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Income and Other Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income and Other Taxes | 6. Income and Other Taxes (PPL) "Income Before Income Taxes" included the following:
| 2020 |  | 2019 |  | 2018
Domestic income | $ | 902 |  |  | $ | 964 |  |  | $ | 1,127 |
Foreign income | 1,069 |  |  | 1,191 |  |  | 1,158 |
Total | $ | 1,971 |  |  | $ | 2,155 |  |  | $ | 2,285 |
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:
| 2020 |  | 2019
Deferred Tax Assets |  |  |
Deferred investment tax credits | $ | 30 |  |  | $ | 31 |
Regulatory liabilities | 68 |  |  | 75 |
Income taxes due to customers | 444 |  |  | 462 |
Accrued pension and postretirement costs | 106 |  |  | 211 |
Federal loss carryforwards | 234 |  |  | 324 |
State loss carryforwards | 448 |  |  | 432 |
Federal and state tax credit carryforwards | 401 |  |  | 402 |
Foreign capital loss carryforwards | 370 |  |  | 320 |
Foreign - other | 6 |  |  | 8 |
Contributions in aid of construction | 115 |  |  | 112 |
Domestic - other | 136 |  |  | 99 |
Valuation allowances | (906) |  |  | (834) |
Total deferred tax assets | 1,452 |  |  | 1,642 |
Deferred Tax Liabilities |  |  |
Domestic plant - net | 3,700 |  |  | 3,546 |
Regulatory assets | 195 |  |  | 262 |
Foreign plant - net | 911 |  |  | 765 |
Foreign - pensions | 127 |  |  | 72 |
Domestic - other | 70 |  |  | 61 |
Total deferred tax liabilities | 5,003 |  |  | 4,706 |
Net deferred tax liability | $ | 3,551 |  |  | $ | 3,064 |
State deferred taxes are determined by entity and by jurisdiction. As a result, $17 million and $24 million of net deferred tax assets are shown as "Other noncurrent assets" on the Balance Sheets for 2020 and 2019. At December 31, 2020, 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 and other carryforwards |  |  |  |  |  |  |
Federal net operating losses | $ | 1,111 |  |  | $ | 234 |  |  | $ | — |  |  | 2035-2037
State net operating losses | 6,032 |  |  | 448 |  |  | (419) |  |  | 2021-2040
Foreign capital losses (a) | 1,945 |  |  | 370 |  |  | (370) |  |  | Indefinite
Federal - Other | 13 |  |  | 2 |  |  | — |  |  | Indefinite
State - Other | 2 |  |  | — |  |  | — |  |  | Indefinite
Credit carryforwards |  |  |  |  |  |  |
Federal investment tax credit |  |  | 134 |  |  | — |  |  | 2025-2040
Federal foreign tax credits (b) |  |  | 218 |  |  | (113) |  |  | 2024-2027
Federal - other |  |  | 32 |  |  | (4) |  |  | 2021-2040
State Recycling Credit |  |  | 16 |  |  | — |  |  | 2028
State - other |  |  | 1 |  |  | — |  |  | Indefinite
(a)In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction from 19% to 17%. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million. (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
2020 | $ | 834 |  |  | $ | 69 |  | (a) | $ | 7 |  |  | $ | 4 |  |  | $ | 906 |
2019 | 808 |  |  | 31 |  |  | — |  |  | 5 |  |  | 834 |
2018 | 838 |  |  | 26 |  |  | — |  |  | 56 |  | (b) | 808 |
(a)The cancellation of the reduction of the U.K. statutory income tax rate in 2020 resulted in a $38 million increase 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 2020. In addition, deferred tax assets and corresponding valuation allowances were increased in 2020 by approximately $11 million due to the effect of foreign currency exchange rates. (b)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. A U.S. based company with foreign subsidiaries may be required to record deferred taxes associated with the reversal of differences in the outside book-tax basis of those subsidiaries. The primary component of such outside basis differences is ordinarily accumulated unremitted earnings. PPL Global does not record deferred U.S. income taxes associated with the accumulated 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, 2020 was $8.0 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., but it could be material. PPL will reassess the indefinite reinvestment of these earnings if and when the U.K. utility business meets the criteria to be classified as held for sale. 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:
