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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Deferred Income Taxes Deferred income taxes are provided for temporary differences. The significant components of deferred income tax assets and liabilities consist of the following.
(in millions) | 2016 |  | 2015 |
Gross deferred income tax assets |  |
Tax loss and credit carryforwards | $ | 675 |  | $ | 387 |
Regulatory liabilities | 292 |  | 210 |
Employee future benefits | 155 |  | 116 |
Fair value of long-term debt adjustment | 88 |  | — |
Unrealized foreign exchange losses on long-term debt | 56 |  | 65 |
Other | 57 |  | 58 |
| 1,323 |  | 836 |
Deferred income tax assets valuation allowance | (56 | ) | (73 | )
Net deferred income tax assets | $ | 1,267 |  | $ | 763 |
Gross deferred income tax liabilities |  |
Utility capital assets | $ | (4,213 | ) | $ | (2,575 | )
Regulatory assets | (242 | ) | (201 | )
Intangible assets | (75 | ) | (37 | )
| (4,530 | ) | (2,813 | )
Net deferred income tax liability | $ | (3,263 | ) | $ | (2,050 | )
The deferred income tax asset associated with unrealized foreign exchange losses on long‑term debt reflects $56 million of unrealized capital losses as at December 31, 2016 (December 31, 2015 - $65 million). The deferred income tax asset can only be used if the Corporation has capital gains to offset the losses once realized. Management believes that it is more likely than not that Fortis will not be able to generate future capital gains and, as a result, the Corporation recorded a $56 million valuation allowance against the deferred income tax asset as at December 31, 2016 (December 31, 2015 - $65 million). Management believes that based on its historical pattern of taxable income, Fortis will produce sufficient income in the future to realize all other deferred income tax assets. Unrecognized Tax Benefits The following table summarizes the change in unrecognized tax benefits during 2016 and 2015.
(in millions) | 2016 |  | 2015 |
Total unrecognized tax benefits, beginning of year | $ | 13 |  | $ | 11 |
Additions related to the current year | 10 |  | 1 |
Adjustments related to prior years | — |  | 1 |
Total unrecognized tax benefits, end of year | $ | 23 |  | $ | 13 |
Unrecognized tax benefits, if recognized, would reduce income tax expense by $1 million in 2016. Fortis has no t recognized interest expense in 2016 and 2015 related to unrecognized tax benefits. 25. INCOME TAXES (cont’d) The components of the income tax expense were as follows.
(in millions) | 2016 |  | 2015 |
Canadian |  |
Earnings before income taxes | $ | 357 |  | $ | 544 |
Current income taxes | 66 |  | 59 |
Deferred income taxes | 54 |  | 113 |
Less: regulatory adjustments | (77 | ) | (100 | )
| (23 | ) | 13 |
Total Canadian | $ | 43 |  | $ | 72 |
Foreign |  |
Earnings before income taxes | $ | 501 |  | $ | 519 |
Current income taxes | (19 | ) | — |
Deferred income taxes | 121 |  | 151 |
Total Foreign | $ | 102 |  | $ | 151 |
Income tax expense | $ | 145 |  | $ | 223 |
Income taxes differ from the amount that would be expected to be generated by applying the enacted combined Canadian federal and provincial statutory income tax rate to earnings before income taxes. The following is a reconciliation of consolidated statutory taxes to consolidated effective taxes.
(in millions, except as noted) | 2016 |  | 2015 |
Earnings before income taxes | $ | 858 |  | 1,063 |
Combined Canadian federal and provincial statutory income tax rate | 28.0 | % | 27.5 | %
Statutory income tax rate applied to earnings before income taxes | $ | 240 |  | $ | 292 |
Difference between Canadian statutory income tax rate and rates applicable to foreign subsidiaries | (28 | ) | (7 | )
Difference in Canadian provincial statutory income tax rates applicable to subsidiaries in different Canadian jurisdictions | (4 | ) | (4 | )
Items capitalized for accounting purposes but expensed for income tax purposes | (40 | ) | (39 | )
Difference between gain on sale of assets for accounting and amounts calculated for tax purposes | — |  | (18 | )
Change in tax rates and legislation | (6 | ) | 13 |
Difference between capital cost allowance and amounts claimed for accounting purposes | (25 | ) | (15 | )
Other | 8 |  | 1 |
Income tax expense | $ | 145 |  | $ | 223 |
Effective tax rate | 16.9 | % | 21.0 | %
25. INCOME TAXES (cont’d) As at December 31, 2016, the Corporation had the following tax carryforward amounts.
(in millions) | Expiring Year | Amount |
Canadian |  |
Capital loss | n/a | $ | 76 |
Non-capital loss | 2025-2036 | 244 |
Other tax credits | 2026-2035 | 2 |
|  | 322 |
Unrecognized in the consolidated financial statements |  | (76 | )
|  | $ | 246 |
Foreign |  |
Capital loss | 2020-2021 | $ | 3 |
Federal and state net operating loss | 2031-2036 | 862 |
Other tax credits | 2032-2036 | 126 |
|  | 991 |
Unrecognized in the consolidated financial statements |  | (2 | )
|  | $ | 989 |
Total tax carryforwards |  | $ | 1,235 |
As at December 31, 2016, the Corporation had approximately $1,235 million in tax carryforward amounts recognized in the consolidated financial statements (December 31, 2015 - $912 million). The Corporation and one or more of its subsidiaries are subject to taxation in Canada, the United States and other foreign jurisdictions. The material jurisdictions in which the Corporation is subject to potential examinations include the United States (Federal, Arizona, Kansas, Iowa, Michigan, Minnesota and New York) and Canada (Federal and British Columbia). The Corporation’s 2011 to 2016 taxation years are still open for audit in the Canadian jurisdictions and 2012 to 2016 taxation years are still open for audit in the United States jurisdictions. The Corporation is not currently under examination for income tax matters in any of these jurisdictions.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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