percent for years 2018 and 2019, respectively. The TCJA does not allow bonus depreciation after December 31, 2017 (excluding certain transition rules) for Companies that qualify as a utility company for the consolidated group under the de minimis exception to Treasury regulations. In December 2019, the Federal government issued final regulations providing guidance on provisions in the TCJA allowing for full expensing of qualified plant additions. These provisions, which Con Edison adopted under the proposed regulations of August 2018, allowed the Utilities a full expense tax deduction for plant additions in the fourth quarter of 2017, and the Utilities continue additional first year depreciation transition rules for plant additions placed in service in tax years beginning in 2018, under long-term construction contracts entered into before September 28, 2017. The impact on the Utilities of these regulations is discussed above. In November 2018, the Federal government issued, and Con Edison adopted, proposed regulations providing guidance on the tax deductibility of interest expense under the TCJA. The TCJA generally provides for the continued deductibility of interest expense by regulated public utilities and may limit the deduction for interest expense by most non-utility businesses to 30 percent of adjusted taxable income (which resembles earnings before interest, taxes, depreciation and amortization).The regulations provide an annual safe harbor test that if at least 90 percent of consolidated plant assets consist of utility property, the entire consolidated group will be treated as a regulated public utility, and all of the consolidated group’s interest expense will be currently tax deductible. For 2018, Con Edison met the 90 percent safe harbor test and its deduction for interest expense was not limited. For 2019, Con Edison did not meet the 90 percent safe harbor test and its deduction for interest expense will be limited by an amount that is not material. Con Edison, as permitted, will carry over the portion of its 2019 interest expense that it will not be able to deduct for 2019 to future years when Con Edison expects it will be able to deduct such interest expense. Qualifying consolidated groups would not be entitled to the full expensing provisions in the TCJA noted above. The safe harbor rules do not apply to partnerships in which Con Edison and its subsidiaries are a partner. Uncertain Tax Positions Under the accounting rules for income taxes, the Companies are not permitted to recognize the tax benefit attributable to a tax position unless such position is more likely than not to be sustained upon examination by taxing authorities, including resolution of any related appeals and litigation processes, based solely on the technical merits of the position. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for Con Edison and CECONY follows:
| Con Edison | CECONY
(Millions of Dollars) | 2019 |  | 2018 | 2017 | 2019 |  | 2018 |  | 2017 |
Balance at January 1, | $6 | $12 | $42 | $4 | $5 | $21
Additions based on tax positions related to the current year | 1 | 2 | 1 | 1 | 2 | 1
Additions based on tax positions of prior years | 10 | 1 | 1 | — |  | 1 | 1
Reductions for tax positions of prior years | (2) | (2) | (24) | (1) | (1) | (18)
Reductions from expiration of statute of limitations | — |  | (4) | (2) | — |  | — |  | — |
Settlements | (2) | (3) | (6) | (2) | (3) | — |
Balance at December 31, | $13 | $6 | $12 | $2 | $4 | $5
In 2019, Con Edison reached a settlement with the IRS on tax year 2017 and was denied state refund claims in New Jersey, which resulted in Con Edison reversing $4 million in uncertain tax positions. Of this amount, only an immaterial amount reduced Con Edison’s effective tax rate. The amount related to CECONY was $2 million, of which, only an immaterial amount reduced CECONY’s effective tax rate. Current and prior year additions in 2019 are for tax credits and a state combined reporting issue, which increased Con Edison's effective tax rate. As of December 31, 2019, Con Edison reasonably expects to resolve within the next twelve months approximately $10 million of various federal and state uncertainties due to the expected completion of ongoing tax examinations, of which the entire amount, if recognized, would reduce Con Edison’s effective tax rate. The amount related to CECONY is approximately $1 million, of which the entire amount, if recognized, would reduce CECONY’s effective tax rate. The Companies recognize interest on liabilities for uncertain tax positions in interest expense and would recognize penalties, if any, in operating expenses in the Companies’ consolidated income statements. In 2019, 2018 and 2017, the Companies recognized an immaterial amount of interest and no penalties for uncertain tax positions in their consolidated income statements. At December 31, 2019 and 2018, the Companies reflected an immaterial amount of interest and no penalties in their consolidated balance sheets. At December 31, 2019, the total amount of unrecognized tax benefits that, if recognized, would reduce the Companies’ effective tax rate is $13 million ($12 million, net of federal taxes) with $2 million attributable to CECONY. Con Edison's federal tax return for 2018 remains under examination. State income tax returns remain open for examination in New York for tax years 2010 through 2018 and in New Jersey for tax years 2008 through 2018.

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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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