| 2020 |  | 2019 |  | 2018
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | (9) |  |  | $ | (10) |  |  | $ | (19) |
Current - State | 24 |  |  | 19 |  |  | 17 |
Current - Foreign | 85 |  |  | 91 |  |  | 104 |
Total Current Expense (Benefit) | 100 |  |  | 100 |  |  | 102 |
Deferred - Federal | 123 |  |  | 139 |  |  | 203 |
Deferred - State | 94 |  |  | 76 |  |  | 100 |
Deferred - Foreign (a) | 215 |  |  | 123 |  |  | 107 |
Total Deferred Expense (Benefit), excluding operating loss carryforwards | 432 |  |  | 338 |  |  | 410 |
Amortization of investment tax credit | (3) |  |  | (3) |  |  | (3) |
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal | 6 |  |  | 7 |  |  | (20) |
Deferred - State | (33) |  |  | (33) |  |  | (31) |
Total Tax Expense (Benefit) of Operating Loss Carryforwards | (27) |  |  | (26) |  |  | (51) |
Total income tax expense (benefit) | $ | 502 |  |  | $ | 409 |  |  | $ | 458 |
Total income tax expense (benefit) - Federal | $ | 117 |  |  | $ | 133 |  |  | $ | 161 |
Total income tax expense (benefit) - State | 85 |  |  | 62 |  |  | 86 |
Total income tax expense (benefit) - Foreign | 300 |  |  | 214 |  |  | 211 |
Total income tax expense (benefit) | $ | 502 |  |  | $ | 409 |  |  | $ | 458 |
(a)In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction from 19% to 17%. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million. In the table above, the following income tax expense (benefit) are excluded from income taxes:
| 2020 |  | 2019 |  | 2018
Other comprehensive income | $ | (19) |  |  | $ | (93) |  |  | $ | (6) |
Total | $ | (19) |  |  | $ | (93) |  |  | $ | (6) |
| 2020 |  | 2019 |  | 2018
Reconciliation of Income Tax Expense (Benefit) |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 414 |  | $ | 453 |  | $ | 480
Increase (decrease) due to: |  |  |  |  |
State income taxes, net of federal income tax benefit | 48 |  | 45 |  | 40
Valuation allowance adjustments (a) | 26 |  | 22 |  | 21
Impact of lower U.K. income tax rates | (26) |  | (25) |  | (25)
U.S. income tax on foreign earnings - net of foreign tax credit | 11 |  | 2 |  | 3
Federal and state income tax return adjustments | (9) |  | 1 |  | —
Impact of the U.K. Finance Acts on deferred tax balances (b) | 101 |  | (14) |  | (13)
Depreciation and other items not normalized | (5) |  | (10) |  | (11)
Amortization of excess deferred federal and state income taxes | (43) |  | (40) |  | (37)
Interest benefit on U.K. financing activities | (12) |  | (12) |  | (17)
Deferred tax impact of Kentucky tax reform (c) | — |  | — |  | 9
Kentucky recycling credit, net of federal income tax expense (d) | — |  | (18) |  | —
Other | (3) |  | 5 |  | 8
Total increase (decrease) | 88 |  | (44) |  | (22)
Total income tax expense (benefit) | $ | 502 |  | $ | 409 |  | $ | 458
Effective income tax rate | 25.5% |  | 19.0% |  | 20.0%
(a)In 2020, 2019 and 2018, PPL recorded deferred income tax expense of $24 million, $25 million and $24 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized. (b)In 2018 and 2019, PPL reduced its net deferred tax liabilities as a result of the U.K. Finance Act 2016 that was enacted in September 2016 and reduced the U.K. statutory income tax rate effective April, 2020 to 17%. In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction to 17%. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million. (c)In 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. (d)In 2019, LKE recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky.
