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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes Disclosure [Abstract] |
Income Taxes | Income Taxes Current and Deferred Taxes The components of income tax expense by location of taxing jurisdiction are:
|  | Years ended December 31,
(in millions) |  | 2011 | 2010 | 2009
Current: |  |  |  |
Federal |  | $ | (275 | ) | $ | (145 | ) | $ | (82 | )
State |  | 91 |  | (71 | ) | 173 |
|  | (184 | ) | (216 | ) | 91 |
Deferred: |  |  |  |
Federal |  | 757 |  | 663 |  | 200 |
State |  | 28 |  | (7 | ) | (42 | )
|  | 785 |  | 656 |  | 158 |
Total |  | $ | 601 |  | $ | 440 |  | $ | 249 |
The components of net accumulated deferred income tax liability are:
|  | December 31,
(in millions) |  | 2011 | 2010
Deferred tax assets: |  |  |
Property and software related |  | $ | 728 |  | $ | 655 |
Regulatory balancing accounts |  | 89 |  | 230 |
Unrealized gains and losses |  | 374 |  | 389 |
Loss and credit carryforwards |  | 15 |  | — |
Pensions and PBOPs |  | 173 |  | 176 |
Other |  | 480 |  | 490 |
Total |  | $ | 1,859 |  | $ | 1,940 |
Deferred tax liabilities: |  |  |
Property-related |  | $ | 6,492 |  | $ | 5,520 |
Capitalized software costs |  | 324 |  | 293 |
Regulatory balancing accounts |  | 301 |  | 293 |
Unrealized gains and losses |  | 374 |  | 389 |
Other |  | 238 |  | 264 |
Total |  | $ | 7,729 |  | $ | 6,759 |
Accumulated deferred income tax liability – net |  | $ | 5,870 |  | $ | 4,819 |
Classification of accumulated deferred income taxes – net: |  |  |
Included in deferred credits and other liabilities |  | $ | 5,781 |  | $ | 4,829 |
Included in current liabilities |  | $ | 89 |  | $ | — |
Included in other current assets |  | $ | — |  | $ | 10 |
As of December 31, 2011, SCE had $10 million of federal tax credit carryforwards, $2 million of which expire in 2030 and 2031 and the remainder has no expiration date. Additionally, SCE had $5 million of federal net operating loss carryforwards which expire in 2015. 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 from continuing operations.
|  | Years ended December 31,
(in millions) |  | 2011 | 2010 | 2009
Income from continuing operations before income taxes |  | $ | 1,745 |  | $ | 1,532 |  | $ | 1,620 |
Net income attributable to noncontrolling interests in the Big 4 projects |  | — |  | — |  | (94 | )
Adjusted income from continuing operations before income taxes |  | $ | 1,745 |  | $ | 1,532 |  | $ | 1,526 |
Provision for income tax at federal statutory rate of 35% |  | 611 |  | 536 |  | 534 |
Increase (decrease) in income tax from: |  |  |  |
Items presented with related state income tax, net |  |  |  |
Global settlement related 1 |  | — |  | (95 | ) | (306 | )
Change in tax accounting method for asset removal costs 2 |  | — |  | (40 | ) | — |
State tax – net of federal benefit |  | 80 |  | 59 |  | 67 |
Health care legislation 3 |  | — |  | 39 |  | — |
Property-related |  | (76 | ) | (47 | ) | (64 | )
Other |  | (14 | ) | (12 | ) | 18 |
Total income tax expense from continuing operations |  | $ | 601 |  | $ | 440 |  | $ | 249 |
Effective tax rate |  | 34.4 | % | 28.7 | % | 16.3 | %
1 | Edison International and the IRS finalized the terms of a Global Settlement on May 5, 2009. The Global Settlement resolved all of SCE's federal income tax disputes and affirmative claims through tax year 2002. During 2009, SCE recorded after-tax earnings of approximately $306 million. During 2010, SCE recognized a $95 million earnings benefit from the acceptance by the California Franchise Tax Board of the IRS tax positions finalized in 2009 and receipt of the final interest determination from the Franchise Tax Board.
2 | During 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 as required by the CPUC.
3 | During 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 | 2009
Balance at January 1 |  | $ | 329 |  | $ | 482 |  | $ | 2,066 |
Tax positions taken during the current year |  |  |  |
Increases |  | 34 |  | 47 |  | 14 |
Tax positions taken during a prior year |  |  |  |
Increases |  | 82 |  | 140 |  | 200 |
Decreases |  | (72 | ) | (272 | ) | (212 | )
Decreases for settlements during the period |  | — |  | (68 | ) | (1,586 | )
Balance at December 31 |  | $ | 373 |  | $ | 329 |  | $ | 482 |
Unrecognized tax benefits were reduced by $68 million during 2010 related to the California Franchise Tax Board's acceptance of the federal Global Settlement as discussed above and $1.6 billion during 2009 primarily due to completion of the federal Global Settlement as discussed above. As of December 31, 2011 and 2010, respectively, if recognized, $282 million and $225 million of the unrecognized tax benefits 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 $93 million, including interest through December 31, 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 $75 million and $61 million as of December 31, 2011 and 2010, respectively. The net after-tax interest and penalties recognized in income tax expense was $8 million in 2011, compared to a benefit of $80 million and $279 million in 2010 and 2009, respectively. Repair Deductions In 2009, Edison International made a voluntary election to change its tax accounting method for certain repair costs incurred on SCE's transmission, distribution and generation assets. The change in tax accounting method resulted in a $192 million cash benefit realized in the fourth quarter of 2009. In August of 2011 the IRS issued guidance on repair deductions and changes in accounting method related to transmission and distribution assets. Based on this guidance, SCE will include a second change in tax accounting method in its 2011 tax return. SCE does not expect any cash impact in 2011 due to its current net operating loss position. Regulatory treatment for the incremental deductions taken after the voluntary election to change SCE's tax accounting method for certain repair costs will be addressed in SCE's 2012 GRC. Due to the pending regulatory decision, SCE has not recognized an earnings benefit or regulatory asset related to this method change and incremental deductions taken in 2009, 2010 and 2011.

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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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