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Income and Other Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
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 included significant changes to the taxation of corporations, including provisions specifically applicable to regulated public utilities. The more significant changes that impact the Registrants were:
• | 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 the TCJA. The changes enacted by the TCJA were recorded as an adjustment to the Registrants' deferred tax provisions, 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 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 tax rate reduction impacts on non-regulated deferred tax assets and liabilities were recorded as an adjustment to the Registrants' deferred tax provisions, 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 will 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. Refunds of other deferred taxes either have been or 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 |
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 for purposes of the 2017 tax provision. 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. 2018 Impacts of TCJA The Registrants recognized certain provisional amounts relating to the impact of the enactment of the TCJA in their December 31, 2017 financial statements, in accordance with SEC guidance. Included in those provisional amounts were estimates of: tax depreciation, deductible executive compensation, accumulated foreign earnings, foreign tax credits, and deemed dividends from foreign subsidiaries, all of which were based on the interpretation and application of various provisions of the TCJA. In the third quarter of 2018, PPL filed its consolidated federal income tax return, which was prepared using guidance issued by the U.S. Treasury Department and the IRS since the filing of each Registrant's 2017 Form 10-K. Accordingly, the Registrants have updated the following provisional amounts and now consider them to be complete: (1) the amount of the deemed dividend and associated foreign tax credits relating to the transition tax imposed on accumulated foreign earnings as of December 31, 2017; (2) the amount of accelerated 100% "bonus" depreciation PPL was eligible to claim in its 2017 federal income tax return; and (3) the related impacts on PPL's 2017 consolidated federal net operating loss to be carried forward to future periods. In addition, the Registrants recorded the tax impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on the changes to deferred tax assets and liabilities resulting from the completed provisional amounts. The completed provisional amounts related to the tax rate reduction had an insignificant impact on the net regulatory liabilities of PPL's U.S. regulated operations. In the fourth quarter of 2018, PPL completed its analysis of the deductibility of executive compensation awarded as of November 2, 2017 and concluded that no material change to the provisional amounts is required. The final amounts reported in PPL's 2017 federal income tax return, provisional amounts for the year ended December 31, 2017, the related measurement period adjustments, and the resulting tax impact for the year ended December 31,2018 are as follows.
| Taxable Income (Loss) (a)
| Adjustments per 2017 Tax Return |  | Adjustments per 2017 Tax Provision |  | 2018 Adjustments
PPL |  |  |  |  |
Deemed Dividend | $ | 397 |  |  | $ | 462 |  |  | $ | (65 | )
Bonus Depreciation (b) | (67 | ) |  | — |  |  | (67 | )
Consolidated Federal Net Operating Loss due to the TCJA (c) | (330 | ) |  | (462 | ) |  | 132 |
Total | $ | — |  |  | $ | — |  |  | $ | — |
PPL Electric |  |  |  |  |
Bonus Depreciation (b) | $ | (39 | ) |  | $ | — |  |  | $ | (39 | )
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c) | (68 | ) |  | (105 | ) |  | 37 |
Total | $ | (107 | ) |  | $ | (105 | ) |  | $ | (2 | )
LKE |  |  |  |  |
Bonus Depreciation (b) | $ | (28 | ) |  | $ | — |  |  | $ | (28 | )
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c) | (32 | ) |  | (45 | ) |  | 13 |
Total | $ | (60 | ) |  | $ | (45 | ) |  | $ | (15 | )
LG&E |  |  |  |  |
Bonus Depreciation (b) | $ | (17 | ) |  | $ | — |  |  | $ | (17 | )
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c) | 17 |  |  | — |  |  | 17 |
Total | $ | — |  |  | $ | — |  |  | $ | — |
KU |  |  |  |  |
Bonus Depreciation (b) | $ | (11 | ) |  | $ | — |  |  | $ | (11 | )
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c) | 11 |  |  | — |  |  | 11 |
Total | $ | — |  |  | $ | — |  |  | $ | — |
(a) | The above table reflects, for each item, the amount subject to change as a result of the TCJA and does not reflect the total amount of each item included in the return and the provision.
(b) | The TCJA increased the bonus depreciation percentage from 50% to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2018. Increases in tax depreciation reduce the Registrants' taxes payable and increase net deferred tax liabilities with no impact to “Income Taxes” on the Statements of Income.
