XML 61 R14.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income and Other Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income and Other Taxes | 5. Income and Other Taxes (All Registrants) Tax Cuts and Jobs Act (TCJA) On December 22, 2017, President Trump signed into law the TCJA. Substantially all of the provisions of the TCJA are effective for taxable years beginning after December 31, 2017. The TCJA includes significant changes to the taxation of corporations, including provisions specifically applicable to regulated public utilities. The more significant changes that impact the Registrants are:
• | The reduction in the U.S. federal corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, effective January 1, 2018;
• | The exclusion from U.S. federal taxable income of dividends from foreign subsidiaries and the associated "transition tax;"
• | Limitations on the tax deductibility of interest expense, with an exception to these limitations for regulated public utilities;
• | Full current year expensing of capital expenditures with an exception for regulated public utilities that qualify for the exception to the interest expense limitation; and
• | The continuation of certain rate normalization requirements for accelerated depreciation benefits. For non-regulated businesses, the TCJA generally provides for full expensing of property acquired after September 27, 2017.
Under GAAP, the tax effect of changes in tax laws must be recognized in the period in which the law is enacted, or December 2017 for TCJA. The changes enacted by the TCJA were recorded as an adjustment to the Registrants' deferred tax provision, and have been reflected in "Income Taxes" on the Statement of Income for the year ended December 31, 2017 as follows:
| PPL |  | PPL Electric |  | LKE |  | LG&E |  | KU
Income tax expense (benefit) | $ | 321 |  |  | $ | (13 | ) |  | $ | 112 |  |  | $ | — |  |  | $ | — |
The components of these adjustments are discussed below: Reduction of U.S. Federal Corporate Income Tax Rate GAAP requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Registrants' deferred taxes were remeasured based upon the new U.S. federal corporate income tax rate of 21%. For PPL’s regulated entities, the changes in deferred taxes were, in large part, recorded as an offset to either a regulatory asset or regulatory liability and will be reflected in future rates charged to customers. The rate reduction on non-regulated deferred tax assets and liabilities were recorded as an adjustment to the Registrants' deferred tax provision, and have been reflected in "Income Taxes" on the Statement of Income for the year ended December 31, 2017 as follows:
| PPL |  | PPL Electric |  | LKE |  | LG&E |  | KU
Income tax expense (benefit) | $ | 220 |  |  | $ | (13 | ) |  | $ | 112 |  |  | $ | — |  |  | $ | — |
As indicated in Note 1 - "Summary of Significant Accounting Policies - Income Taxes", PPL’s U.S. regulated operations' accounting for income taxes are impacted by rate regulation. Therefore, reductions in accumulated deferred income tax balances due to the reduction in the U.S. federal corporate income tax rate to 21% under the provisions of the TCJA may result in amounts previously collected from utility customers for these deferred taxes to be refundable to such customers over a period of time. The TCJA includes provisions that stipulate how these excess deferred taxes are to be passed back to customers for certain accelerated tax depreciation benefits. Potential refunds of other deferred taxes will be determined by the Registrants’ regulators. The Balance Sheets at December 31, 2017 reflect the increase to the Registrants' net regulatory liabilities as a result of the TCJA as follows:
| PPL |  | PPL Electric |  | LKE |  | LG&E |  | KU
Net Increase in Regulatory Liabilities | $ | 2,185 |  |  | $ | 1,019 |  |  | $ | 1,166 |  |  | $ | 532 |  |  | $ | 634 |
Prior to the TCJA, PPL Electric had recorded a net regulatory asset related to taxes recoverable on certain property related deferred taxes, the tax benefit of which was received by the customer. The net regulatory asset represents the future taxes owed in excess of taxes paid by the customer to date, with an additional tax gross-up. As a result of the U.S. federal corporate income tax rate reduction enacted by the TCJA, the future taxes expected to be due are now less than taxes funded through rates, resulting in a net regulatory liability. Transition Tax The TCJA included a conversion from a worldwide tax system to a territorial tax system, effective January 1, 2018. In the transition to the territorial regime, a one-time transition tax was imposed on PPL’s unrepatriated accumulated foreign earnings in 2017. These earnings were treated as a taxable deemed dividend to PPL of approximately $462 million. As the PPL consolidated U.S. group had a taxable loss for 2017, inclusive of the taxable deemed dividend, the foreign tax credits associated with the deemed dividend were recorded as a deferred tax asset. However, it is expected that under the TCJA, the current and prior year foreign tax credit carryforwards will not be fully realizable. As a result, the net deferred income tax expense impact of the deemed repatriation was $101 million and was recorded in "Income Taxes" on the PPL Statement of Income for the year ended December 31, 2017 and "Deferred tax liabilities" on the PPL Balance Sheet at December 31, 2017. SEC Guidance on Accounting for TCJA On December 22, 2017, the SEC issued guidance for accounting for income taxes in the event that information is not available or is incomplete for purposes of reflecting the impact of the TCJA. The SEC guidance provides a period of up to one year (the measurement period) to complete the analysis and accounting to properly reflect the TCJA. The SEC guidance provides a three-step process that companies should apply to each reporting period within the measurement period:
1. | A company should record the effects of the TCJA for which the accounting is complete.
2. | A company should report provisional amounts (or adjustments to provisional amounts) for the effects of the TCJA for which the accounting is not complete, but for which a reasonable estimate can be determined. Provisional amounts and any related adjustments to such provisional amounts should be recorded to income tax expense through continuing operations in the period they are identified.
