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Income Taxes | 12 Months Ended
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Dec. 31, 2014
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) |  | 2014 |  | 2013 |  | 2012
Income from continuing operations before income taxes |  | $ | 1,979 |  |  | $ | 1,221 |  |  | $ | 1,861 |
Discontinued operations before income taxes |  | (525 | ) |  | — |  |  | (2,235 | )
Income (loss) before income tax |  | $ | 1,454 |  |  | $ | 1,221 |  |  | $ | (374 | )
The components of income tax expense (benefit) by location of taxing jurisdiction are:
| Edison International |  | SCE
| Years ended December 31,
(in millions) | 2014 |  | 2013 |  | 2012 |  | 2014 |  | 2013 |  | 2012
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (99 | ) |  | $ | (97 | ) |  | $ | — |  |  | $ | (89 | ) |  | $ | (119 | ) |  | $ | — |
State | 20 |  |  | (9 | ) |  | — |  |  | 101 |  |  | (19 | ) |  | 50 |
| (79 | ) |  | (106 | ) |  | — |  |  | 12 |  |  | (138 | ) |  | 50 |
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | 454 |  |  | 317 |  |  | 132 |  |  | 476 |  |  | 345 |  |  | 136 |
State | 68 |  |  | 31 |  |  | 135 |  |  | (14 | ) |  | 72 |  |  | 28 |
| 522 |  |  | 348 |  |  | 267 |  |  | 462 |  |  | 417 |  |  | 164 |
Total continuing operations | 443 |  |  | 242 |  |  | 267 |  |  | 474 |  |  | 279 |  |  | 214 |
Discontinued operations 1 | (710 | ) |  | (36 | ) |  | (549 | ) |  | — |  |  | — |  |  | — |
Total | $ | (267 | ) |  | $ | 206 |  |  | $ | (282 | ) |  | $ | 474 |  |  | $ | 279 |  |  | $ | 214 |
1 | See Note 15 for a discussion of discontinued operations related to EME.
The components of net accumulated deferred income tax liability are:
| Edison International |  | SCE
| December 31,
(in millions) | 2014 |  | 2013 |  | 2014 |  | 2013
Deferred tax assets: |  |  |  |  |  |  |
Property and software related | $ | 572 |  |  | $ | 523 |  |  | $ | 571 |  |  | $ | 523 |
Nuclear decommissioning trust assets in excess of nuclear ARO liability | 441 |  |  | 569 |  |  | 441 |  |  | 569 |
Loss and credit carryforwards | 1,657 |  |  | 2,228 |  |  | 205 |  |  | 427 |
Regulatory balancing accounts | 18 |  |  | 139 |  |  | 18 |  |  | 139 |
Pension and PBOPs | 510 |  |  | 283 |  |  | 321 |  |  | 105 |
Other | 582 |  |  | 712 |  |  | 445 |  |  | 544 |
Sub-total | 3,780 |  |  | 4,454 |  |  | 2,001 |  |  | 2,307 |
Less valuation allowance | 29 |  |  | 1,380 |  |  | — |  |  | — |
Total | 3,751 |  |  | 3,074 |  |  | 2,001 |  |  | 2,307 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property-related | 8,709 |  |  | 7,879 |  |  | 8,699 |  |  | 7,869 |
Capitalized software costs | 285 |  |  | 318 |  |  | 285 |  |  | 318 |
Regulatory balancing accounts | 577 |  |  | 625 |  |  | 577 |  |  | 625 |
Nuclear decommissioning trust assets | 441 |  |  | 569 |  |  | 441 |  |  | 569 |
PBOPs | 227 |  |  | 6 |  |  | 227 |  |  | 6 |
Other | 274 |  |  | 497 |  |  | 171 |  |  | 393 |
Total | 10,513 |  |  | 9,894 |  |  | 10,400 |  |  | 9,780 |
Accumulated deferred income tax liability, net | $ | 6,762 |  |  | $ | 6,820 |  |  | $ | 8,399 |  |  | $ | 7,473 |
Classification of accumulated deferred income taxes, net: |  |  |  |  |  |  |
Included in deferred credits and other liabilities | $ | 7,214 |  |  | $ | 7,241 |  |  | $ | 8,190 |  |  | $ | 7,737 |
Included in current liabilities (assets) | (452 | ) |  | (421 | ) |  | 209 |  |  | (264 | )
Net Operating Loss and Tax Credit Carryforwards The amounts of loss and credit carryforwards (after-tax) are as follows:
| Edison International |  | SCE
| December 31, 2014
(in millions) | Loss Carryforwards |  | Credit Carryforwards |  | Loss Carryforwards |  | Credit Carryforwards
2015 to 2019 | $ | 3 |  |  | $ | — |  |  | $ | 14 |  |  | $ | — |
2020 to 2033 | 1,213 |  |  | 405 |  |  | 132 |  |  | 39 |
No expiration date | — |  |  | 36 |  |  | — |  |  | 20 |
Total | $ | 1,216 |  |  | $ | 441 |  |  | $ | 146 |  |  | $ | 59 |
