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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Current and Deferred Taxes Edison International's sources of income (loss) before income taxes are:
|  | Years ended December 31,
(in millions) |  | 2013 |  | 2012 |  | 2011
Income from continuing operations before income taxes |  | $ | 1,221 |  |  | $ | 1,861 |  |  | $ | 1,668 |
Discontinued operations before income taxes |  | — |  |  | (2,235 | ) |  | (1,931 | )
Income (loss) before income tax |  | $ | 1,221 |  |  | $ | (374 | ) |  | $ | (263 | )
The components of income tax expense (benefit) by location of taxing jurisdiction are:
| Edison International |  | SCE
| Years ended December 31,
(in millions) | 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (97 | ) |  | $ | — |  |  | $ | (279 | ) |  | $ | (119 | ) |  | $ | — |  |  | $ | (275 | )
State | (9 | ) |  | — |  |  | 80 |  |  | (19 | ) |  | 50 |  |  | 91 |
| (106 | ) |  | — |  |  | (199 | ) |  | (138 | ) |  | 50 |  |  | (184 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | 317 |  |  | 132 |  |  | 727 |  |  | 345 |  |  | 136 |  |  | 757 |
State | 31 |  |  | 135 |  |  | 40 |  |  | 72 |  |  | 28 |  |  | 28 |
| 348 |  |  | 267 |  |  | 767 |  |  | 417 |  |  | 164 |  |  | 785 |
Total continuing operations | 242 |  |  | 267 |  |  | 568 |  |  | 279 |  |  | 214 |  |  | 601 |
Discontinued operations | (36 | ) |  | (549 | ) |  | (853 | ) |  | — |  |  | — |  |  | — |
Total | $ | 206 |  |  | $ | (282 | ) |  | $ | (285 | ) |  | $ | 279 |  |  | $ | 214 |  |  | $ | 601 |
The components of net accumulated deferred income tax liability are:
| Edison International |  | SCE
| December 31,
(in millions) | 2013 |  | 2012 |  | 2013 |  | 2012
Deferred tax assets: |  |  |  |  |  |  |
Property and software related | $ | 523 |  |  | $ | 600 |  |  | $ | 523 |  |  | $ | 600 |
Unrealized gains and losses | 579 |  |  | 491 |  |  | 569 |  |  | 477 |
Loss and credit carryforwards | 2,228 |  |  | 1,515 |  |  | 427 |  |  | 125 |
Regulatory balancing accounts | 139 |  |  | 80 |  |  | 139 |  |  | 80 |
Pension and PBOPs | 264 |  |  | 275 |  |  | 86 |  |  | 99 |
Other | 721 |  |  | 723 |  |  | 563 |  |  | 625 |
Sub-total | 4,454 |  |  | 3,684 |  |  | 2,307 |  |  | 2,006 |
Less valuation allowance | 1,380 |  |  | 1,017 |  |  | — |  |  | — |
Total | 3,074 |  |  | 2,667 |  |  | 2,307 |  |  | 2,006 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property-related | 7,879 |  |  | 7,289 |  |  | 7,869 |  |  | 7,279 |
Capitalized software costs | 318 |  |  | 325 |  |  | 318 |  |  | 325 |
Regulatory balancing accounts | 625 |  |  | 296 |  |  | 625 |  |  | 296 |
Unrealized gains and losses | 569 |  |  | 477 |  |  | 569 |  |  | 477 |
Other | 503 |  |  | 471 |  |  | 399 |  |  | 379 |
Total | 9,894 |  |  | 8,858 |  |  | 9,780 |  |  | 8,756 |
Accumulated deferred income tax liability, net | $ | 6,820 |  |  | $ | 6,191 |  |  | $ | 7,473 |  |  | $ | 6,750 |
Classification of accumulated deferred income taxes, net: |  |  |  |  |  |  |
Included in deferred credits and other liabilities | $ | 7,241 |  |  | $ | 6,127 |  |  | $ | 7,737 |  |  | $ | 6,669 |
Included in current liabilities (assets) | (421 | ) |  | 64 |  |  | (264 | ) |  | 81 |
Net Operating Loss and Tax Credit Carryforwards As of December 31, 2013, Edison International has $1.9 billion of net operating loss carryforwards (tax effected) of which $36 million expire between 2015 and 2025, and the remainder expires in 2031 and 2032. Edison International also has $399 million of federal tax credit carryforwards of which $376 million expire between 2029 and 2033 and the remainder has no expiration date. As of December 31, 2013, SCE has $371 million of net operating loss carryforwards (tax effected) of which $18 million expire between 2015 and 2017, and the remainder expire in 2031 and 2033. SCE also has $55 million of federal tax credit carryforwards of which $41 million expire between 2030 and 2033 and the remainder has no expiration date. Edison International has recorded