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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax provision from continuing operations consisted of the following amounts:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
| (In millions, except percentages)
Current |  |  |  |  |
State | $ | 19 |  |  | $ | 6 |  |  | $ | 9 |
Total — current | 19 |  |  | 6 |  |  | 9 |
Deferred |  |  |  |  |
U.S. Federal | (6 | ) |  | 3 |  |  | 1,020 |
State | (7 | ) |  | (6 | ) |  | 315 |
Foreign | 2 |  |  | 2 |  |  | 1 |
Total — deferred | (11 | ) |  | (1 | ) |  | 1,336 |
Total income tax expense | $ | 8 |  |  | $ | 5 |  |  | $ | 1,345 |
Effective tax rate | (0.5 | )% |  | (0.5 | )% |  | (27.0 | )%
The following represents the domestic and foreign components of loss before income tax expense:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
| (In millions)
U.S. | $ | (1,557 | ) |  | $ | (989 | ) |  | $ | (4,997 | )
Foreign | 17 |  |  | 11 |  |  | 11 |
Total | $ | (1,540 | ) |  | $ | (978 | ) |  | $ | (4,986 | )
A reconciliation of the U.S. federal statutory rate of 35% to NRG's effective rate is as follows:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
| (In millions, except percentages)
Loss before income taxes | $ | (1,540 | ) |  | $ | (978 | ) |  | $ | (4,986 | )
Tax at 35% | (539 | ) |  | (342 | ) |  | (1,745 | )
State taxes | 19 |  |  | — |  |  | (215 | )
Foreign operations | 2 |  |  | 10 |  |  | 1 |
Federal and state tax credits, excluding PTCs | — |  |  | — |  |  | (5 | )
Tax Act - corporate income tax rate change | 733 |  |  | — |  |  | — |
Valuation allowance due to corporate income tax rate change | (660 | ) |  | — |  |  | — |
Valuation allowance - current period activities | 482 |  |  | 398 |  |  | 3,023 |
Impact of non-taxable equity earnings | (5 | ) |  | 22 |  |  | (10 | )
Book goodwill impairment | 30 |  |  | — |  |  | 340 |
Net interest accrued on uncertain tax positions | — |  |  | 1 |  |  | (3 | )
Production tax credits | (20 | ) |  | (26 | ) |  | (33 | )
Recognition of uncertain tax benefits | (5 | ) |  | 2 |  |  | (15 | )
Tax expense attributable to consolidated partnerships | 4 |  |  | (1 | ) |  | 12 |
State rate change including true-up to current period activity | 18 |  |  | (59 | ) |  | (7 | )
AMT refundable credit | (64 | ) |  | — |  |  | — |
Other | 13 |  |  | — |  |  | 2 |
Income tax expense | $ | 8 |  |  | $ | 5 |  |  | $ | 1,345 |
Effective income tax rate | (0.5 | )% |  | (0.5 | )% |  | (27.0 | )%
For the year ended December 31, 2017, NRG's overall effective tax rate was different than the statutory rate of 35% primarily due to tax expense recorded from the revaluation of the existing net deferred tax asset and state taxes, partially offset by the change in valuation allowance, establishing the AMT credit receivable and the generation of PTC’s from various wind facilities. The tax expense recorded for revaluation of the net deferred tax asset is required to reflect the reduction in the corporate income tax rate from 35% to 21% in accordance with the Tax Cuts and Jobs Act of 2017, or the Tax Act. For the year ended December 31, 2016, NRG's overall effective tax rate was different than the statutory rate of 35% primarily due to the change in valuation allowance, the impact of non-taxable equity earnings and current state tax expense, partially offset by the generation of PTCs from various wind facilities. For the year ended December 31, 2015, NRG's overall effective tax rate was different than the statutory rate of 35% primarily due to recording of a valuation allowance on the federal and certain state net deferred tax assets that may not be realizable under a “more likely than not” measurement. In addition, a portion of the book goodwill impairment is classified as a permanent reversal impacting the effective tax rate. The temporary differences, which gave rise to the Company's deferred tax assets and liabilities consisted of the following:
| As of December 31,
| 2017 |  | 2016
| (In millions)
Deferred tax liabilities: |  |  |
Emissions allowances | $ | 15 |  |  | $ | 31 |
Derivatives, net | 15 |  |  | — |
Cumulative translation adjustments | — |  |  | 11 |
Investment in projects | 231 |  |  | 378 |
Discount/premium on notes | 2 |  |  | 5 |
Deferred financing costs | 2 |  |  | 2 |
Discontinued operations | — |  |  | 6 |
Total deferred tax liabilities | 265 |  |  | 433 |
Deferred tax assets: |  |  |
Deferred compensation, accrued vacation and other reserves | 141 |  |  | 256 |
Difference between book and tax basis of property | 596 |  |  | 530 |
Goodwill | 38 |  |  | 83 |
Differences between book and tax basis of contracts | 68 |  |  | 60 |
Pension and other postretirement benefits | 74 |  |  | 122 |
Equity compensation | 10 |  |  | 11 |
Bad debt reserve | 14 |  |  | 12 |
U.S. capital loss carryforwards | 1 |  |  | 1 |
U.S. Federal net operating loss carryforwards | 596 |  |  | 728 |
Foreign net operating loss carryforwards | 66 |  |  | 63 |
State net operating loss carryforwards | 140 |  |  | 106 |
Foreign capital loss carryforwards | 1 |  |  | 1 |
Federal and state tax credit carryforwards | 376 |  |  | 446 |
Federal benefit on state uncertain tax positions | 7 |  |  | 12 |
Intangibles amortization (excluding goodwill) | 101 |  |  | 115 |
Derivatives, net | — |  |  | 106 |
Inventory obsolescence | 12 |  |  | 5 |
Other | — |  |  | 7 |
Discontinued operations | — |  |  | 2,093 |