(c) | An increase in the consolidated federal net operating loss reduces net deferred tax liabilities with the opposite effect if there is a decrease in the consolidated federal net operating loss. These increases or decreases have no impact to “Income Taxes” on the Statements of Income.
| Income Tax Expense (Benefit)
| Adjustments per 2017 Tax Return |  | Adjustments per 2017 Tax Provision |  | 2018 Adjustments
PPL |  |  |  |  |
Deemed Dividend | $ | 139 |  |  | $ | 161 |  |  | $ | (22 | )
Foreign Tax Credits | (157 | ) |  | (205 | ) |  | 48 |
Valuation of Foreign Tax Credit Carryforward | 110 |  |  | 145 |  |  | (35 | )
Reduction in U.S. federal income tax rate | 229 |  |  | 220 |  |  | 9 |
Total | $ | 321 |  |  | $ | 321 |  |  | $ | — |
PPL Electric |  |  |  |  |
Reduction in U.S. federal income tax rate | $ | (13 | ) |  | $ | (13 | ) |  | $ | — |
LKE |  |  |  |  |
Reduction in U.S. federal income tax rate | $ | 110 |  |  | $ | 112 |  |  | $ | (2 | )
The Registrants' accounting related to the effects of the TCJA on financial results for the period ended December 31, 2017 is complete as of December 31, 2018 with respect to all provisional amounts. In 2018, the IRS issued proposed regulations for certain provisions of the TCJA, including interest deductibility, Base Erosion Anti-Avoidance Tax (BEAT), and Global Intangible Low-Taxed Income (GILTI). PPL has determined that the proposed regulations related to BEAT and GILTI do not materially change PPL's current interpretation of the statutory impact of these rules on the company. Proposed regulations relating to the limitation on the deductibility of interest expense were issued in November 2018 and such regulations provide detailed rules implementing the broader statutory provisions. These proposed regulations should not apply to the Registrants until the year in which the regulations are issued in final form, which is expected to be 2019. It is uncertain what form the final regulations will take and, therefore, the Registrants cannot predict what impact the final regulations will have on the tax deductibility of interest expense. However, if the proposed regulations were issued as final in their current form, the Registrants could have a limitation on a portion of their interest expense deduction for tax purposes and such limitation could be significant. (PPL) "Income Before Income Taxes" included the following:
| 2018 |  | 2017 |  | 2016
Domestic income | $ | 1,127 |  |  | $ | 874 |  |  | $ | 1,463 |
Foreign income | 1,158 |  |  | 1,038 |  |  | 1,087 |
Total | $ | 2,285 |  |  | $ | 1,912 |  |  | $ | 2,550 |
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 7 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:
| 2018 |  | 2017
Deferred Tax Assets |  |  |
Deferred investment tax credits | $ | 31 |  |  | $ | 33 |
Regulatory liabilities | 87 |  |  | 68 |
Income taxes due to customer | 479 |  |  | 499 |
Accrued pension and postretirement costs | 277 |  |  | 232 |
Federal loss carryforwards | 325 |  |  | 356 |
State loss carryforwards | 419 |  |  | 409 |
Federal and state tax credit carryforwards | 392 |  |  | 455 |
Foreign capital loss carryforwards | 313 |  |  | 329 |
Foreign loss carryforwards | 1 |  |  | 2 |
Foreign - regulatory obligations | — |  |  | 2 |
Foreign - other | 9 |  |  | 7 |
Contributions in aid of construction | 139 |  |  | 134 |
Domestic - other | 81 |  |  | 102 |
Unrealized losses on qualifying derivatives | 7 |  |  | 10 |
Valuation allowances | (808 | ) |  | (838 | )
Total deferred tax assets | 1,752 |  |  | 1,800 |
Deferred Tax Liabilities |  |  |
Domestic plant - net | 3,359 |  |  | 3,168 |
Regulatory assets | 314 |  |  | 288 |
Reacquired debt costs | 12 |  |  | 15 |
Foreign plant - net | 724 |  |  | 726 |
Foreign - pensions | 83 |  |  | 32 |
Domestic - other | 28 |  |  | 9 |
Total deferred tax liabilities | 4,520 |  |  | 4,238 |
Net deferred tax liability | $ | 2,768 |  |  | $ | 2,438 |
State deferred taxes are determined on a by entity, by jurisdiction basis. As a result, $28 million and $24 million of net deferred tax assets are shown as "Other noncurrent assets" on the Balance Sheets for 2018 and 2017. At December 31, 2018, 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 | $ | 1,519 |  |  | $ | 319 |  |  | $ | — |  |  | 2031-2037
Federal charitable contributions | 29 |  |  | 6 |  |  | — |  |  | 2020-2022
State net operating losses | 5,725 |  |  | 418 |  |  | (370 | ) |  | 2019-2038
State charitable contributions | 7 |  |  | 1 |  |  | — |  |  | 2020-2022
Foreign net operating losses | 6 |  |  | 1 |  |  | — |  |  | Indefinite
Foreign capital losses | 1,842 |  |  | 313 |  |  | (313 | ) |  | Indefinite
Credit carryforwards |  |  |  |  |  |  |
Federal investment tax credit |  |  | 133 |  |  | — |  |  | 2025-2036
Federal alternative minimum tax credit (a) |  |  | 15 |  |  | — |  |  | Indefinite
Federal foreign tax credits (b) |  |  | 218 |  |  | (113 | ) |  | 2024-2027
Federal - other |  |  | 25 |  |  | (8 | ) |  | 2019-2038
State - other |  |  | 1 |  |  | — |  |  | Indefinite
(a) | 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.