3. | A company should continue to apply GAAP based on the tax law in effect just prior to enactment of TCJA if a reasonable estimate of the specific effect of the TCJA cannot be made.
The measurement period ends at the earlier of the time the company finalizes its accounting for the impact of the TCJA or one year. The Registrants have completed or made reasonable estimates of the effects of the TCJA and reflected these amounts in their December 31, 2017 financial statements. The Registrants continue to evaluate the application of the TCJA and have made certain assumptions concerning the application of various components of the law in the calculation of 2017 income tax expense. The current and deferred components of the income tax expense calculations that the Registrants consider provisional within the meaning of the SEC guidance due to uncertainty either with respect to the technical application of the law or the quantification of the impact of the law include (but are not limited to): tax depreciation, deductible executive compensation, and the accumulated foreign earnings used to calculate the deemed dividend included in PPL’s taxable income in 2017 along with the impact of associated foreign tax credits and related valuation allowances. The Registrants believe that classification of these items as provisional is appropriate. The Registrants have accounted for these items based on their interpretation of the TCJA. Further interpretive guidance on the TCJA from the IRS, Treasury, the Joint Committee on Taxation through its “Blue Book” or from Congress in the form of Technical Corrections may differ from the Registrants' interpretation of the TCJA. (PPL) "Income from Continuing Operations Before Income Taxes" included the following:
| 2017 |  | 2016 |  | 2015
Domestic income | $ | 874 |  |  | $ | 1,463 |  |  | $ | 968 |
Foreign income | 1,038 |  |  | 1,087 |  |  | 1,100 |
Total | $ | 1,912 |  |  | $ | 2,550 |  |  | $ | 2,068 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes and the tax effects of net operating loss and tax credit carryforwards. The provision for PPL's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles of the applicable jurisdiction. See Notes 1 and 6 for additional information. Net deferred tax assets have been recognized based on management's estimates of future taxable income for the U.S. and the U.K. Significant components of PPL's deferred income tax assets and liabilities were as follows:
| 2017 (a) |  | 2016
Deferred Tax Assets |  |  |
Deferred investment tax credits | $ | 33 |  |  | $ | 51 |
Regulatory liabilities | 62 |  |  | 94 |
Income taxes due to customer (b) | 499 |  |  | — |
Accrued pension costs | 159 |  |  | 250 |
Federal loss carryforwards | 356 |  |  | 565 |
State loss carryforwards | 409 |  |  | 326 |
Federal and state tax credit carryforwards | 455 |  |  | 256 |
Foreign capital loss carryforwards | 329 |  |  | 302 |
Foreign loss carryforwards | 2 |  |  | 3 |
Foreign - pensions | (32 | ) |  | 41 |
Foreign - regulatory obligations | 2 |  |  | 6 |
Foreign - other | 7 |  |  | 5 |
Contributions in aid of construction | 134 |  |  | 141 |
Domestic - other | 104 |  |  | 188 |
Unrealized losses on qualifying derivatives | 10 |  |  | 20 |
Valuation allowances | (838 | ) |  | (593 | )
Total deferred tax assets | 1,691 |  |  | 1,655 |
Deferred Tax Liabilities |  |  |
Domestic plant - net (b) | 3,168 |  |  | 4,325 |
Taxes recoverable through future rates (b) | — |  |  | 170 |
Regulatory assets | 211 |  |  | 343 |
Reacquired debt costs | 15 |  |  | 25 |
Foreign plant - net | 726 |  |  | 640 |
Domestic - other | 9 |  |  | 14 |
Total deferred tax liabilities | 4,129 |  |  | 5,517 |
Net deferred tax liability | $ | 2,438 |  |  | $ | 3,862 |
(a) | Deferred tax assets and liabilities at December 31, 2017 reflect the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(b) | The impact on net deferred tax liabilities as a result of the U.S. federal corporate income tax rate reduction enacted by the TCJA is primarily related to plant (net of net operating losses) and resulted in a regulatory liability for income taxes due to customers, the deferred tax impact of which is reflected as a deferred tax asset.
State deferred taxes are determined on a by entity, by jurisdiction basis. As a result, $24 million and $27 million of net deferred tax assets are shown as "Other noncurrent assets" on the Balance Sheets for 2017 and 2016. At December 31, 2017, PPL had the following loss and tax credit carryforwards, related deferred tax assets and valuation allowances recorded against the deferred tax assets.
| Gross |  | Deferred Tax Asset |  | Valuation Allowance |  | Expiration
Loss carryforwards |  |  |  |  |  |  |
Federal net operating losses (a) | $ | 1,662 |  |  | $ | 349 |  |  | $ | — |  |  | 2029-2037
Federal charitable contributions (a) | 36 |  |  | 7 |  |  | — |  |  | 2020-2022
State net operating losses (a) | 5,512 |  |  | 407 |  |  | (348 | ) |  | 2018-2037
State charitable contributions (a) | 26 |  |  | 2 |  |  | — |  |  | 2018-2022
Foreign net operating losses | 10 |  |  | 2 |  |  | — |  |  | Indefinite
Foreign capital losses | 1,938 |  |  | 329 |  |  | (329 | ) |  | Indefinite
Credit carryforwards |  |  |  |  |  |  |
Federal investment tax credit |  |  | 133 |  |  | — |  |  | 2025-2036
Federal alternative minimum tax credit (b) |  |  | 30 |  |  | — |  |  | Indefinite
Federal foreign tax credits (c) |  |  | 267 |  |  | (148 | ) |  | 2024-2027
Federal - other |  |  | 24 |  |  | (8 | ) |  | 2019-2037
State - other |  |  | 1 |  |  | — |  |  | Indefinite
(a) | Due to the enactment of the TCJA, deferred tax assets are reflected at the new U.S. federal corporate income tax rate of 21%.
