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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the President signed into law the TCJA, which, among other things, enacted significant changes to the Internal Revenue Code, as amended, including a reduction in the maximum U.S. federal corporate income tax rate from 35% to 21%, and certain other provisions related specifically to the public utility industry, including the continuation of certain interest expense deductibility. These changes were effective January 1, 2018. Under GAAP, the effects of a change in tax law are recorded as a discrete item in the period of enactment. Rates for our regulated customers include provisions for the collection of U.S. federal income taxes. Accordingly, accounting effects related to changes in tax rates here that would normally be recognized as a component of income tax expense may instead be deferred as a regulatory asset or liability and reflected in future rate-making. In December 2017, we remeasured our deferred tax assets and liabilities to the new federal corporate income tax rate. The result of this remeasurement was a reduction in the net deferred tax liability of approximately $1.3 billion, including approximately $0.4 billion of regulatory "gross up" to account for over-collection of past taxes from customers. Offsetting the reduction in net deferred tax liabilities was an increase in regulatory liabilities of approximately $1.5 billion and an increase in income tax expense of $0.2 billion. In 2018, we received regulatory orders from most of the jurisdictions in which we operate regarding the treatment and pass back of excess deferred taxes. As a result of these orders we reduced our regulatory liability related to excess deferred income taxes by $120.7 million (net of tax). This adjustment is reflected in "Income Taxes" on our Consolidated Statements of Income (Loss). On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. There were no adjustments recorded in the SAB 118 remeasurement period in 2018. The components of income tax expense (benefit) were as follows:
Year Ended December 31, (in millions) | 2018 |  | 2017 |  | 2016
Income Taxes |  |  |  |  |
Current |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | 8.2 |  |  | 7.8 |  |  | (0.1 | )
Total Current | 8.2 |  |  | 7.8 |  |  | (0.1 | )
Deferred |  |  |  |  |
Federal | (209.4 | ) |  | 302.7 |  |  | 165.6 |
State | 22.2 |  |  | 5.0 |  |  | 18.0 |
Total Deferred | (187.2 | ) |  | 307.7 |  |  | 183.6 |
Deferred Investment Credits | (1.0 | ) |  | (1.0 | ) |  | (1.4 | )
Income Taxes | $ | (180.0 | ) |  | $ | 314.5 |  |  | $ | 182.1 |
Total income taxes were different from the amount that would be computed by applying the statutory federal income tax rate to book income before income tax. The major reasons for this difference were as follows:
Year Ended December 31, (in millions) | 2018 |  | 2017 |  | 2016
Book income (loss) before income taxes | $ | (230.6 | ) |  |  |  | $ | 443.0 |  |  |  |  | $ | 513.6 |  |  |
Tax expense (benefit) at statutory federal income tax rate | (48.4 | ) |  | 21.0 | % |  | 155.0 |  |  | 35.0 | % |  | 179.8 |  |  | 35.0 | %
Increases (reductions) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit | 24.7 |  |  | (10.7 | ) |  | 6.9 |  |  | 1.5 |  |  | 11.3 |  |  | 2.2 |
Amortization of regulatory liabilities | (29.3 | ) |  | 12.7 |  |  | (2.4 | ) |  | (0.5 | ) |  | (1.5 | ) |  | (0.3 | )
Charitable contribution carryover | — |  |  | — |  |  | (1.2 | ) |  | (0.3 | ) |  | 2.8 |  |  | 0.5 |
State regulatory proceedings | (127.8 | ) |  | 55.4 |  |  | — |  |  | — |  |  | — |  |  | — |
Remeasurement due to TCJA | — |  |  | — |  |  | 161.1 |  |  | 36.4 |  |  | — |  |  | — |
Employee stock ownership plan dividends and other compensation | (2.2 | ) |  | 1.0 |  |  | (6.5 | ) |  | (1.5 | ) |  | (9.5 | ) |  | (1.8 | )
Other adjustments | 3.0 |  |  | (1.3 | ) |  | 1.6 |  |  | 0.4 |  |  | (0.8 | ) |  | (0.1 | )
Income Taxes | $ | (180.0 | ) |  | 78.1 | % |  | $ | 314.5 |  |  | 71.0 | % |  | $ | 182.1 |  |  | 35.5 | %