As of December 31, 2014, Edison International and SCE had federal net operating loss carryforwards related to the tax benefit on employee stock plans that would be recorded to additional paid-in capital when realized for the amount of $42 million and $22 million. Change in Valuation Allowance Related to EME EME's Plan of Reorganization, filed in December 2013, provided 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 would 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 Plan of Reorganization that would result in a tax deconsolidation of EME, Edison International recorded a valuation allowance of $1.38 billion based on the estimated amount of such benefits as calculated under the applicable federal and state tax regulations as of December 31, 2013. On April 1, 2014, under the Amended Plan of Reorganization, EME emerged from bankruptcy free of liabilities but remained an indirect wholly-owned subsidiary of Edison International, which will continue to be consolidated with Edison International for income tax purposes. Edison International anticipates realization of the federal and California tax benefits before they expire. Therefore, the valuation allowance on the federal and California tax benefits that Edison International recorded in 2013 was released in 2014. See Note 15 for discontinued operations related to the EME bankruptcy. 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) | 2014 |  | 2013 |  | 2012 |  | 2014 |  | 2013 |  | 2012
Income from continuing operations before income taxes | $ | 1,979 |  |  | $ | 1,221 |  |  | $ | 1,861 |  |  | $ | 2,039 |  |  | $ | 1,279 |  |  | $ | 1,874 |
Provision for income tax at federal statutory rate of 35% | 693 |  |  | 427 |  |  | 652 |  |  | 714 |  |  | 448 |  |  | 656 |
Increase (decrease) in income tax from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items presented with related state income tax, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Repair deductions | — |  |  | — |  |  | (231 | ) |  | — |  |  | — |  |  | (231 | )
State tax, net of federal benefit | 56 |  |  | 18 |  |  | 108 |  |  | 55 |  |  | 34 |  |  | 54 |
Property-related 1 | (252 | ) |  | (216 | ) |  | (223 | ) |  | (252 | ) |  | (216 | ) |  | (223 | )
Accumulated deferred income tax adjustments | — |  |  | — |  |  | (41 | ) |  | — |  |  | — |  |  | (41 | )
Change related to uncertain tax positions | 5 |  |  | 14 |  |  | 40 |  |  | 12 |  |  | 14 |  |  | 36 |
San Onofre OII settlement | (23 | ) |  | 24 |  |  | — |  |  | (23 | ) |  | 24 |  |  | — |
Other | (36 | ) |  | (25 | ) |  | (38 | ) |  | (32 | ) |  | (25 | ) |  | (37 | )
Total income tax expense from continuing operations | $ | 443 |  |  | $ | 242 |  |  | $ | 267 |  |  | $ | 474 |  |  | $ | 279 |  |  | $ | 214 |
Effective tax rate | 22.4 | % |  | 19.8 | % |  | 14.3 | % |  | 23.2 | % |  | 21.8 | % |  | 11.4 | %
1 | Includes incremental repair benefit recorded in 2012 to 2014. 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. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts in SCE's rate cases and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. Repair Deductions Edison International made a voluntary election in 2009 to change its tax accounting method for certain tax repair costs incurred on SCE's transmission, distribution and generation assets. Regulatory treatment for the 2009 – 2011 incremental repair deductions taken after the 2009 tax accounting method change resulted in SCE recognizing a $231 million earnings benefit in 2012. Incremental repair deductions represent amounts recognized for regulatory accounting purposes in excess of amounts included in the authorized revenue requirements through the General Rate Case ("GRC") proceedings. Incremental repair deductions for the years 2012 – 2014 resulted in additional income tax benefits of $133 million in 2014, $89 million in 2013, and $115 million in 2012. SCE included estimated repair deductions in its 2015 GRC currently before the CPUC. As part of these proceedings, TURN recommended a reduction in revenue requirement related to repair deductions that originated during the period 2012 – 2014. SCE cannot predict the outcome of the 2015 GRC related to the treatment of repair deductions for prior periods. 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) | 2014 |  | 2013 |  | 2012 |  | 2014 |  | 2013 |  | 2012
Balance at January 1, | $ | 815 |  |  | $ | 812 |  |  | $ | 631 |  |  | $ | 532 |  |  | $ | 571 |  |  | $ | 373 |