(b) | The TCJA repealed the corporate alternative minimum tax (AMT) for tax years beginning after December 31, 2017. The existing indefinite carryforward period for AMT credits was retained.
(c) | Includes $62 million of foreign tax credits carried forward from 2016 and $205 million of additional foreign tax credits in 2017 related to the taxable deemed dividend associated with the TCJA.
Valuation allowances have been established for the amount that, more likely than not, will not be realized. The changes in deferred tax valuation allowances were as follows:
|  |  | Additions |  |  |  |
| Balance at Beginning of Period |  | Charged to Income |  | Charged to Other Accounts |  | Deductions |  | Balance at End of Period
2017 | $ | 593 |  |  | $ | 256 |  | (a) | $ | — |  |  | $ | 11 |  |  | $ | 838 |
2016 | 662 |  |  | 17 |  |  | 2 |  |  | 88 |  | (b) | 593 |
2015 | 622 |  |  | 24 |  |  | 77 |  | (c) | 61 |  | (b) | 662 |
(a) | Increase in valuation allowance of approximately $145 million related to expected future utilization of both 2017 foreign tax credits and pre-2017 foreign tax credits carried forward. For additional information, see the "Reconciliation of Income Tax Expense" and associated notes below.
In addition, the reduction of the U.S. federal corporate income tax rate enacted by the TCJA in 2017 resulted in a $62 million increase in federal deferred tax assets and a corresponding valuation allowance related to the federal tax benefits of state net operating losses.
(b) | The reductions of the U.K. statutory income tax rates in 2016 and 2015 resulted in $19 million and $44 million in reductions in the deferred tax assets and corresponding valuation allowances. See "Reconciliation of Income Tax Expense" below for more information on the impact of the U.K. Finance Acts 2016 and 2015. In addition, the deferred tax assets and corresponding valuation allowances were reduced in 2016 by approximately $65 million due to the effect of foreign currency exchange rates.
(c) | Valuation allowance related to the deferred tax assets previously reflected on the PPL Energy Supply Segment. The deferred tax assets and related valuation allowance remained with PPL after the spinoff.
PPL Global does not record U.S. income taxes on the unremitted earnings of WPD, as management has determined that such earnings are indefinitely reinvested. Current year distributions from WPD to the U.S. are sourced from a portion of the current year’s earnings of the WPD group. As noted above, the TCJA includes a conversion from a worldwide tax system to a territorial tax system, effective January 1, 2018. In the transition to the territorial regime, a one-time transition tax was imposed on PPL’s unrepatriated accumulated foreign earnings in 2017. These earnings were treated as a taxable deemed dividend from the U.K. The total amount of the taxable deemed dividend was approximately $462 million, including $205 million of foreign tax credits. The U.S. tax consequences of the deemed dividend have been recorded in PPL’s 2017 tax provision and are explained below. Despite this 2017 deemed dividend, there have been no material changes to the facts underlying PPL’s assertion that historically reinvested earnings of WPD as well as some portion of current year earnings will continue to be indefinitely reinvested. WPD's long-term working capital forecasts and capital expenditure projections for the foreseeable future require reinvestment of WPD's undistributed earnings. Additionally, U.S. long-term working capital forecasts and capital expenditure projections for the foreseeable future do not require or contemplate annual distributions from WPD in excess of some portion of WPD's future annual earnings. The cumulative undistributed earnings are included in "Earnings reinvested" on the Balance Sheets. The amount considered indefinitely reinvested at December 31, 2017 was $6.0 billion. It is not practicable to estimate the amount of additional taxes that could be payable on these foreign earnings in the event of repatriation to the U.S. Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income from Continuing Operations Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows:
| 2017 |  | 2016 |  | 2015
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | 6 |  |  | $ | (14 | ) |  | $ | (26 | )
Current - State | 25 |  |  | 21 |  |  | 25 |
Current - Foreign | 45 |  |  | 80 |  |  | 89 |
Total Current Expense | 76 |  |  | 87 |  |  | 88 |
Deferred - Federal (a) | 532 |  |  | 385 |  |  | 699 |
Deferred - State | 88 |  |  | 89 |  |  | 68 |
Deferred - Foreign | 133 |  |  | 86 |  |  | 41 |
Total Deferred Expense, excluding operating loss carryforwards | 753 |  |  | 560 |  |  | 808 |
| 2017 |  | 2016 |  | 2015
Income Tax Expense (Benefit) |  |  |  |  |
Amortization of investment tax credit | (3 | ) |  | (3 | ) |  | (4 | )
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal (b) | (16 | ) |  | 25 |  |  | (396 | )
Deferred - State | (26 | ) |  | (21 | ) |  | (31 | )
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (42 | ) |  | 4 |  |  | (427 | )
Total income taxes from continuing operations | $ | 784 |  |  | $ | 648 |  |  | $ | 465 |
Total income tax expense - Federal | $ | 519 |  |  | $ | 393 |  |  | $ | 273 |
Total income tax expense - State | 87 |  |  | 89 |  |  | 62 |
Total income tax expense - Foreign | 178 |  |  | 166 |  |  | 130 |
Total income taxes from continuing operations | $ | 784 |  |  | $ | 648 |  |  | $ | 465 |
(a) | Due to the enactment of the TCJA in 2017, PPL recorded the following:
• | $220 million of deferred income tax expense related to the impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on deferred tax assets and liabilities;
• | $162 million of deferred tax expense related to the utilization of current year losses resulting from the taxable deemed dividend; partially offset by,
• | $60 million of deferred tax benefits related to the $205 million of 2017 foreign tax credits partially offset by $145 million of valuation allowances.
