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Income Taxes | 9 Months Ended
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Sep. 30, 2011
Income Taxes Disclosure [Abstract] |
Income Taxes | Income Taxes Effective Tax Rate The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision.
| Three months ended September 30, |  | Nine months ended September 30,
(in millions) | 2011 |  | 2010 |  | 2011 |  | 2010
Income before income taxes | $ | 666 |  |  | $ | 612 |  |  | $ | 1,378 |  |  | $ | 1,235 |
Provision for income tax at federal statutory rate of 35% | 233 |  |  | 214 |  |  | 482 |  |  | 433 |
Increase (decrease) in income tax from: |  |  |  |  |  |  |
Items presented with related state income tax, net |  |  |  |  |  |  |
Global settlement related 1 | — |  |  | (42 | ) |  | — |  |  | (95 | )
Change in tax accounting method for asset removal costs 2 | — |  |  | — |  |  | — |  |  | (40 | )
State tax – net of federal benefit | 31 |  |  | 26 |  |  | 61 |  |  | 47 |
Health care legislation 3 | — |  |  | — |  |  | — |  |  | 39 |
Property-related and other | (19 | ) |  | 7 |  |  | (47 | ) |  | (46 | )
Total income tax expense | $ | 245 |  |  | $ | 205 |  |  | $ | 496 |  |  | $ | 338 |
Effective tax rate | 37 | % |  | 33 | % |  | 36 | % |  | 27 | %
1 | During the nine months ended September 30, 2010, SCE recognized a $95 million earnings benefit relating to the California impact of the federal Global Settlement, including $53 million in the second quarter resulting from the acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and $42 million in the third quarter resulting from receipt of the final interest determination for the Franchise Tax Board.
2 | During the second quarter of 2010, the IRS approved SCE's request to change its tax accounting method for asset removal costs primarily related to its infrastructure replacement program. As a result, SCE recognized a $40 million earnings benefit (of which $28 million relates to asset removal costs incurred prior to 2010) from deducting asset removal costs earlier in the construction cycle. These deductions were recorded on a flow-through basis.
3 | During the first quarter of 2010, SCE recorded a $39 million non-cash charge to reverse previously recognized federal tax benefits eliminated by the federal health care legislation enacted in March 2010. The health care law eliminated the federal tax deduction for retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies.
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense. Accounting for Uncertainty in Income Taxes Authoritative guidance related to accounting for uncertainty in income taxes requires an enterprise to recognize, in its financial statements, the best estimate of the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained upon examination. The guidance requires the disclosure of all unrecognized tax benefits, which includes both the reserves recorded for tax positions on filed tax returns and the unrecognized portion of affirmative claims. Unrecognized Tax Benefits The following table provides a reconciliation of unrecognized tax benefits:
(in millions) | 2011 |  | 2010
Balance at January 1, | $ | 329 |  |  | $ | 482 |
Tax positions taken during the current year |  |  |
Increases | 58 |  |  | 65 |
Tax positions taken during a prior year |  |  |
Increases | 44 |  |  | 185 |
Decreases | (34 | ) |  | (14 | )
Decreases for settlements during the period | — |  |  | (68 | )
Balance at September 30, | $ | 397 |  |  | $ | 650 |
As of September 30, 2011 and December 31, 2010 $266 million and $225 million, respectively, of the unrecognized tax benefits, if recognized, would impact the effective tax rate. Edison International's federal income tax returns and its California combined franchise tax returns are currently open for years subsequent to 2002. In addition, specific California refund claims made by Edison International for years 1991 through 2002 are currently under review by the Franchise Tax Board. The IRS examination phase of tax years 2003 through 2006 was completed in the fourth quarter of 2010. This included a proposed adjustment to disallow a component of SCE's repair allowance deduction, which if sustained, would result in a federal tax payment of approximately $92 million, including interest through September 30, 2011. Edison International disagrees with the proposed adjustment and filed a protest with the IRS in the first quarter of 2011. Accrued Interest and Penalties The total amount of accrued interest and penalties related to SCE's income tax liabilities was $69 million and $61 million as of September 30, 2011 and December 31, 2010, respectively. The net after-tax interest and penalties recognized in income tax expense was $2 million and $5 million for the three- and nine-month periods ended September 30, 2011, respectively, compared to a benefit of $27 million and $48 million for the same periods in 2010.

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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 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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=6907707&loc=d3e32559-109319 Reference 6: 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=6907707&loc=d3e32639-109319 Reference 7: 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=6907707&loc=d3e32718-109319 Reference 8: 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=6881521&loc=d3e23780-122690 + Details
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