| 2020 |  | 2019 |  | 2018
Taxes, other than income |  |  |  |  |
State gross receipts | $ | 100 |  |  | $ | 107 |  |  | $ | 103 |
Foreign property | 127 |  |  | 127 |  |  | 134 |
Domestic - other | 80 |  |  | 79 |  |  | 75 |
Total | $ | 307 |  |  | $ | 313 |  |  | $ | 312 |
(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:
| 2020 |  | 2019
Deferred Tax Assets |  |  |
Accrued pension and postretirement costs | $ | 25 |  |  | $ | 81 |
Contributions in aid of construction | 91 |  |  | 88 |
Regulatory liabilities | 24 |  |  | 31 |
Income taxes due to customers | 162 |  |  | 170 |
State loss carryforwards | — |  |  | 6 |
Federal loss carryforwards | 52 |  |  | 78 |
Other | 29 |  |  | 23 |
Total deferred tax assets | 383 |  |  | 477 |
Deferred Tax Liabilities |  |  |
Electric utility plant - net | 1,826 |  |  | 1,761 |
Regulatory assets | 86 |  |  | 139 |
Other | 30 |  |  | 24 |
Total deferred tax liabilities | 1,942 |  |  | 1,924 |
Net deferred tax liability | $ | 1,559 |  |  | $ | 1,447 |
PPL Electric expects to have adequate levels of taxable income to realize its recorded deferred income tax assets. At December 31, 2020, PPL Electric had the following loss and tax credit carryforwards and related deferred tax assets:
| Gross |  | Deferred Tax Asset |  | Expiration
Loss carryforwards |  |  |  |  |
Federal net operating losses | $ | 248 |  |  | $ | 52 |  |  | 2035-2037
Credit carryforwards |  |  |  |  |  |  |
Federal - other |  |  |  |  | 5 |  |  | 2031-2040
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:
| 2020 |  | 2019 |  | 2018
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | 61 |  |  | $ | 44 |  |  | $ | 2 |
Current - State | 23 |  |  | 15 |  |  | 9 |
Total Current Expense (Benefit) | 84 |  |  | 59 |  |  | 11 |
Deferred - Federal | 45 |  |  | 51 |  |  | 96 |
Deferred - State | 38 |  |  | 39 |  |  | 37 |
Total Deferred Expense (Benefit), excluding operating loss carryforwards | 83 |  |  | 90 |  |  | 133 |
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal | — |  |  | — |  |  | (8) |
Total Tax Expense (Benefit) of Operating Loss Carryforwards | — |  |  | — |  |  | (8) |
Total income tax expense (benefit) | $ | 167 |  |  | $ | 149 |  |  | $ | 136 |
Total income tax expense (benefit) - Federal | $ | 106 |  |  | $ | 95 |  |  | $ | 90 |
Total income tax expense (benefit) - State | 61 |  |  | 54 |  |  | 46 |
Total income tax expense (benefit) | $ | 167 |  |  | $ | 149 |  |  | $ | 136 |
| 2020 |  | 2019 |  | 2018
Reconciliation of Income Tax Expense (Benefit) |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 139 |  | $ | 127 |  | $ | 119
Increase (decrease) due to: |  |  |  |  |
State income taxes, net of federal income tax benefit | 52 |  | 47 |  | 43
Federal and state income tax return adjustments | (4) |  | 1 |  | —
Depreciation and other items not normalized | (5) |  | (10) |  | (11)
Amortization of excess deferred federal income taxes (a) | (16) |  | (18) |  | (17)
Other | 1 |  | 2 |  | 2
Total increase (decrease) | 28 |  | 22 |  | 17
Total income tax expense (benefit) | $ | 167 |  | $ | 149 |  | $ | 136
Effective income tax rate | 25.2% |  | 24.6% |  | 24.0%
(a)In 2020, 2019 and 2018, PPL Electric recorded lower income tax expense for the amortization of excess deferred taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.