(b) | Increase in federal loss carryforwards for 2015 primarily relates to the extension of bonus depreciation and the impact of bonus depreciation related to provision to return adjustments.
In the table above, the following income tax expense (benefit) are excluded from income taxes from continuing operations:
| 2017 |  | 2016 |  | 2015
Discontinued operations - PPL Energy Supply Segment | $ | — |  |  | $ | — |  |  | $ | (30 | )
Stock-based compensation recorded to Earnings Reinvested | — |  |  | (7 | ) |  | — |
Other comprehensive income | (34 | ) |  | (6 | ) |  | (2 | )
Valuation allowance on state deferred taxes recorded to other comprehensive income | (1 | ) |  | 1 |  |  | (4 | )
Total | $ | (35 | ) |  | $ | (12 | ) |  | $ | (36 | )
| 2017 |  | 2016 |  | 2015
Reconciliation of Income Tax Expense |  |  |  |  |  |  |  |
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 35% | $ | 669 |  |  | $ | 893 |  |  | $ | 724 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 46 |  |  | 46 |  |  | 31 |
Valuation allowance adjustments (a) | 36 |  |  | 16 |  |  | 24 |
Impact of lower U.K. income tax rates (b) | (176 | ) |  | (177 | ) |  | (176 | )
U.S. income tax on foreign earnings - net of foreign tax credit (c) | 47 |  |  | (42 | ) |  | 8 |
Federal and state tax reserves adjustments (d) | — |  |  | — |  |  | (22 | )
Foreign income return adjustments | (8 | ) |  | 2 |  |  | — |
Impact of the U.K. Finance Acts on deferred tax balances (b) | (16 | ) |  | (49 | ) |  | (91 | )
Depreciation not normalized | (10 | ) |  | (10 | ) |  | (5 | )
Interest benefit on U.K. financing entities | (16 | ) |  | (17 | ) |  | (20 | )
Stock-based compensation (e) | (3 | ) |  | (10 | ) |  | — |
Deferred tax impact of U.S. tax reform (f) | 220 |  |  | — |  |  | — |
Other | (5 | ) |  | (4 | ) |  | (8 | )
Total increase (decrease) | 115 |  |  | (245 | ) |  | (259 | )
Total income taxes from continuing operations | $ | 784 |  |  | $ | 648 |  |  | $ | 465 |
Effective income tax rate | 41.0 | % |  | 25.4 | % |  | 22.5 | %
(a) | During 2017, PPL recorded an increase in valuation allowances of $23 million primarily related to foreign tax credits recorded in 2016. The future utilization of these credits is expected to be lower as a result of the TCJA.
During 2017 and 2016, PPL recorded deferred income tax expense of $16 million and $13 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized. During 2015, PPL recorded $24 million of deferred income tax expense related to deferred tax valuation allowances. PPL recorded state deferred income tax expense of $12 million primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized and $12 million of federal deferred income tax expense primarily related to federal tax credit carryforwards that are expected to expire as a result of lower future taxable earnings due to the extension of bonus depreciation.
(b) | The U.K. Finance Act 2016, enacted in September 2016, reduced the U.K. statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a $42 million deferred income tax benefit during 2016.
The U.K. Finance Act 2015, enacted in November 2015, reduced the U.K. statutory income tax rate from 20% to 19% effective April 1, 2017 and from 19% to 18% effective April 1, 2020. As a result, PPL reduced its net deferred tax liabilities and recognized a $90 million deferred income tax benefit during 2015, related to both rate decreases.
(c) | During 2017, PPL recorded a federal income tax benefit of $35 million primarily attributable to U.K. pension contributions.
During 2017, PPL recorded deferred income tax expense of $83 million primarily related to enactment of the TCJA. The enacted tax law included a conversion from a worldwide tax system to a territorial tax system, effective January 1, 2018. In the transition to the territorial regime, a one-time transition tax was imposed on PPL’s unrepatriated accumulated foreign earnings in 2017. These earnings were treated as a taxable deemed dividend to PPL of approximately $462 million, including $205 million of foreign tax credits. As the PPL consolidated U.S. group had a taxable loss for 2017, inclusive of the taxable deemed dividend, these credits were recorded as a deferred tax asset. However, it is expected that under the TCJA, only $83 million of the $205 million of foreign tax credits will be realized in the carry forward period. Accordingly, a valuation allowance on the current year foreign tax credits in the amount of $122 million has been recorded to reflect the reduction in the future utilization of the credits. The foreign tax credits associated with the deemed repatriation result in a gross carryforward and corresponding deferred tax asset of $205 million offset by a valuation allowance of $122 million. During 2016, PPL recorded lower income taxes primarily attributable to foreign tax credit carryforwards, arising from a decision to amend prior year tax returns to claim foreign tax credits rather than deduct foreign taxes. This decision was prompted by changes to the Company's most recent business plan.
(d) | During 2015, PPL recorded a $9 million income tax benefit related to a planned amendment of a prior period tax return and a $12 million income tax benefit related to the settlement of the IRS audit for the tax years 1998-2011.