deferred tax assets related to net operating losses and tax credit carryforwards that pertain to Edison International's consolidated or combined federal and state tax returns, including approximately $1.6 billion related to EME. Edison International continues to consolidate EME for federal and certain combined state tax returns. EME’s Plan of Reorganization, filed in December 2013 ("December Plan of Reorganization"), provides for the transfer of Edison International’s ownership interest to the creditors which would result in a tax deconsolidation of EME. Under federal and state tax regulations, the tax deconsolidation of EME will reduce the amounts of net operating loss and tax credits carryforwards that Edison International would be eligible to use in future periods. As a result of EME's December Plan of Reorganization that would result in a tax deconsolidation of EME, Edison International has recorded a valuation allowance of $1.380 billion based on the estimated amount of such benefits as calculated under the applicable federal and state tax regulations as of December 31, 2013. The deferred income tax benefits recognized by Edison International less the valuation allowance for amounts that would no longer be available upon tax deconsolidation of EME was approximately $220 million. See Note 16 for subsequent events related to the EME bankruptcy. As of December 31, 2013, Edison International has a tax basis of $544 million (tax-effected) in the stock of EME. To the extent that Edison International's tax basis in EME stock is positive upon tax deconsolidation, Edison International may be entitled to claim a tax deduction equal to the amount of its tax basis. A change in Edison International’s tax basis in the stock of EME can result from a number of items, including, but not limited to, utilization of net operating loss carryforwards and tax payments. Edison International has not recorded a deferred tax asset at December 31, 2013 related to potential tax benefits from a tax deduction related to its tax basis in EME. 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:
| Edison International |  | SCE
| Years ended December 31,
(in millions) | 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Income from continuing operations before income taxes | $ | 1,221 |  |  | $ | 1,861 |  |  | $ | 1,668 |  |  | $ | 1,279 |  |  | $ | 1,874 |  |  | $ | 1,745 |
Provision for income tax at federal statutory rate of 35% | 427 |  |  | 652 |  |  | 584 |  |  | 448 |  |  | 656 |  |  | 611 |
Increase (decrease) in income tax from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items presented with related state income tax, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Repair deductions 1 | — |  |  | (231 | ) |  | — |  |  | — |  |  | (231 | ) |  | — |
State tax, net of federal benefit | 18 |  |  | 108 |  |  | 85 |  |  | 34 |  |  | 54 |  |  | 80 |
Property-related 2 | (192 | ) |  | (223 | ) |  | (46 | ) |  | (192 | ) |  | (223 | ) |  | (46 | )
Accumulated deferred income tax adjustments | — |  |  | (41 | ) |  | (30 | ) |  | — |  |  | (41 | ) |  | (30 | )
Change related to uncertain tax positions | 14 |  |  | 40 |  |  | — |  |  | 14 |  |  | 36 |  |  | (3 | )
Other | (25 | ) |  | (38 | ) |  | (25 | ) |  | (25 | ) |  | (37 | ) |  | (11 | )
Total income tax expense from continuing operations | $ | 242 |  |  | $ | 267 |  |  | $ | 568 |  |  | $ | 279 |  |  | $ | 214 |  |  | $ | 601 |
Effective tax rate | 19.8 | % |  | 14.3 | % |  | 34.1 | % |  | 21.8 | % |  | 11.4 | % |  | 34.4 | %
1 | Edison International made a voluntary election in 2009 to change its tax accounting method for certain repair costs incurred on SCE's transmission, distribution and generation assets. Regulatory treatment for the 2009 – 2011 incremental repairs deductions taken after the 2009 tax accounting method change resulted in SCE recognizing a $231 million earnings benefit in 2012.
2 | Includes incremental repair benefit recorded in 2013 and 2012. See discussion of repair deductions below.