(b) | Includes $62 million of foreign tax credits carried forward from 2016 and $156 million of additional foreign tax credits from 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
2018 | $ | 838 |  |  | $ | 26 |  |  | $ | — |  |  | $ | 56 |  | (a) | $ | 808 |
2017 | 593 |  |  | 256 |  | (b) | — |  |  | 11 |  |  | 838 |
2016 | 662 |  |  | 17 |  |  | 2 |  |  | 88 |  | (c) | 593 |
(a) | Decrease in the valuation allowance of approximately $35 million due to the change in the total foreign tax credits available after finalization of the deemed dividend calculation required by the TCJA in 2017. In addition, the deferred tax assets and corresponding valuation allowances were reduced in 2018 by approximately $19 million due to the effect of foreign currency exchange rates.
(b) | 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.
(c) | The reduction of the U.K. statutory income tax rate in 2016 resulted in a $19 million reduction in deferred tax assets and corresponding valuation allowances. See "Reconciliation of Income Tax Expense" below for additional information on the impact of the U.K. Finance Act 2016. In addition, deferred tax assets and corresponding valuation allowances were reduced in 2016 by approximately $65 million due to the effect of foreign currency exchange rates.
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. 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, 2018 was $6.7 billion. The foregoing is not impacted by U.S. tax reform and the conversion from a worldwide to a participation exemption system. 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 Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows:
| 2018 |  | 2017 |  | 2016
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | (19 | ) |  | $ | 6 |  |  | $ | (14 | )
Current - State | 17 |  |  | 25 |  |  | 21 |
Current - Foreign | 104 |  |  | 45 |  |  | 80 |
Total Current Expense | 102 |  |  | 76 |  |  | 87 |
Deferred - Federal (a) | 203 |  |  | 532 |  |  | 385 |
Deferred - State | 100 |  |  | 88 |  |  | 89 |
Deferred - Foreign | 107 |  |  | 133 |  |  | 86 |
Total Deferred Expense, excluding operating loss carryforwards | 410 |  |  | 753 |  |  | 560 |
Amortization of investment tax credit | (3 | ) |  | (3 | ) |  | (3 | )
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal | (20 | ) |  | (16 | ) |  | 25 |
Deferred - State | (31 | ) |  | (26 | ) |  | (21 | )
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (51 | ) |  | (42 | ) |  | 4 |
Total income taxes | $ | 458 |  |  | $ | 784 |  |  | $ | 648 |
Total income tax expense - Federal | $ | 161 |  |  | $ | 519 |  |  | $ | 393 |
Total income tax expense - State | 86 |  |  | 87 |  |  | 89 |
Total income tax expense - Foreign | 211 |  |  | 178 |  |  | 166 |
Total income taxes | $ | 458 |  |  | $ | 784 |  |  | $ | 648 |
(a) | Due to the enactment of the TCJA, PPL recorded the following in 2017:
• | $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.