The effective income tax rates were 78.1%, 71.0% and 35.5% in 2018, 2017 and 2016, respectively. The 7.1% increase in the overall effective tax rate in 2018 versus 2017 was primarily the result of state regulatory proceedings which resulted in a $127.8 million decrease in federal income taxes offset by a related increase in state income taxes of $7.1 million. Additionally, the increase was driven by a $26.9 million decrease in income taxes related to amortization of the regulatory liability primarily associated with excess deferred taxes. The 35.5% increase in the overall effective tax rate in 2017 versus 2016 was primarily the result of a $161.1 million increase in income taxes related to implementing the provisions of the TCJA. The charge to income tax expense resulting from implementation of the TCJA relates primarily to remeasurement of parent company deferred tax assets for NOL carryforwards. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. Among other provisions, the standard requires that all income tax effects of awards are recognized in the income statement when the awards vest and are distributed. Deferred income taxes result from temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The principal components of our net deferred tax liability were as follows:
At December 31, (in millions) | 2018 |  | 2017
Deferred tax liabilities |  |  |
Accelerated depreciation and other property differences | $ | 2,458.0 |  |  | $ | 2,260.7 |
Other regulatory assets | 375.4 |  |  | 309.5 |
Total Deferred Tax Liabilities | 2,833.4 |  |  | 2,570.2 |
Deferred tax assets |  |  |
Other regulatory liabilities and deferred investment tax credits (including TCJA) | 365.5 |  |  | 406.0 |
Pension and other postretirement/postemployment benefits | 157.5 |  |  | 136.7 |
Net operating loss carryforward and AMT credit carryforward | 849.8 |  |  | 576.0 |
Environmental liabilities | 24.4 |  |  | 24.0 |
Other accrued liabilities | 37.5 |  |  | 37.2 |
Other, net | 68.2 |  |  | 97.4 |
Total Deferred Tax Assets | 1,502.9 |  |  | 1,277.3 |
Net Deferred Tax Liabilities | $ | 1,330.5 |  |  | $ | 1,292.9 |
State income tax net operating loss benefits are recorded at their realizable value. We anticipate it is more likely than not that we will realize $88.5 million and $65.8 million of these tax benefits as of December 31, 2018 and 2017, respectively, prior to their expiration. These tax benefits are primarily related to Indiana, Massachusetts and Pennsylvania. The remaining net operating loss carryforward tax benefits represent a federal carryforward of $759.6 million ($508.5 million of which relates to years prior to the implementation of the TCJA) and an Alternative Minimum Tax credit of $1.7 million. The carryforward periods for pre-TCJA tax benefits expire in various tax years from 2028 to 2037. Per the TCJA, federal NOL carryforwards generated after December 31, 2017 do not expire, but are limited to 80% of current year taxable income. Unrecognized tax benefits for the periods reported are immaterial. We present accrued interest on unrecognized tax benefits, accrued interest on other income tax liabilities and tax penalties in "Income Taxes" on our Statements of Consolidated Income (Loss). Interest expense recorded on unrecognized tax benefits and other income tax liabilities was immaterial for all periods presented. There were no accruals for penalties recorded in the Statements of Consolidated Income (Loss) for the years ended December 31, 2018, 2017 and 2016, and there were no balances for accrued penalties recorded on the Consolidated Balance Sheets as of December 31, 2018 and 2017. We are subject to income taxation in the United States and various state jurisdictions; primarily Indiana, Pennsylvania, Kentucky, Massachusetts, Maryland and Virginia. We participate in the IRS CAP which provides the opportunity to resolve tax matters with the IRS before filing each year's consolidated federal income tax return. As of December 31, 2018, tax years through 2017 have been audited and are effectively closed to further assessment. The audit of tax year 2018 under the CAP program is expected to be completed in 2019. The statute of limitations in each of the state jurisdictions in which we operate remains open until the years are settled for federal income tax purposes, at which time amended state income tax returns reflecting all federal income tax adjustments are filed. As of December 31, 2018, there were no state income tax audits in progress that would have a material impact on the consolidated financial statements.

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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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