| 2020 |  | 2019 |  | 2018
Taxes, other than income |  |  |  |  |
State gross receipts | $ | 100 |  |  | $ | 107 |  |  | $ | 103 |
Property and other | 7 |  |  | 5 |  |  | 6 |
Total | $ | 107 |  |  | $ | 112 |  |  | $ | 109 |
(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:
| 2020 |  | 2019
Deferred Tax Assets |  |  |
Federal loss carryforwards | $ | 107 |  |  | $ | 140 |
State loss carryforwards | 28 |  |  | 31 |
Federal tax credit carryforwards | 159 |  |  | 162 |
Contributions in aid of construction | 23 |  |  | 23 |
Regulatory liabilities | 43 |  |  | 44 |
Accrued pension and postretirement costs | 57 |  |  | 71 |
State tax credit carryforwards | 17 |  |  | 19 |
Income taxes due to customers | 282 |  |  | 292 |
Deferred investment tax credits | 30 |  |  | 31 |
Lease liabilities | 13 |  |  | 14 |
Valuation allowances | (4) |  |  | (6) |
Other | 29 |  |  | 28 |
Total deferred tax assets | 784 |  |  | 849 |
Deferred Tax Liabilities |  |  |
Plant - net | 1,831 |  |  | 1,778 |
Regulatory assets | 109 |  |  | 122 |
Lease right-of-use assets | 11 |  |  | 12 |
Other | 8 |  |  | 6 |
Total deferred tax liabilities | 1,959 |  |  | 1,918 |
Net deferred tax liability | $ | 1,175 |  |  | $ | 1,069 |
At December 31, 2020, 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 | $ | 511 |  |  | $ | 107 |  |  | $ | — |  |  | 2035 - 2037
Federal charitable contributions | 1 |  |  | — |  |  | — |  |  | 2024
State net operating losses | 710 |  |  | 28 |  |  | — |  |  | 2029 - 2038
| Gross |  | Deferred Tax Asset |  | Valuation Allowance |  | Expiration
Credit carryforwards |  |  |  |  |  |  |
Federal investment tax credit |  |  | 134 |  |  | — |  |  | 2025 - 2028, 2036 - 2040
Federal - other |  |  | 25 |  |  | (4) |  |  | 2021-2040
State - recycling credit |  |  | 16 |  |  | — |  |  | 2028
State - other |  |  | 1 |  |  | — |  |  | Indefinite
Changes in deferred tax valuation allowances were:
| Balance at Beginning of Period |  | Additions |  | Deductions |  | Balance at End of Period
2020 | $ | 6 |  |  | $ | — |  |  | $ | 2 |  | (a) | $ | 4 |
2019 | 8 |  |  | 3 |  |  | 5 |  | (a) | 6 |
2018 | 8 |  |  | — |  |  | — |  |  | 8 |
(a)Tax credits 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:
| 2020 |  | 2019 |  | 2018
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | 41 |  |  | $ | 20 |  |  | $ | 31 |
Current - State | 1 |  |  | — |  |  | 4 |
Total Current Expense (Benefit) | 42 |  |  | 20 |  |  | 35 |
Deferred - Federal | 43 |  |  | 81 |  |  | 65 |
Deferred - State (a) | 24 |  |  | 5 |  |  | 34 |
Total Deferred Expense (Benefit), excluding benefits of operating loss carryforwards | 67 |  |  | 86 |  |  | 99 |
Amortization of investment tax credit - Federal | (3) |  |  | (3) |  |  | (3) |
Tax expense (benefit) of operating loss carryforwards |  |  |  |  |
Deferred - Federal | — |  |  | — |  |  | (2) |
Total Tax Expense (Benefit) of Operating Loss Carryforwards | — |  |  | — |  |  | (2) |
Total income tax expense (benefit) (b) | $ | 106 |  |  | $ | 103 |  |  | $ | 129 |
Total income tax expense (benefit) - Federal | $ | 81 |  |  | $ | 98 |  |  | $ | 91 |
Total income tax expense (benefit) - State | 25 |  |  | 5 |  |  | 38 |
Total income tax expense (benefit) (b) | $ | 106 |  |  | $ | 103 |  |  | $ | 129 |
(a)In 2019, LKE recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky. (b)Excludes deferred federal and state tax expense (benefit) recorded to OCI of $2 million in 2020, $(1) million in 2019 and $5 million in 2018.
| 2020 |  | 2019 |  | 2018
Reconciliation of Income Tax Expense (Benefit) |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 117 |  | $ | 120 |  | $ | 121
Increase (decrease) due to: |  |  |  |  |
State income taxes, net of federal income tax benefit | 22 |  | 23 |  | 22
Amortization of investment tax credit | (3) |  | (3) |  | (3)
Amortization of excess deferred federal and state income taxes | (28) |  | (23) |  | (20)
Deferred tax impact of state tax reform (a) | — |  | — |  | 9
Kentucky Recycling Credit, net of federal income tax expense (b) | — |  | (18) |  | —
Other | (2) |  | 4 |  | —
Total increase (decrease) | (11) |  | (17) |  | 8
Total income tax expense (benefit) | $ | 106 |  | $ | 103 |  | $ | 129
Effective income tax rate | 19.1% |  | 18.0% |  | 22.5%
(a)In 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. (b)In 2019, LKE recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky.