In the table above, the following income tax expense (benefit) are excluded from income taxes.
| 2018 |  | 2017 |  | 2016
Stock-based compensation recorded to Earnings reinvested | $ | — |  |  | $ | — |  |  | $ | (7 | )
Other comprehensive income | (6 | ) |  | (34 | ) |  | (6 | )
Valuation allowance on state deferred taxes recorded to other comprehensive income | — |  |  | (1 | ) |  | 1 |
Total | $ | (6 | ) |  | $ | (35 | ) |  | $ | (12 | )
| 2018 |  | 2017 |  | 2016
Reconciliation of Income Tax Expense |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate (a) | $ | 480 |  |  | $ | 669 |  |  | $ | 893 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit (a) | 40 |  |  | 46 |  |  | 46 |
Valuation allowance adjustments (b) | 21 |  |  | 36 |  |  | 16 |
Impact of lower U.K. income tax rates(c) | (25 | ) |  | (176 | ) |  | (177 | )
U.S. income tax on foreign earnings - net of foreign tax credit (a)(d) | 3 |  |  | 47 |  |  | (42 | )
Foreign income return adjustments | — |  |  | (8 | ) |  | 2 |
Impact of the U.K. Finance Act on deferred tax balances (e) | (13 | ) |  | (16 | ) |  | (49 | )
Depreciation and other items not normalized | (11 | ) |  | (10 | ) |  | (10 | )
Amortization of excess deferred federal and state income taxes(f) | (37 | ) |  | — |  |  | — |
Interest benefit on U.K. financing entities | (17 | ) |  | (16 | ) |  | (17 | )
Stock-based compensation | 4 |  |  | (3 | ) |  | (10 | )
Deferred tax impact of U.S. tax reform (g) | — |  |  | 220 |  |  | — |
Deferred tax impact of Kentucky tax reform (h) | 9 |  |  | — |  |  | — |
Other (i) | 4 |  |  | (5 | ) |  | (4 | )
Total increase (decrease) | (22 | ) |  | 115 |  |  | (245 | )
Total income taxes | $ | 458 |  |  | $ | 784 |  |  | $ | 648 |
Effective income tax rate | 20.0 | % |  | 41.0 | % |  | 25.4 | %
(a) | The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.
(b) | 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 2018, 2017 and 2016, PPL recorded deferred income tax expense of $24 million, $16 million and $13 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.
(c) | The reduction in the U.S. federal corporate income tax rate from 35% to 21% significantly reduced the difference between the U.K. and U.S. income tax rates in 2018 compared with 2017.
(d) | 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.
(e) | The U.K. Finance Act 2016, enacted in September 2016, reduced the U.K. statutory income tax rate effective April 1, 2020 to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a $42 million deferred income tax benefit during 2016.
(f) | During 2018, PPL recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(g) | 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.
(h) | During 2018, PPL recorded deferred income tax expense, primarily associated with LKE’s non-regulated entities, due to the Kentucky corporate income tax rate reduction from 6% to 5%, as enacted by HB 487, effective January, 1, 2018.
(i) | During 2018, PPL filed its consolidated federal income tax return, which included updates to the TCJA provisional amounts recorded in 2017. The adjustments to the various provisional amounts that are considered complete as of the filed tax return resulted in an immaterial impact to income tax expense and are discussed in the TCJA section above.
| 2018 |  | 2017 |  | 2016
Taxes, other than income |  |  |  |  |
State gross receipts | $ | 103 |  |  | $ | 102 |  |  | $ | 100 |
State capital stock | — |  |  | (6 | ) |  | — |
Foreign property | 134 |  |  | 127 |  |  | 135 |
Domestic Other | 75 |  |  | 69 |  |  | 66 |
Total | $ | 312 |  |  | $ | 292 |  |  | $ | 301 |
(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:
| 2018 |  | 2017
Deferred Tax Assets |  |  |
Accrued pension and postretirement costs | $ | 110 |  |  | $ | 81 |
Contributions in aid of construction | 118 |  |  | 117 |
Regulatory liabilities | 35 |  |  | 25 |
Income taxes due to customers | 181 |  |  | 193 |
State loss carryforwards | 14 |  |  | 19 |
Federal loss carryforwards | 79 |  |  | 91 |
Other | 25 |  |  | 27 |
Total deferred tax assets | 562 |  |  | 553 |
Deferred Tax Liabilities |  |  |
Electric utility plant - net | 1,681 |  |  | 1,544 |
Reacquired debt costs | 6 |  |  | 8 |
Regulatory assets | 176 |  |  | 150 |
Other | 19 |  |  | 5 |
Total deferred tax liabilities | 1,882 |  |  | 1,707 |
Net deferred tax liability | $ | 1,320 |  |  | $ | 1,154 |
PPL Electric expects to have adequate levels of taxable income to realize its recorded deferred income tax assets. At December 31, 2018, PPL Electric had the following loss carryforwards and related deferred tax assets:
| Gross |  | Deferred Tax Asset |  | Expiration
Loss carryforwards |  |  |  |  |
Federal net operating losses | $ | 370 |  |  | $ | 78 |  |  | 2031-2037
Federal charitable contributions | 6 |  |  | 1 |  |  | 2020-2022
State net operating losses | 180 |  |  | 14 |  |  | 2031-2032
State charitable contributions | 5 |  |  | — |  |  | 2020-2022
Credit carryforwards were insignificant at December 31, 2018. 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.