Total deferred tax assets | 2,241 |  |  | 4,757 |
Valuation allowance | (1,863 | ) |  | (2,032 | )
Discontinued operations | — |  |  | (2,087 | )
Total deferred tax assets, net of valuation allowance | 378 |  |  | 638 |
Net deferred tax asset | $ | 113 |  |  | $ | 205 |
The following table summarizes NRG's net deferred tax position:
| As of December 31,
| 2017 |  | 2016
| (In millions)
Net deferred tax asset — noncurrent | $ | 134 |  |  | $ | 225 |
Net deferred tax liability — noncurrent | (21 | ) |  | (20 | )
Net deferred tax asset | $ | 113 |  |  | $ | 205 |
The primary driver for the decrease in the net deferred tax asset from $205 million to $113 million is the revaluation of the ending balance utilizing a 21% corporate income tax rate instead of a 35% corporate income tax rate pursuant to the Tax Act as of December 22, 2017. NRG Energy, Inc.’s revaluation is completely offset by its valuation allowance. Since NRG Yield, Inc. does not have a valuation allowance against its net deferred tax asset, its ending balance remains at December 31, 2017. Additionally, due to GenOn's petition for bankruptcy on June 14, 2017, its inventory of deferreds is reclassed to discontinued operations for the year ended December 31, 2016 and is completely deconsolidated for the year ended December 31, 2017. Deferred tax assets and valuation allowance Net deferred tax balance — As of December 31, 2017 and 2016, NRG recorded a net deferred tax asset of $1.9 billion and $2.2 billion, respectively. The Company believes the federal and certain state net deferred tax assets may not be realizable under a “more likely than not” measurement and as such, a valuation allowance has been recorded to reduce the asset accordingly. The Company assesses cumulative and forecasted pretax book earnings and the future reversal of existing taxable temporary differences, including the potential impacts of the recently enacted Tax Act. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company may recognize provisional amounts for the effect of the changes related to the Tax Act. Consistent with that guidance, the Company recognized provisional amounts based upon our interpretation of the tax laws and estimates which require significant judgments. Based on the Company's assessment of positive and negative evidence, including available tax planning strategies, NRG believes that it is more likely than not that a benefit will not be realized on $1.8 billion and $2.0 billion of tax assets as of December 31, 2017, and 2016, respectively, thus a valuation allowance has been recorded. The net deferred tax asset of $113 million is predominantly due to the inclusion of NRG Yield Inc.'s net deferred tax asset consisting primarily of net operating losses. NOL carryforwards — At December 31, 2017, the Company had tax effected cumulative domestic NOLs consisting of carryforwards for federal income tax purposes of $596 million and state of $140 million. The Company estimates it will need to generate future taxable income to fully realize the net federal deferred tax asset before expiration commencing in 2026. In addition, NRG has cumulative foreign NOL carryforwards of $66 million with no expiration date. Valuation allowance — As of December 31, 2017, the Company's tax effected valuation allowance was $1.8 billion, consisting of domestic federal net deferred tax assets of approximately $1.5 billion, domestic state net deferred tax assets of $267 million, foreign net operating loss carryforwards of $66 million and foreign capital loss carryforwards of approximately $1 million. Based upon the assessment of cumulative and forecasted pretax book earnings, and the future reversal of existing taxable temporary differences, it was determined that a valuation allowance was required to be recorded during the year. Taxes Receivable and Payable As of December 31, 2017, NRG recorded a current tax payable of $7 million that represents a tax liability due for state income taxes. NRG has a tax receivable of $1 million, comprised of refunds due from state income tax estimated payments and return filings for 2017 and 2016, respectively. Uncertain tax benefits NRG has identified uncertain tax benefits whose after-tax value is $30 million for which, as of December 31, 2017 and 2016, NRG has recorded a non-current tax liability of $33 million and $37 million, respectively. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense. During the year ended December 31, 2017, the Company recognized an expense of $1 million in interest. As of December 31, 2017 and 2016, NRG had cumulative interest and penalties related to these uncertain tax benefits of $3 million and $4 million, respectively. Tax jurisdictions — NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2015. With few exceptions, state and local income tax examinations are no longer open for years before 2010. The following table reconciles the total amounts of uncertain tax benefits:
| As of December 31,
| 2017 |  | 2016
| (In millions)
Balance as of January 1 | $ | 34 |  |  | $ | 32 |
Increase due to current year positions | 4 |  |  | 8 |
Decrease due to prior year positions | (8 | ) |  | — |
Decrease due to settlements and payments | — |  |  | (6 | )
Uncertain tax benefits as of December 31 | $ | 30 |  |  | $ | 34 |

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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