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 for continuing and discontinued operations:
| Edison International |  | SCE
| December 31,
(in millions) | 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Balance at January 1, | $ | 812 |  |  | $ | 631 |  |  | $ | 565 |  |  | $ | 571 |  |  | $ | 373 |  |  | $ | 329 |
Tax positions taken during the current year: |  |  |  |  |  |  |  |  |  |  |
Increases | 19 |  |  | 33 |  |  | 39 |  |  | 22 |  |  | 35 |  |  | 34 |
Tax positions taken during a prior year: |  |  |  |  |  |  |  |  |  |  |
Increases | 43 |  |  | 177 |  |  | 102 |  |  | 45 |  |  | 169 |  |  | 82 |
Decreases | (109 | ) |  | (11 | ) |  | (75 | ) |  | (106 | ) |  | (6 | ) |  | (72 | )
Increases (decreases) – deconsolidation of EME 1 | 50 |  |  | (18 | ) |  | — |  |  | — |  |  | — |  |  | — |
Decreases for settlements during the period | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance at December 31, | $ | 815 |  |  | $ | 812 |  |  | $ | 631 |  |  | $ | 532 |  |  | $ | 571 |  |  | $ | 373 |
1 | Unrecognized tax benefits of EME have been deconsolidated as a result of the bankruptcy filing by EME, except for tax liabilities that Edison International is jointly liable with EME under the Internal Revenue Code and applicable state statues. See Note 16 for further information. During 2013, Edison International increased the amount of unrecognized tax benefits related to the taxable gain on sale of EME’s international assets by $50 million as a result of unfavorable developments during the fourth quarter of 2013.
As of December 31, 2013 and 2012, if recognized, $653 million and $622 million respectively, of the unrecognized tax benefits would impact Edison International's effective tax rate; and $374 million and $388 million, respectively, of the unrecognized tax benefits would impact SCE's effective tax rate. Tax Disputes The IRS examination phase of tax years 2003 through 2006 was completed in the fourth quarter of 2010, which included proposed adjustments for the following two items:
• | A proposed adjustment increasing the taxable gain on the 2004 sale of EME's international assets, which if sustained, would result in a federal tax payment of approximately $206 million, including interest and penalties through December 31, 2013, see Note 16.
• | 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 $100 million, including interest through December 31, 2013.
Edison International disagrees with the proposed adjustments and filed a protest with the IRS in the first quarter of 2011. During the fourth quarter of 2013, the Internal Revenue Service advised Edison International that it intends to issue technical advice adverse to Edison International supporting the proposed adjustment by IRS examination increasing the taxable gain on the 2004 sale of EME’s international assets (the technical advice adverse to Edison International was received in February 2014). The technical advice did not address penalties. Edison International is continuing to protest the asserted penalty with IRS Appeals. Edison International anticipates that the IRS will issue a deficiency notice for the tax, interest and possibly penalties related to this issue at the conclusion of the IRS appeals process. After the receipt of such deficiency notice, Edison International will have 90 days to file a petition in United States Tax Court. If a petition is not timely filed, Edison International anticipates after the expiration of the 90-day period, the IRS will assess the underpayment of tax, interest and penalties, if any, and demand payment. Tax Years 2007 – 2009 The IRS examination phase of tax years 2007 through 2009 was completed during the first quarter of 2013. Edison International received a Revenue Agent Report from the IRS on February 28, 2013 which included a proposed adjustment to disallow a component of SCE's repair allowance deduction (similar to the 2003 – 2006 tax years). The proposed adjustment to disallow a component of SCE's repair allowance deduction, if sustained, would result in a federal tax payment of approximately $74 million, including interest through December 31, 2013. Edison International disagrees with the proposed adjustment and filed a protest with the IRS in April 2013. Accrued Interest and Penalties The total amount of accrued interest and penalties related to income tax liabilities for continuing and discontinued operations are:
| Edison International |  | SCE
| December 31,
(in millions) | 2013 |  | 2012 |  | 2013 |  | 2012
Accrued interest and penalties | $ | 406 |  |  | $ | 278 |  |  | $ | 88 |  |  | $ | 87 |
The net after-tax interest and penalties recognized in income tax expense are:
| Edison International |  | SCE
| December 31,
(in millions) | 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Net after-tax interest and penalties tax benefit (expense) | $ | (3 | ) |  | $ | (10 | ) |  | $ | (8 | ) |  | $ | 2 |  |  | $ | (11 | ) |  | $ | (8 | )

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 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=6907707&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=6907707&loc=d3e32537-109319 Reference 6: 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 + Details
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