(e) | During 2016, PPL recorded lower income tax expense related to the application of new stock-based compensation accounting guidance. See Note 1 for additional information.
(f) | During 2017, PPL recorded deferred income tax expense related to the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
| 2017 |  | 2016 |  | 2015
Taxes, other than income |  |  |  |  |
State gross receipts (a) | $ | 102 |  |  | $ | 100 |  |  | $ | 89 |
State capital stock | (6 | ) |  | — |  |  | — |
Foreign property | 127 |  |  | 135 |  |  | 148 |
Domestic Other | 69 |  |  | 66 |  |  | 62 |
Total | $ | 292 |  |  | $ | 301 |  |  | $ | 299 |
(a) | In 2015, the settlement of a 2011 gross receipts tax audit resulted in the reversal of $17 million of previously recognized reserves.
(PPL Electric) The provision for PPL Electric's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the PUC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets. Significant components of PPL Electric's deferred income tax assets and liabilities were as follows:
| 2017 (a) |  | 2016
Deferred Tax Assets |  |  |
Accrued pension costs | $ | 63 |  |  | $ | 107 |
Contributions in aid of construction | 117 |  |  | 112 |
Regulatory liabilities | 25 |  |  | 34 |
Income taxes due to customers (b) | 193 |  |  | — |
State loss carryforwards | 19 |  |  | 22 |
Federal loss carryforwards | 91 |  |  | 147 |
Other | 45 |  |  | 81 |
Total deferred tax assets | 553 |  |  | 503 |
Deferred Tax Liabilities |  |  |
Electric utility plant - net (b) | 1,544 |  |  | 2,001 |
Taxes recoverable through future rates (b) | — |  |  | 141 |
Reacquired debt costs | 8 |  |  | 15 |
Regulatory assets | 150 |  |  | 240 |
Other | 5 |  |  | 5 |
Total deferred tax liabilities | 1,707 |  |  | 2,402 |
Net deferred tax liability | $ | 1,154 |  |  | $ | 1,899 |
(a) | Deferred tax assets and liabilities at December 31, 2017 reflect the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(b) | The impact on net deferred tax liabilities as a result of the U.S. federal tax rate reduction enacted by the TCJA is primarily related to plant (net of net operating losses) and resulted in a regulatory liability for income taxes due to customers, the deferred tax impact of which is reflected as a deferred tax asset.
At December 31, 2017, PPL Electric had the following loss carryforwards and related deferred tax assets:
| Gross |  | Deferred Tax Asset |  | Expiration
Loss carryforwards (a) |  |  |  |  |
Federal net operating losses | $ | 426 |  |  | $ | 89 |  |  | 2031-2037
Federal charitable contributions | 8 |  |  | 2 |  |  | 2020-2022
State net operating losses | 233 |  |  | 18 |  |  | 2030-2032
State charitable contributions | 13 |  |  | 1 |  |  | 2018-2022
(a) | Due to the enactment of the TCJA, deferred tax assets are reflected at the new U.S. federal corporate income tax rate of 21%.
Credit carryforwards were insignificant at December 31, 2017. Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows.
| 2017 |  | 2016 |  | 2015
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | (65 | ) |  | $ | (29 | ) |  | $ | (80 | )
Current - State | 20 |  |  | 19 |  |  | 23 |
Total Current Expense (Benefit) | (45 | ) |  | (10 | ) |  | (57 | )
Deferred - Federal (a) | 234 |  |  | 193 |  |  | 287 |
Deferred - State | 29 |  |  | 29 |  |  | 12 |
Total Deferred Expense, excluding operating loss carryforwards | 263 |  |  | 222 |  |  | 299 |
| 2017 |  | 2016 |  | 2015
Amortization of investment tax credit | — |  |  | — |  |  | — |
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal | (5 | ) |  | — |  |  | (75 | )
Deferred - State | — |  |  | — |  |  | (3 | )
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (5 | ) |  | — |  |  | (78 | )
Total income tax expense | $ | 213 |  |  | $ | 212 |  |  | $ | 164 |
Total income tax expense - Federal | $ | 164 |  |  | $ | 164 |  |  | $ | 132 |
Total income tax expense - State | 49 |  |  | 48 |  |  | 32 |
Total income tax expense | $ | 213 |  |  | $ | 212 |  |  | $ | 164 |
(a) | Due to the enactment of the TCJA in 2017, PPL Electric recorded a $13 million deferred tax benefit related to the impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on deferred tax assets and liabilities.
| 2017 |  | 2016 |  | 2015
Reconciliation of Income Taxes |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 201 |  |  | $ | 193 |  |  | $ | 146 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 36 |  |  | 36 |  |  | 25 |
Depreciation not normalized | (8 | ) |  | (8 | ) |  | (4 | )
Stock-based compensation (a) | (2 | ) |  | (6 | ) |  | — |
Deferred tax impact of U.S. tax reform (b) | (13 | ) |  | — |  |  | — |
Other | (1 | ) |  | (3 | ) |  | (3 | )
Total increase (decrease) | 12 |  |  | 19 |  |  | 18 |
Total income tax expense | $ | 213 |  |  | $ | 212 |  |  | $ | 164 |
Effective income tax rate | 37.0 | % |  | 38.4 | % |  | 39.4 | %
(a) | During 2016, PPL Electric recorded lower income tax expense related to the application of new stock-based compensation accounting guidance. See Note 1 for additional information.