| 2018 |  | 2017 |  | 2016
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | 2 |  |  | $ | (65 | ) |  | $ | (29 | )
Current - State | 9 |  |  | 20 |  |  | 19 |
Total Current Expense (Benefit) | 11 |  |  | (45 | ) |  | (10 | )
Deferred - Federal (a) | 96 |  |  | 234 |  |  | 193 |
Deferred - State | 37 |  |  | 29 |  |  | 29 |
Total Deferred Expense, excluding operating loss carryforwards | 133 |  |  | 263 |  |  | 222 |
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal | (8 | ) |  | (5 | ) |  | — |
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (8 | ) |  | (5 | ) |  | — |
Total income taxes | $ | 136 |  |  | $ | 213 |  |  | $ | 212 |
Total income tax expense - Federal | $ | 90 |  |  | $ | 164 |  |  | $ | 164 |
Total income tax expense - State | 46 |  |  | 49 |  |  | 48 |
Total income taxes | $ | 136 |  |  | $ | 213 |  |  | $ | 212 |
(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.
| 2018 |  | 2017 |  | 2016
Reconciliation of Income Taxes |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate (a) | $ | 119 |  |  | $ | 201 |  |  | $ | 193 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit (a) | 43 |  |  | 36 |  |  | 36 |
Depreciation and other items not normalized | (11 | ) |  | (8 | ) |  | (8 | )
Amortization of excess deferred federal income taxes (a) | (17 | ) |  | — |  |  | — |
Stock-based compensation | 1 |  |  | (2 | ) |  | (6 | )
Deferred tax impact of U.S. tax reform (b) | — |  |  | (13 | ) |  | — |
Other | 1 |  |  | (1 | ) |  | (3 | )
Total increase (decrease) | 17 |  |  | 12 |  |  | 19 |
Total income taxes | $ | 136 |  |  | $ | 213 |  |  | $ | 212 |
Effective income tax rate | 24.0 | % |  | 37.0 | % |  | 38.4 | %
(a) | The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.
(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.
| 2018 |  | 2017 |  | 2016
Taxes, other than income |  |  |  |  |  |  |  |
State gross receipts | $ | 103 |  |  | $ | 102 |  |  | $ | 100 |
Property and other | 6 |  |  | 5 |  |  | 5 |
Total | $ | 109 |  |  | $ | 107 |  |  | $ | 105 |
(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:
| 2018 |  | 2017
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | 142 |  |  | $ | 150 |
State loss carryforwards | 33 |  |  | 41 |
Federal tax credit carryforwards | 169 |  |  | 181 |
Contributions in aid of construction | 21 |  |  | 17 |
Regulatory liabilities | 52 |  |  | 43 |
Accrued pension and postretirement costs | 92 |  |  | 100 |
Income taxes due to customers | 299 |  |  | 305 |
Deferred investment tax credits | 32 |  |  | 33 |
Valuation allowances | (8 | ) |  | (8 | )
Other | 29 |  |  | 33 |
Total deferred tax assets | 861 |  |  | 895 |
Deferred Tax Liabilities |  |  |
Plant - net | 1,671 |  |  | 1,615 |
Regulatory assets | 138 |  |  | 138 |
Other | 8 |  |  | 8 |
Total deferred tax liabilities | 1,817 |  |  | 1,761 |
Net deferred tax liability | $ | 956 |  |  | $ | 866 |
At December 31, 2018, 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 |  |  |  |  |  |  |
Federal net operating losses | $ | 674 |  |  | $ | 142 |  |  | $ | — |  |  | 2031 - 2037
Federal charitable contributions | 11 |  |  | 2 |  |  | — |  |  | 2020 - 2022
State net operating losses | 848 |  |  | 33 |  |  | — |  |  | 2029 - 2038
Credit carryforwards |  |  |  |  |  |  |
Federal investment tax credit |  |  | 133 |  |  | — |  |  | 2025 - 2028, 2036
Federal alternative minimum tax credit (a) |  |  | 14 |  |  | — |  |  | Indefinite
Federal - other |  |  | 22 |  |  | (8 | ) |  | 2019-2038
State - other |  |  | 1 |  |  | — |  |  | Indefinite
(a) | 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
2018 | $ | 8 |  |  | $ | — |  |  | $ | — |  |  | $ | 8 |
2017 | 11 |  |  | 4 |  | (a) | 7 |  | (b) | 8 |
2016 | 12 |  |  | — |  |  | 1 |  | (b) | 11 |
(a) | Federal tax credits expiring in 2021 that are more likely than not to expire before being utilized.