| 2020 |  | 2019 |  | 2018
Taxes, other than income |  |  |  |  |
Property and other | $ | 77 |  |  | $ | 74 |  |  | $ | 70 |
Total | $ | 77 |  |  | $ | 74 |  |  | $ | 70 |
(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:
| 2020 |  | 2019
Deferred Tax Assets |  |  |
Contributions in aid of construction | $ | 15 |  |  | $ | 15 |
Regulatory liabilities | 20 |  |  | 19 |
Accrued pension and postretirement costs | — |  |  | 6 |
Deferred investment tax credits | 8 |  |  | 8 |
Income taxes due to customers | 132 |  |  | 136 |
State tax credit carryforwards | 12 |  |  | 14 |
Lease liabilities | 5 |  |  | 5 |
Valuation allowances | (12) |  |  | (14) |
Other | 11 |  |  | 10 |
Total deferred tax assets | 191 |  |  | 199 |
Deferred Tax Liabilities |  |  |
Plant - net | 833 |  |  | 811 |
Regulatory assets | 66 |  |  | 77 |
Lease right-of-use assets | 4 |  |  | 4 |
Other | 4 |  |  | 4 |
Total deferred tax liabilities | 907 |  |  | 896 |
Net deferred tax liability | $ | 716 |  |  | $ | 697 |
At December 31, 2020 LG&E had $12 million of state credit carryforwards that expire in 2028 and a $12 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income. 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:
| 2020 |  | 2019 |  | 2018
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | 53 |  |  | $ | 4 |  |  | $ | — |
Current - State | 7 |  |  | 4 |  |  | 4 |
Total Current Expense (Benefit) | 60 |  |  | 8 |  |  | 4 |
Deferred - Federal | (4) |  |  | 46 |  |  | 51 |
Deferred - State | 7 |  |  | 10 |  |  | 10 |
Total Deferred Expense (Benefit) | 3 |  |  | 56 |  |  | 61 |
Amortization of investment tax credit - Federal | (1) |  |  | (1) |  |  | (1) |
Total income tax expense (benefit) | $ | 62 |  |  | $ | 63 |  |  | $ | 64 |
Total income tax expense (benefit) - Federal | $ | 48 |  |  | $ | 49 |  |  | $ | 50 |
Total income tax expense (benefit) - State | 14 |  |  | 14 |  |  | 14 |
Total income tax expense (benefit) | $ | 62 |  |  | $ | 63 |  |  | $ | 64 |
| 2020 |  | 2019 |  | 2018
Reconciliation of Income Tax Expense (Benefit) |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 64 |  | $ | 62 |  | $ | 62
Increase (decrease) due to: |  |  |  |  |
State income taxes, net of federal income tax benefit | 12 |  | 12 |  | 11
Amortization of excess deferred federal and state income taxes | (11) |  | (10) |  | (8)
Kentucky recycling credit, net of federal income tax expense (a) | — |  | (14) |  | —
Valuation allowance adjustments (a) | — |  | 14 |  | —
Other | (3) |  | (1) |  | (1)
Total increase (decrease) | (2) |  | 1 |  | 2
Total income tax expense (benefit) | $ | 62 |  | $ | 63 |  | $ | 64
Effective income tax rate | 20.3% |  | 21.4% |  | 21.5%
(a)In 2019, LG&E recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky. This amount has been reserved due to insufficient Kentucky taxable income projected at LG&E.
