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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

10. Income Taxes

Income tax provision

The income tax provision, for the years ended December 31, differs from that computed using the enacted combined Canadian federal and provincial statutory income tax rate for the following reasons:
millions of Canadian dollars	2020		2019
Income before provision for income taxes	$	1,325	$	771
Statutory income tax rate		29.5%		31%
Income taxes, at statutory income tax rate		391		239
Additional impact from the sale of Emera Maine		102		-
Deferred income taxes on regulated income recorded as regulatory assets and regulatory liabilities		(48)		(66)
Foreign tax rate variance		(45)		(49)
Amortization of deferred income tax regulatory liabilities		(44)		(36)
Tax effect of equity earnings		(15)		(15)
Other		-		(12)
Income tax expense	$	341	$	61
Effective income tax rate		26%		8%

Composition of taxes on income from continuing operations

millions of Canadian dollars	2020		2019
Current income taxes
Canada	$	18	$	(19)
United States		(58)		(46)
Other		-		1
Deferred income taxes
Canada		20		45
United States		426		137
Other		(9)		-
Investment tax credits
United States		(10)		(9)
Operating loss carryforwards
Canada		(46)		(48)
Income tax expense	$	341	$	61
The following table reflects the composition of income before provision for income taxes presented in the Consolidated Statements of Income for the years ended December 31:
millions of Canadian dollars	2020		2019
Canada	$	176	$	98
United States		1,142		682
Other		7		(9)
Income before provision for income taxes	$	1,325	$	771

Deferred income tax assets and liabilities

The deferred income tax assets and liabilities presented in the Consolidated Balance Sheets as at December 31 consisted of the following:
millions of Canadian dollars	2020		2019
Deferred income tax assets:
Tax loss carryforwards	$	724	$	908
Tax credit carryforwards		319		311
Regulatory liabilities - cost of removal		184		195
Derivative instruments		108		145
Other		375		413
Total deferred income tax assets before valuation allowance		1,710		1,972
Valuation allowance		(202)		(193)
Total deferred income tax assets after valuation allowance	$	1,508	$	1,779
Deferred income tax (liabilities):
Property, plant and equipment	$	(2,450)	$	(2,382)
Derivative instruments		(93)		(148)
Other		(385)		(348)
Total deferred income tax liabilities	$	(2,928)	$	(2,878)
Consolidated Balance Sheets presentation:
Long-term deferred income tax assets	$	209	$	186
Long-term deferred income tax liabilities		(1,629)		(1,285)
Net deferred income tax liabilities	$	(1,420)	$	(1,099)

Net operating loss ("NOL"), capital loss and tax credit carryforwards and their expiration periods

Emera’s net operating loss (“NOL”), capital loss and tax credit carryforwards and their expiration periods as at December 31, 2020 consisted of the following:
	Gross Tax		Unrecognized		Net Tax		Expiration
millions of Canadian dollars	Carryforwards		Amounts		Carryforwards		Period
Canada
NOL	$	1,370	$	(619)	$	751	2027 - 2040
Capital loss		61		(61)		-	Indefinite
United States
Federal NOL	$	1,412	$	-	$	1,412	2030 - 2040
State NOL		563		-		563	2032 - 2040
Tax credit		319		-		319	2025 - 2040
Other
NOL	$	39	$	(39)	$	-	2021 - 2027

Details of the change in unrecognized tax benefits

millions of Canadian dollars	2020		2019
Balance, January 1	$	29	$	26
Increases due to tax positions related to current year		1		2
Increases due to tax positions related to a prior year		2		1
Decreases due to tax positions related to a prior year		(2)		-
Balance, December 31	$	30	$	29

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