(b) | Federal tax credit expiring.
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:
| 2018 |  | 2017 |  | 2016
Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Current - Federal | $ | 31 |  |  | $ | 74 |  |  | $ | (36 | )
Current - State | 4 |  |  | 6 |  |  | 1 |
Total Current Expense (Benefit) | 35 |  |  | 80 |  |  | (35 | )
Deferred - Federal (a) | 65 |  |  | 268 |  |  | 248 |
Deferred - State | 34 |  |  | 32 |  |  | 38 |
Total Deferred Expense, excluding benefits of operating loss carryforwards | 99 |  |  | 300 |  |  | 286 |
Amortization of investment tax credit - Federal | (3 | ) |  | (3 | ) |  | (3 | )
Tax benefit of operating loss carryforwards |  |  |  |  |  |  |  |
Deferred - Federal | (2 | ) |  | (2 | ) |  | 10 |
Deferred - State | — |  |  | — |  |  | (1 | )
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (2 | ) |  | (2 | ) |  | 9 |
Total income taxes (b) | $ | 129 |  |  | $ | 375 |  |  | $ | 257 |
Total income tax expense - Federal | $ | 91 |  |  | $ | 337 |  |  | $ | 219 |
Total income tax expense - State | 38 |  |  | 38 |  |  | 38 |
Total income taxes (b) | $ | 129 |  |  | $ | 375 |  |  | $ | 257 |
(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 $5 million in 2018, $(10) million in 2017 and $(16) million in 2016.
| 2018 |  | 2017 |  | 2016
Reconciliation of Income Tax Expense |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate (a) | $ | 121 |  |  | $ | 242 |  |  | $ | 240 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 22 |  |  | 26 |  |  | 26 |
Amortization of investment tax credit | (3 | ) |  | (3 | ) |  | (3 | )
Amortization of excess deferred federal and state income taxes (b) | (20 | ) |  | (2 | ) |  | (1 | )
Stock-based compensation | 1 |  |  | 1 |  |  | (3 | )
Deferred tax impact of U.S. tax reform (c) | — |  |  | 112 |  |  | — |
Deferred tax impact of state tax reform (d) | 9 |  |  | — |  |  | — |
Other (e) | (1 | ) |  | (1 | ) |  | (2 | )
Total increase | 8 |  |  | 133 |  |  | 17 |
Total income taxes | $ | 129 |  |  | $ | 375 |  |  | $ | 257 |
Effective income tax rate | 22.5 | % |  | 54.3 | % |  | 37.5 | %
(a) | The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.
(b) | During 2018, LKE recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
(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.
(d) | During 2018, LKE recorded deferred income tax expense, primarily associated with LKE's non-regulated entities, due to the Kentucky corporate income tax rate reduction from 6% to 5%, as enacted by HB 487, effective January 1, 2018.