(b) | During 2017, PPL Electric recorded a deferred tax benefit related to the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
| 2017 |  | 2016 |  | 2015
Taxes, other than income |  |  |  |  |  |  |  |
State gross receipts (a) | $ | 102 |  |  | $ | 100 |  |  | $ | 89 |
Property and other | 5 |  |  | 5 |  |  | 5 |
Total | $ | 107 |  |  | $ | 105 |  |  | $ | 94 |
(a) | In 2015, the settlement of a 2011 gross receipts tax audit resulted in the reversal of $17 million of previously recognized reserves.
(LKE) The provision for LKE's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC, VSCC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets. Significant components of LKE's deferred income tax assets and liabilities were as follows:
| 2017 (a) |  | 2016
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | 150 |  |  | $ | 248 |
State loss carryforwards | 41 |  |  | 35 |
Federal tax credit carryforwards | 181 |  |  | 186 |
Contributions in aid of construction | 17 |  |  | 29 |
Regulatory liabilities | 37 |  |  | 60 |
Accrued pension costs | 29 |  |  | 58 |
Income taxes due to customers (b) | 305 |  |  | 15 |
Deferred investment tax credits | 33 |  |  | 51 |
Derivative liability | 7 |  |  | 12 |
Other | 26 |  |  | 49 |
Valuation allowances | (8 | ) |  | (11 | )
Total deferred tax assets | 818 |  |  | 732 |
Deferred Tax Liabilities |  |  |
Plant - net (b) | 1,615 |  |  | 2,352 |
Regulatory assets | 61 |  |  | 102 |
Other | 8 |  |  | 13 |
Total deferred tax liabilities | 1,684 |  |  | 2,467 |
Net deferred tax liability | $ | 866 |  |  | $ | 1,735 |
(a) | Deferred tax assets and liabilities at December 31, 2017 reflect the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(b) | The impact on net deferred tax liabilities as a result of the U.S. federal tax rate reduction enacted by the TCJA is primarily related to plant (net of net operating losses) and resulted in a regulatory liability for income taxes due to customers, the deferred tax impact of which is reflected as a deferred tax asset.
At December 31, 2017, LKE had the following loss and tax credit carryforwards, related deferred tax assets, and valuation allowances recorded against the deferred tax assets.
| Gross |  | Deferred Tax Asset |  | Valuation Allowance |  | Expiration
Loss carryforwards (a) |  |  |  |  |  |  |
Federal net operating losses | $ | 713 |  |  | $ | 150 |  |  | $ | — |  |  | 2028-2037
Federal charitable contributions | 14 |  |  | 3 |  |  | — |  |  | 2020-2022
State net operating losses | 874 |  |  | 41 |  |  | — |  |  | 2028-2037
Credit carryforwards |  |  |  |  |  |  |
Federal investment tax credit |  |  | 133 |  |  | — |  |  | 2025-2036
Federal alternative minimum tax credit (b) |  |  | 27 |  |  | — |  |  | Indefinite
Federal - other |  |  | 21 |  |  | (8 | ) |  | 2019-2037
State - other |  |  | 1 |  |  | — |  |  | Indefinite
(a) | Due to the enactment of the TCJA, deferred tax assets are reflected at the new U.S. federal corporate income tax rate of 21%.
(b) | The TCJA repealed the corporate alternative minimum tax (AMT) for tax years beginning after December 31, 2017. The existing indefinite carryforward period for AMT credits was retained.
Changes in deferred tax valuation allowances were:
| Balance at Beginning of Period |  | Additions |  | Deductions |  | Balance at End of Period
2017 | $ | 11 |  |  | $ | 4 |  | (a) | $ | 7 |  | (b) | $ | 8 |
2016 | 12 |  |  | — |  |  | 1 |  | (b) | 11 |
2015 | — |  |  | 12 |  | (c) | — |  |  | 12 |
(a) | Federal tax credits expiring in 2021 that are more likely than not to expire before being utilized.
(b) | Federal tax credit expiring.
(c) | Federal tax credits expiring in 2016 through 2020 that are more likely than not to expire before being utilized.
Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income from Continuing Operations Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:
| 2017 |  | 2016 |  | 2015
Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Current - Federal | $ | 74 |  |  | $ | (36 | ) |  | $ | 2 |
Current - State | 6 |  |  | 1 |  |  | 1 |
Total Current Expense (Benefit) | 80 |  |  | (35 | ) |  | 3 |
Deferred - Federal (a) | 268 |  |  | 248 |  |  | 405 |
Deferred - State | 32 |  |  | 38 |  |  | 32 |
Total Deferred Expense, excluding benefits of operating loss carryforwards | 300 |  |  | 286 |  |  | 437 |
Amortization of investment tax credit - Federal | (3 | ) |  | (3 | ) |  | (3 | )
Tax benefit of operating loss carryforwards |  |  |  |  |  |  |  |
Deferred - Federal | (2 | ) |  | 10 |  |  | (198 | )
Deferred - State | — |  |  | (1 | ) |  | — |
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (2 | ) |  | 9 |  |  | (198 | )
Total income tax expense from continuing operations (b) | $ | 375 |  |  | $ | 257 |  |  | $ | 239 |
Total income tax expense - Federal | $ | 337 |  |  | $ | 219 |  |  | $ | 206 |
Total income tax expense - State | 38 |  |  | 38 |  |  | 33 |
Total income tax expense from continuing operations (b) | $ | 375 |  |  | $ | 257 |  |  | $ | 239 |
(a) | Due to the enactment of the TCJA in 2017, LKE recorded $112 million of deferred income tax expense, of which $108 million related to the impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on deferred tax assets and liabilities and $4 million related to valuation allowances on tax credits expiring in 2021.