| 2020 |  | 2019 |  | 2018
Taxes, other than income |  |  |  |  |
Property and other | $ | 40 |  |  | $ | 39 |  |  | $ | 36 |
Total | $ | 40 |  |  | $ | 39 |  |  | $ | 36 |
(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:
| 2020 |  | 2019
Deferred Tax Assets |  |  |
Contributions in aid of construction | $ | 8 |  |  | $ | 8 |
Regulatory liabilities | 23 |  |  | 25 |
Deferred investment tax credits | 22 |  |  | 23 |
Income taxes due to customers | 150 |  |  | 156 |
State tax credit carryforwards | 5 |  |  | 5 |
Lease liabilities | 8 |  |  | 8 |
Valuation allowances | (4) |  |  | (4) |
Other | 4 |  |  | 3 |
Total deferred tax assets | 216 |  |  | 224 |
Deferred Tax Liabilities |  |  |
Plant - net | 992 |  |  | 959 |
Regulatory assets | 43 |  |  | 45 |
Accrued pension and postretirement costs | 8 |  |  | 2 |
Lease right-of-use assets | 7 |  |  | 7 |
Other | 1 |  |  | 3 |
Total deferred tax liabilities | 1,051 |  |  | 1,016 |
Net deferred tax liability | $ | 835 |  |  | $ | 792 |
At December 31, 2020 KU had $5 million of state credit carryforwards of which $4 million will expire in 2028 and $1 million that has an indefinite carryforward period. At December 31, 2020 KU had a $4 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income. 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:
| 2020 |  | 2019 |  | 2018
Income Tax Expense (Benefit) |  |  |  |  |
Current - Federal | $ | 40 |  |  | $ | 35 |  |  | $ | 22 |
Current - State | 3 |  |  | 5 |  |  | 6 |
Total Current Expense (Benefit) | 43 |  |  | 40 |  |  | 28 |
Deferred - Federal | 11 |  |  | 28 |  |  | 40 |
Deferred - State | 11 |  |  | 13 |  |  | 10 |
Total Deferred Expense (Benefit) | 22 |  |  | 41 |  |  | 50 |
Amortization of investment tax credit - Federal | (2) |  |  | (2) |  |  | (2) |
Total income tax expense (benefit) | $ | 63 |  |  | $ | 79 |  |  | $ | 76 |
Total income tax expense (benefit) - Federal | $ | 49 |  |  | $ | 61 |  |  | $ | 60 |
Total income tax expense (benefit) - State | 14 |  |  | 18 |  |  | 16 |
Total income tax expense (benefit) | $ | 63 |  |  | $ | 79 |  |  | $ | 76 |
| 2020 |  | 2019 |  | 2018
Reconciliation of Income Tax Expense (Benefit) |  |  |  |  |
Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 72 |  | $ | 78 |  | $ | 76
Increase (decrease) due to: |  |  |  |  |
State income taxes, net of federal income tax benefit | 14 |  | 15 |  | 13
Amortization of investment tax credit | (2) |  | (2) |  | (2)
Amortization of excess deferred federal and state income taxes | (17) |  | (13) |  | (12)
Kentucky recycling credit, net of federal income tax expense (a) | — |  | (4) |  | —
Valuation allowance adjustments (a) | — |  | 4 |  | —
Other | (4) |  | 1 |  | 1
Total increase (decrease) | (9) |  | 1 |  | —
Total income tax expense (benefit) | $ | 63 |  | $ | 79 |  | $ | 76
Effective income tax rate | 18.4% |  | 21.2% |  | 21.0%
(a)In 2019, KU recorded a deferred income tax benefit associated with a project placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky. This amount has been reserved due to insufficient Kentucky taxable income projected at KU.
| 2020 |  | 2019 |  | 2018
Taxes, other than income |  |  |  |  |
Property and other | $ | 37 |  |  | $ | 35 |  |  | $ | 34 |
Total | $ | 37 |  |  | $ | 35 |  |  | $ | 34 |
(All Registrants) Unrecognized Tax Benefits 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. 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, 2020, 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) | 2016 and prior |  | 2016 and prior |  | 2016 and prior |  | 2016 and prior |  | 2016 and prior
Pennsylvania (state) | 2016 and prior |  | 2016 and prior |  |  |  |  |  |
Kentucky (state) | 2014 and prior |  |  |  | 2014 and prior |  | 2014 and prior |  | 2014 and prior
U.K. (foreign) | 2016 and prior |  |  |  |  |  |  |  |
Tax Cuts and Jobs Act (TCJA) On December 22, 2017, the TCJA was signed into law. Substantially all of the provisions of the TCJA were 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 for capital projects commencing after December 31, 2017 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. 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 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 was 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 were 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 was complete as of December 31, 2018 with respect to all provisional amounts. TCJA Regulatory Update The IRS issued proposed regulations for certain provisions of the TCJA in 2018, including interest deductibility and Global Intangible Low-Taxed Income (GILTI). In 2019, final and new proposed regulations were issued relating to the GILTI provisions. PPL has determined that neither the final or new proposed regulations materially change PPL's conclusion that currently no incremental tax arises under these rules. 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 did not apply to the Registrants in 2019. In July 2020, the IRS issued final and new proposed regulations relating to the limitation on interest deductibility. The final regulations do not apply to the Registrants until the 2021 tax year. The new proposed regulations were finalized on January 5, 2021 and will apply to the Registrants in the 2022 tax year. The Registrants are evaluating the final regulations issued in 2021, but do not expect these regulations or the 2020 final regulations to have a material impact on the Registrants’ financial condition or results of operations.

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