(e) | During 2018, PPL filed its consolidated federal income tax return, which included updates to the TCJA provisional amounts recorded in 2017. The adjustments to the various provisional amounts that are considered complete as of the filed tax return resulted in an immaterial impact to income tax expense and are discussed in the TCJA section above.
| 2018 |  | 2017 |  | 2016
Taxes, other than income |  |  |  |  |  |  |  |
Property and other | $ | 70 |  |  | $ | 65 |  |  | $ | 62 |
Total | $ | 70 |  |  | $ | 65 |  |  | $ | 62 |
(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:
| 2018 |  | 2017
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | — |  |  | $ | 29 |
Contributions in aid of construction | 14 |  |  | 11 |
Regulatory liabilities | 24 |  |  | 21 |
Accrued pension and postretirement costs | 16 |  |  | 14 |
Deferred investment tax credits | 9 |  |  | 9 |
Income taxes due to customers | 139 |  |  | 142 |
Other | 15 |  |  | 19 |
Total deferred tax assets | 217 |  |  | 245 |
Deferred Tax Liabilities |  |  |
Plant - net | 751 |  |  | 724 |
Regulatory assets | 88 |  |  | 88 |
Other | 6 |  |  | 5 |
Total deferred tax liabilities | 845 |  |  | 817 |
Net deferred tax liability | $ | 628 |  |  | $ | 572 |
LG&E expects to have adequate levels of taxable income to realize its recorded deferred income tax assets. At December 31, 2018 LG&E had $6 million of federal credit carryforwards that expire from 2036 - 2038. 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:
| 2018 |  | 2017 |  | 2016
Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Current - Federal | $ | — |  |  | $ | — |  |  | $ | (22 | )
Current - State | 4 |  |  | 5 |  |  | 1 |
Total current Expense (Benefit) | 4 |  |  | 5 |  |  | (21 | )
Deferred - Federal | 51 |  |  | 112 |  |  | 134 |
Deferred - State | 10 |  |  | 14 |  |  | 18 |
Total Deferred Expense, excluding benefits of operating loss carryforwards | 61 |  |  | 126 |  |  | 152 |
Amortization of investment tax credit - Federal | (1 | ) |  | (1 | ) |  | (1 | )
Tax benefit of operating loss carryforwards |  |  |  |  |  |  |
Deferred - Federal | — |  |  | 1 |  |  | (4 | )
Total Tax Benefit of Operating Loss Carryforwards | — |  |  | 1 |  |  | (4 | )
Total income taxes | $ | 64 |  |  | $ | 131 |  |  | $ | 126 |
Total income tax expense - Federal | $ | 50 |  |  | $ | 112 |  |  | $ | 107 |
Total income tax expense - State | 14 |  |  | 19 |  |  | 19 |
Total income taxes | $ | 64 |  |  | $ | 131 |  |  | $ | 126 |
| 2018 |  | 2017 |  | 2016
Reconciliation of Income Tax Expense |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate (a) | $ | 62 |  |  | $ | 120 |  |  | $ | 115 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 11 |  |  | 14 |  |  | 12 |
Amortization of investment tax credit | (1 | ) |  | (1 | ) |  | (1 | )
Amortization of excess deferred federal and state income taxes (b) | (8 | ) |  | (1 | ) |  | — |
Other | — |  |  | (1 | ) |  | — |
Total increase | 2 |  |  | 11 |  |  | 11 |
Total income taxes | $ | 64 |  |  | $ | 131 |  |  | $ | 126 |
Effective income tax rate | 21.5 | % |  | 38.1 | % |  | 38.3 | %
(a) | The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.