(b) | Excludes deferred federal and state tax expense (benefit) recorded to OCI of $(10) million in 2017, $(16) million in 2016 and less than $(1) million in 2015.
| 2017 |  | 2016 |  | 2015
Reconciliation of Income Taxes |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 242 |  |  | $ | 240 |  |  | $ | 211 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 25 |  |  | 25 |  |  | 22 |
Amortization of investment tax credit | (3 | ) |  | (3 | ) |  | (3 | )
Valuation allowance adjustment (a) | — |  |  | — |  |  | 12 |
Stock-based compensation (b) | 1 |  |  | (3 | ) |  | — |
Deferred tax impact of U.S. tax reform (c) | 112 |  |  | — |  |  | — |
Other | (2 | ) |  | (2 | ) |  | (3 | )
Total increase | 133 |  |  | 17 |  |  | 28 |
Total income tax expense | $ | 375 |  |  | $ | 257 |  |  | $ | 239 |
Effective income tax rate | 54.3 | % |  | 37.5 | % |  | 39.6 | %
(a) | Represents a valuation allowance against tax credits expiring through 2020 that are more likely than not to expire before being utilized.
(b) | During 2016, LKE recorded lower income tax expense related to the application of new stock-based compensation accounting guidance. See Note 1 for additional information.
(c) | During 2017, LKE recorded deferred income tax expense primarily due to the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
| 2017 |  | 2016 |  | 2015
Taxes, other than income |  |  |  |  |  |  |  |
Property and other | $ | 65 |  |  | $ | 62 |  |  | $ | 57 |
Total | $ | 65 |  |  | $ | 62 |  |  | $ | 57 |
(LG&E) The provision for LG&E's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets. Significant components of LG&E's deferred income tax assets and liabilities were as follows:
| 2017 (a) |  | 2016
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | 29 |  |  | $ | 80 |
Contributions in aid of construction | 11 |  |  | 18 |
Regulatory liabilities | 21 |  |  | 34 |
Deferred investment tax credits | 9 |  |  | 14 |
Income taxes due to customers (b) | 142 |  |  | 17 |
Derivative liability | 7 |  |  | 12 |
Other | 12 |  |  | 17 |
Total deferred tax assets | 231 |  |  | 192 |
Deferred Tax Liabilities |  |  |
Plant - net (b) | 724 |  |  | 1,058 |
Regulatory assets | 40 |  |  | 65 |
Accrued pension costs | 34 |  |  | 35 |
Other | 5 |  |  | 8 |
Total deferred tax liabilities | 803 |  |  | 1,166 |
Net deferred tax liability | $ | 572 |  |  | $ | 974 |
(a) | Deferred tax assets and liabilities at December 31, 2017 reflect the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(b) | The impact on net deferred tax liabilities as a result of the U.S. federal tax rate reduction enacted by the TCJA is primarily related to plant (net of net operating losses) and resulted in a regulatory liability for income taxes due to customers, the deferred tax impact of which is reflected as a deferred tax asset.
LG&E expects to have adequate levels of taxable income to realize its recorded deferred income tax assets. At December 31, 2017, LG&E had $140 million of federal net operating loss carryforwards that expire in 2035 and $6 million of federal credit carryforwards that expire from 2034 to 2037. Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:
| 2017 |  | 2016 |  | 2015
Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Current - Federal | $ | — |  |  | $ | (22 | ) |  | $ | (15 | )
Current - State | 5 |  |  | 1 |  |  | 3 |
Total current Expense (Benefit) | 5 |  |  | (21 | ) |  | (12 | )
Deferred - Federal | 112 |  |  | 134 |  |  | 190 |
Deferred - State | 14 |  |  | 18 |  |  | 13 |
Total Deferred Expense, excluding benefits of operating loss carryforwards | 126 |  |  | 152 |  |  | 203 |
Amortization of investment tax credit - Federal | (1 | ) |  | (1 | ) |  | (1 | )
Tax benefit of operating loss carryforwards |  |  |  |  |  |  |
Deferred - Federal | 1 |  |  | (4 | ) |  | (76 | )
Total Tax Benefit of Operating Loss Carryforwards | 1 |  |  | (4 | ) |  | (76 | )
Total income tax expense | $ | 131 |  |  | $ | 126 |  |  | $ | 114 |
Total income tax expense - Federal | $ | 112 |  |  | $ | 107 |  |  | $ | 98 |
Total income tax expense - State | 19 |  |  | 19 |  |  | 16 |
Total income tax expense | $ | 131 |  |  | $ | 126 |  |  | $ | 114 |
| 2017 |  | 2016 |  | 2015
Reconciliation of Income Taxes |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at |  |  |  |  |
statutory tax rate - 35% | $ | 120 |  |  | $ | 115 |  |  | $ | 105 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 13 |  |  | 12 |  |  | 11 |
Amortization of investment tax credit | (1 | ) |  | (1 | ) |  | (1 | )
Other | (1 | ) |  | — |  |  | (1 | )
Total increase | 11 |  |  | 11 |  |  | 9 |
Total income tax expense | $ | 131 |  |  | $ | 126 |  |  | $ | 114 |
Effective income tax rate | 38.1 | % |  | 38.3 | % |  | 38.1 | %
| 2017 |  | 2016 |  | 2015
Taxes, other than income |  |  |  |  |  |  |  |
Property and other | $ | 33 |  |  | $ | 32 |  |  | $ | 28 |
Total | $ | 33 |  |  | $ | 32 |  |  | $ | 28 |
(KU) The provision for KU's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC, VSCC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets. Significant components of KU's deferred income tax assets and liabilities were as follows:
| 2017 (a) |  | 2016
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | 13 |  |  | $ | 79 |
Contributions in aid of construction | 6 |  |  | 11 |
Regulatory liabilities | 16 |  |  | 26 |
Deferred investment tax credits | 24 |  |  | 37 |
Income taxes due to customers (b) | 163 |  |  | — |
Other | 9 |  |  | 11 |
Total deferred tax assets | 231 |  |  | 164 |
Deferred Tax Liabilities |  |  |
Plant - net (b) | 882 |  |  | 1,280 |
Regulatory assets | 21 |  |  | 37 |
Accrued pension costs | 17 |  |  | 12 |
Other | 2 |  |  | 5 |
Total deferred tax liabilities | 922 |  |  | 1,334 |
Net deferred tax liability | $ | 691 |  |  | $ | 1,170 |
(a) | Deferred tax assets and liabilities at December 31, 2017 reflect the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(b) | The impact on net deferred tax liabilities as a result of the U.S. federal tax rate reduction enacted by the TCJA is primarily related to plant (net of net operating losses) and resulted in a regulatory liability for income taxes due to customers, the deferred tax impact of which is reflected as a deferred tax asset.