Tax positions taken during the current year: |  |  |  |  |  |  |  |  |  |  |
Increases | 65 |  |  | 19 |  |  | 33 |  |  | 57 |  |  | 22 |  |  | 35 |
Tax positions taken during a prior year: |  |  |  |  |  |  |  |  |  |  |
Increases | 1 |  |  | 43 |  |  | 177 |  |  | — |  |  | 45 |  |  | 169 |
Decreases 1 | (143 | ) |  | (109 | ) |  | (11 | ) |  | (93 | ) |  | (106 | ) |  | (6 | )
Increases (decreases) – deconsolidation of EME 2 | — |  |  | 50 |  |  | (18 | ) |  | — |  |  | — |  |  | — |
Decreases for settlements during the period 3 | (162 | ) |  | — |  |  | — |  |  | (55 | ) |  | — |  |  | — |
Balance at December 31, | $ | 576 |  |  | $ | 815 |  |  | $ | 812 |  |  | $ | 441 |  |  | $ | 532 |  |  | $ | 571 |
1 | Decreases in prior year tax positions relate primarily to re-measurement of uncertain tax positions in connection with the settlement of the 2003 – 2006 IRS audit.
2 | Unrecognized tax benefits of EME have been deconsolidated as a result of the bankruptcy filing by EME, except for tax liabilities for which Edison International and EME are jointly liable under the Internal Revenue Code and applicable state statutes. See Note 15 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 approximately $50 million as a result of unfavorable developments during the fourth quarter of 2013.
3 | In the fourth quarter of 2014, Edison International has settled all open tax positions with the IRS for taxable year 2003 through 2006. Edison International has previously made cash deposits which are sufficient to settle all outstanding liabilities for this audit cycle. Total liabilities included tax reserves, previously settled issues and the associated interest and penalties.
As of December 31, 2014 and 2013, if recognized, $503 million and $653 million respectively, of the unrecognized tax benefits would impact Edison International's effective tax rate; and $370 million and $374 million, respectively, of the unrecognized tax benefits would impact SCE's effective tax rate. SCE estimates the amount of unrecognized regulatory tax benefits for flow-through tax items using the same accounting guidance for uncertain tax positions. Accordingly, a change in the amount of flow-through tax items from an audit by a tax authority impacts the amount of regulatory tax benefits recognized by SCE. It is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by approximately $96 million due to a change in estimate of a tax position subject to flow through regulatory treatment. Tax Disputes 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 percentage repair allowance deduction. The proposed adjustment to disallow a component of SCE's percentage repair allowance deduction, if sustained, would result in a federal tax liability of approximately $76 million, including interest through December 31, 2014. In December 2014, Edison International reached a tentative agreement with the IRS regarding SCE's percentage repair allowance deduction for 2007 to 2009, which if finalized, would result in a federal tax liability of approximately $16 million, including interest through December 31, 2014. Tax Years 2010 – 2012 A Revenue Agent Report from the IRS is expected to be received from the examination phase of tax years 2010 through 2012 within the next six months. After receipt of the Revenue Agent Report, SCE expects to update its assessment of uncertain tax positions. 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
| Years ended December 31,
(in millions) | 2014 |  | 2013 |  | 2014 |  | 2013
Accrued interest and penalties | $ | 338 |  |  | $ | 406 |  |  | $ | 64 |  |  | $ | 88 |
The net after-tax interest and penalties recognized in income tax expense for continuing and discontinued operations are:
| Edison International |  | SCE
| December 31,
(in millions) | 2014 |  | 2013 |  | 2012 |  | 2014 |  | 2013 |  | 2012
Net after-tax interest and penalties tax benefit (expense) | $ | 41 |  |  | $ | (3 | ) |  | $ | (10 | ) |  | $ | 16 |  |  | $ | 2 |  |  | $ | (11 | )

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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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