(b) | During 2018, LG&E recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
| 2018 |  | 2017 |  | 2016
Taxes, other than income |  |  |  |  |  |  |  |
Property and other | $ | 36 |  |  | $ | 33 |  |  | $ | 32 |
Total | $ | 36 |  |  | $ | 33 |  |  | $ | 32 |
(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:
| 2018 |  | 2017
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | — |  |  | $ | 13 |
Contributions in aid of construction | 7 |  |  | 6 |
Regulatory liabilities | 28 |  |  | 22 |
Accrued pension and postretirement costs | 7 |  |  | 7 |
Deferred investment tax credits | 23 |  |  | 24 |
Income taxes due to customers | 160 |  |  | 163 |
Other | 3 |  |  | 8 |
Total deferred tax assets | 228 |  |  | 243 |
Deferred Tax Liabilities |  |  |
Plant - net | 911 |  |  | 882 |
Regulatory assets | 50 |  |  | 50 |
Other | 2 |  |  | 2 |
Total deferred tax liabilities | 963 |  |  | 934 |
Net deferred tax liability | $ | 735 |  |  | $ | 691 |
KU expects to have adequate levels of taxable income to realize its recorded deferred income tax assets. 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:
| 2018 |  | 2017 |  | 2016
Income Tax Expense (Benefit) |  |  |  |  |  |  |  |
Current - Federal | $ | 22 |  |  | $ | — |  |  | $ | 31 |
Current - State | 6 |  |  | 7 |  |  | 5 |
Total Current Expense (Benefit) | 28 |  |  | 7 |  |  | 36 |
Deferred - Federal | 40 |  |  | 138 |  |  | 131 |
Deferred - State | 10 |  |  | 16 |  |  | 19 |
Total Deferred Expense, excluding benefits of operating loss carryforwards | 50 |  |  | 154 |  |  | 150 |
Amortization of investment tax credit - Federal | (2 | ) |  | (2 | ) |  | (2 | )
Tax benefit of operating loss carryforwards |  |  |  |  |  |  |  |
Deferred - Federal | — |  |  | — |  |  | (21 | )
Total Tax Benefit of Operating Loss Carryforwards | — |  |  | — |  |  | (21 | )
Total income taxes | $ | 76 |  |  | $ | 159 |  |  | $ | 163 |
Total income tax expense - Federal | $ | 60 |  |  | $ | 136 |  |  | $ | 139 |
Total income tax expense - State | 16 |  |  | 23 |  |  | 24 |
Total income taxes | $ | 76 |  |  | $ | 159 |  |  | $ | 163 |
| 2018 |  | 2017 |  | 2016
Reconciliation of Income Tax Expense |  |  |  |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate (a) | $ | 76 |  |  | $ | 146 |  |  | $ | 150 |
Increase (decrease) due to: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 13 |  |  | 15 |  |  | 16 |
Amortization of investment tax credit | (2 | ) |  | (2 | ) |  | (2 | )
Amortization of excess deferred federal and state income taxes (b) | (12 | ) |  | (1 | ) |  | (1 | )
Other | 1 |  |  | 1 |  |  | — |
Total increase (decrease) | — |  |  | 13 |  |  | 13 |
Total income taxes | $ | 76 |  |  | $ | 159 |  |  | $ | 163 |
Effective income tax rate | 21.0 | % |  | 38.0 | % |  | 38.1 | %
(a) | The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.
(b) | During 2018, KU recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.
| 2018 |  | 2017 |  | 2016
Taxes, other than income |  |  |  |  |  |  |  |
Property and other | $ | 34 |  |  | $ | 32 |  |  | $ | 30 |
Total | $ | 34 |  |  | $ | 32 |  |  | $ | 30 |
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, 2018, 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) | 2013 and prior |  |  |  | 2013 and prior |  | 2013 and prior |  | 2013 and prior
U.K. (foreign) | 2015 and prior |  |  |  |  |  |  |  |
Other Kentucky State Tax Reform (All Registrants) HB 487, which became law on April 27, 2018, provides for significant changes to the Kentucky tax code including (1) adopting mandatory combined reporting for corporate members of unitary business groups for taxable years beginning on or after January 1, 2019 (members of a unitary business group may make an eight-year binding election to file consolidated corporate income tax returns with all members of their federal affiliated group) and (2) a reduction in the Kentucky corporate income tax rate from 6% to 5% for taxable years beginning after December 31, 2017. LKE recognized a deferred tax charge of $9 million in the second quarter of 2018 primarily associated with the remeasurement of non-regulated accumulated deferred income tax balances. As indicated in Note 1, LG&E's and KU's accounting for income taxes is impacted by rate regulation. Therefore, reductions in regulated accumulated deferred income tax balances due to the reduction in the Kentucky corporate income tax rate to 5% under the provisions of HB 487 will result in amounts previously collected from utility customers for these deferred taxes to be refundable to such customers in future periods. In the second quarter of 2018, LG&E and KU recorded the impact of the reduced tax rate, related to the remeasurement of deferred income taxes, as an increase in regulatory liabilities of $16 million and $19 million. In a separate regulatory proceeding, LG&E and KU have requested to begin returning state excess deferred income taxes to customers in conjunction with the 2018 Kentucky base rate case, which was filed on September 28, 2018. See Note 7 for additional information related to the rate case proceedings. PPL is evaluating the impact, if any, of unitary or elective consolidated income tax reporting on all its Registrants.

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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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