KU expects to have adequate levels of taxable income to realize its recorded deferred income tax assets. At December 31, 2017, KU had $61 million of federal net operating loss carryforwards that expire in 2035 and $6 million of federal credit carryforwards that expire from 2034 to 2037. Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:
| 2017 |  | 2016 |  | 2015
Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Current - Federal | $ | — |  |  | $ | 31 |  |  | $ | (21 | )
Current - State | 7 |  |  | 5 |  |  | 1 |
Total Current Expense (Benefit) | 7 |  |  | 36 |  |  | (20 | )
Deferred - Federal | 138 |  |  | 131 |  |  | 240 |
Deferred - State | 16 |  |  | 19 |  |  | 19 |
Total Deferred Expense, excluding benefits of operating loss carryforwards | 154 |  |  | 150 |  |  | 259 |
Amortization of investment tax credit - Federal | (2 | ) |  | (2 | ) |  | (2 | )
Tax benefit of operating loss carryforwards |  |  |  |  |  |  |  |
Deferred - Federal | — |  |  | (21 | ) |  | (97 | )
Total Tax Benefit of Operating Loss Carryforwards | — |  |  | (21 | ) |  | (97 | )
Total income tax expense (a) | $ | 159 |  |  | $ | 163 |  |  | $ | 140 |
Total income tax expense - Federal | $ | 136 |  |  | $ | 139 |  |  | $ | 120 |
Total income tax expense - State | 23 |  |  | 24 |  |  | 20 |
Total income tax expense (a) | $ | 159 |  |  | $ | 163 |  |  | $ | 140 |
(a) | Excludes deferred federal and state tax expense (benefit) recorded to OCI of less than $1 million in 2017, and less than $(1) million in 2016 and 2015.
| 2017 |  | 2016 |  | 2015
Reconciliation of Income Taxes |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% | $ | 146 |  |  | $ | 150 |  |  | $ | 131 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 15 |  |  | 16 |  |  | 13 |
Amortization of investment tax credit | (2 | ) |  | (2 | ) |  | (2 | )
Other | — |  |  | (1 | ) |  | (2 | )
Total increase | 13 |  |  | 13 |  |  | 9 |
Total income tax expense | $ | 159 |  |  | $ | 163 |  |  | $ | 140 |
Effective income tax rate | 38.0 | % |  | 38.1 | % |  | 37.4 | %
| 2017 |  | 2016 |  | 2015
Taxes, other than income |  |  |  |  |  |  |  |
Property and other | $ | 32 |  |  | $ | 30 |  |  | $ | 29 |
Total | $ | 32 |  |  | $ | 30 |  |  | $ | 29 |
Unrecognized Tax Benefits (All Registrants) PPL or its subsidiaries file tax returns in four major tax jurisdictions. The income tax provisions for PPL Electric, LG&E and KU are calculated in accordance with an intercompany tax sharing agreement, which provides that taxable income be calculated as if each domestic subsidiary filed a separate consolidated return. Based on this tax sharing agreement, PPL Electric or its subsidiaries indirectly or directly file tax returns in two major tax jurisdictions, and LKE, LG&E and KU or their subsidiaries indirectly or directly file tax returns in two major tax jurisdictions. With few exceptions, at December 31, 2017, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows.
| PPL |  | PPL Electric |  | LKE |  | LG&E |  | KU
U.S. (federal) | 2013 and prior |  | 2013 and prior |  | 2013 and prior |  | 2013 and prior |  | 2013 and prior
Pennsylvania (state) | 2011 and prior |  | 2011 and prior |  |  |  |  |  |
Kentucky (state) | 2012 and prior |  |  |  | 2012 and prior |  | 2012 and prior |  | 2012 and prior
U.K. (foreign) | 2014 and prior |  |  |  |  |  |  |  |
Other (PPL) In 2015, PPL recorded a tax benefit of $24 million, related to the settlement of the IRS audit for tax years 1998-2011. Of this amount, $12 million is reflected in continuing operations. PPL finalized the settlement of interest in 2016 and recorded an additional $3 million tax benefit.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration