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Income Taxes | 12 Months Ended
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Dec. 31, 2015
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) |  | 2015 |  | 2014 |  | 2013
Income from continuing operations before income taxes |  | $ | 1,568 |  |  | $ | 1,979 |  |  | $ | 1,221 |
Income (loss) from discontinued operations before income taxes |  | 15 |  |  | (525 | ) |  | — |
Income before income tax |  | $ | 1,583 |  |  | $ | 1,454 |  |  | $ | 1,221 |
The components of income tax expense (benefit) by location of taxing jurisdiction are:
| Edison International |  | SCE
| Years ended December 31,
(in millions) | 2015 |  | 2014 |  | 2013 |  | 2015 |  | 2014 |  | 2013
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | 18 |  |  | $ | (99 | ) |  | $ | (97 | ) |  | $ | 72 |  |  | $ | (89 | ) |  | $ | (119 | )
State | 19 |  |  | 20 |  |  | (9 | ) |  | 127 |  |  | 101 |  |  | (19 | )
| 37 |  |  | (79 | ) |  | (106 | ) |  | 199 |  |  | 12 |  |  | (138 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | 340 |  |  | 454 |  |  | 317 |  |  | 298 |  |  | 476 |  |  | 345 |
State | 109 |  |  | 68 |  |  | 31 |  |  | 10 |  |  | (14 | ) |  | 72 |
| 449 |  |  | 522 |  |  | 348 |  |  | 308 |  |  | 462 |  |  | 417 |
Total continuing operations | 486 |  |  | 443 |  |  | 242 |  |  | 507 |  |  | 474 |  |  | 279 |
Discontinued operations 1 | (21 | ) |  | (710 | ) |  | (36 | ) |  | — |  |  | — |  |  | — |
Total | $ | 465 |  |  | $ | (267 | ) |  | $ | 206 |  |  | $ | 507 |  |  | $ | 474 |  |  | $ | 279 |
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) | 2015 |  | 2014 |  | 2015 |  | 2014
Deferred tax assets: |  |  |  |  |  |  |
Property and software related | $ | 675 |  |  | $ | 572 |  |  | $ | 675 |  |  | $ | 571 |
Nuclear decommissioning trust assets in excess of nuclear ARO liability | 360 |  |  | 441 |  |  | 360 |  |  | 441 |
Loss and credit carryforwards | 1,388 |  |  | 1,657 |  |  | — |  |  | 205 |
Regulatory balancing accounts | 21 |  |  | 18 |  |  | 21 |  |  | 18 |
Pension and PBOPs | 337 |  |  | 510 |  |  | 154 |  |  | 321 |
Other | 499 |  |  | 582 |  |  | 411 |  |  | 445 |
Sub-total | 3,280 |  |  | 3,780 |  |  | 1,621 |  |  | 2,001 |
Less valuation allowance | 32 |  |  | 29 |  |  | — |  |  | — |
Total | 3,248 |  |  | 3,751 |  |  | 1,621 |  |  | 2,001 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property-related | 9,606 |  |  | 8,709 |  |  | 9,600 |  |  | 8,699 |
Capitalized software costs | 207 |  |  | 285 |  |  | 207 |  |  | 285 |
Regulatory balancing accounts | 202 |  |  | 577 |  |  | 202 |  |  | 577 |
Nuclear decommissioning trust assets | 360 |  |  | 441 |  |  | 360 |  |  | 441 |
PBOPs | 71 |  |  | 227 |  |  | 71 |  |  | 227 |
Other | 189 |  |  | 274 |  |  | 161 |  |  | 171 |
Total | 10,635 |  |  | 10,513 |  |  | 10,601 |  |  | 10,400 |
Accumulated deferred income tax liability, net 1 | $ | 7,387 |  |  | $ | 6,762 |  |  | $ | 8,980 |  |  | $ | 8,399 |
1 | Included in deferred income taxes and credits.
Net Operating Loss and Tax Credit Carryforwards The amounts of net operating loss and tax credit carryforwards (after-tax) are as follows:
| Edison International |  | SCE
| December 31, 2015
(in millions) | Loss Carryforwards |  | Credit Carryforwards |  | Loss Carryforwards |  | Credit Carryforwards
Expire between 2021 to 2034 | $ | 1,136 |  |  | $ | 409 |  |  | $ | 39 |  |  | $ | 22 |
No expiration date | — |  |  | 54 |  |  | — |  |  | 39 |
Total 1 | $ | 1,136 |  |  | $ | 463 |  |  | $ | 39 |  |  | $ | 61 |
1 | Deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $211 million and $100 million for Edison International and SCE, respectively.
Edison International has recorded a valuation allowance of $32 million for state net operating loss carryforwards estimated to expire unused. As of December 31, 2015, 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 $6 million. Edison International consolidates for federal income tax purposes a group of wind projects referred to as Capistrano Wind. The amount of net operating loss and tax credit carryforwards recognized as part of deferred income taxes includes $210 million related to Capistrano Wind. Under a tax allocation agreement, Edison International has recorded the liability as part of other long-term liabilities related to its obligation to make payments to Capistrano Wind of these tax benefits when realized. 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) | 2015 |  | 2014 |  | 2013 |  | 2015 |  | 2014 |  | 2013
Income from continuing operations before income taxes | $ | 1,568 |  |  | $ | 1,979 |  |  | $ | 1,221 |  |  | $ | 1,618 |  |  | $ | 2,039 |  |  | $ | 1,279 |
Provision for income tax at federal statutory rate of 35% | 549 |  |  | 693 |  |  | 427 |  |  | 566 |  |  | 714 |  |  | 448 |
Increase in income tax from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items presented with related state income tax, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory asset write-off 1 | 382 |  |  | — |  |  | — |  |  | 382 |  |  | — |  |  | — |
State tax, net of federal benefit | 5 |  |  | 56 |  |  | 18 |  |  | 34 |  |  | 55 |  |  | 34 |
Property-related 2 | (341 | ) |  | (252 | ) |  | (216 | ) |  | (341 | ) |  | (252 | ) |  | (216 | )
Change related to uncertain tax positions | (67 | ) |  | 5 |  |  | 14 |  |  | (94 | ) |  | 12 |  |  | 14 |
San Onofre OII settlement | — |  |  | (23 | ) |  | 24 |  |  | — |  |  | (23 | ) |  | 24 |
Other | (42 | ) |  | (36 | ) |  | (25 | ) |  | (40 | ) |  | (32 | ) |  | (25 | )
Total income tax expense from continuing operations | $ | 486 |  |  | $ | 443 |  |  | $ | 242 |  |  | $ | 507 |  |  | $ | 474 |  |  | $ | 279 |
Effective tax rate | 31.0 | % |  | 22.4 | % |  | 19.8 | % |  | 31.3 | % |  | 23.2 | % |  | 21.8 | %
1 Includes federal and state.
2 | Includes incremental repair benefit recorded in 2013 to 2015. 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 as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, 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 voluntary elections in 2009 and 2011 to change its tax accounting method for certain tax repair costs incurred on SCE's transmission, distribution and generation assets. 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 and $89 million in 2013. As part of the final decision in SCE's 2015 GRC, the CPUC adopted a rate base offset associated with these incremental tax repair deductions during 2012 – 2014. The 2015 rate base offset is $324 million and amortizes on a straight line basis over 27 years. As a result of the rate base offset included in the final decision, SCE recorded an after tax charge of $382 million during the fourth quarter of 2015 to write down the net regulatory asset for recovery of deferred income taxes related to 2012 – 2014 incremental tax repair deductions which is reflected in "Income tax expense" on the consolidated statements of income. 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) | 2015 |  | 2014 |  | 2013 |  | 2015 |  | 2014 |  | 2013
Balance at January 1, | $ | 576 |  |  | $ | 815 |  |  | $ | 812 |  |  | $ | 441 |  |  | $ | 532 |  |  | $ | 571 |
Tax positions taken during the current year: |  |  |  |  |  |  |  |  |  |  |
Increases | 54 |  |  | 65 |  |  | 19 |  |  | 48 |  |  | 57 |  |  | 22 |
Tax positions taken during a prior year: |  |  |  |  |  |  |  |  |  |  |
Increases | 66 |  |  | 1 |  |  | 43 |  |  | 23 |  |  | — |  |  | 45 |
Decreases 1 | (165 | ) |  | (143 | ) |  | (109 | ) |  | (159 | ) |  | (93 | ) |  | (106 | )
Increases – deconsolidation of EME 2 | — |  |  | — |  |  | 50 |  |  | — |  |  | — |  |  | — |
Decreases for settlements during the period 3 | (2 | ) |  | (162 | ) |  | — |  |  | — |  |  | (55 | ) |  | — |
Balance at December 31, | $ | 529 |  |  | $ | 576 |  |  | $ | 815 |  |  | $ | 353 |  |  | $ | 441 |  |  | $ | 532 |
1 | Decreases in prior year tax positions relate primarily to re-measurement of uncertain tax positions in connection with receipt of the IRS Revenue Agent Report in June 2015. See discussions in Tax Disputes below.
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.
As of December 31, 2015 and 2014, if recognized, $440 million and $503 million respectively, of the unrecognized tax benefits would impact Edison International's effective tax rate; and $256 million and $370 million, respectively, of the unrecognized tax benefits would impact SCE's effective tax rate. Tax Disputes Tax Years 2007 – 2009 Edison International received a Revenue Agent Report from the IRS in February 2013 which included a proposed adjustment to disallow deductions related to certain capitalized overhead costs. Edison International has tentatively reached an agreement with the IRS regarding this matter, which if finalized, would result in a federal tax liability of approximately $64 million, including interest through December 31, 2015. Tax Years 2010 – 2012 The IRS Revenue Agent Report was received in June 2015. As a result, Edison International and SCE have re-measured its Federal and State uncertain tax positions and recorded $94 million and $100 million, respectively, of income tax benefits including interest and penalty during the second quarter of 2015. The Revenue Agent Report included a proposed adjustment to disallow deductions related to certain capitalized overhead expenses. Edison International has tentatively reached an agreement with the IRS regarding this matter, which if finalized, would result in a federal tax liability of approximately $9 million, including interest through December 31, 2015. Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2007 – 2015 and 2003 – 2015, respectively. 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) | 2015 |  | 2014 |  | 2015 |  | 2014
Accrued interest and penalties | $ | 122 |  |  | $ | 338 |  |  | $ | 40 |  |  | $ | 64 |
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) | 2015 |  | 2014 |  | 2013 |  | 2015 |  | 2014 |  | 2013
Net after-tax interest and penalties tax benefit (expense) | $ | 9 |  |  | $ | 41 |  |  | $ | (3 | ) |  | $ | 14 |  |  | $ | 16 |  |  | $ | 2 |

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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 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 2: 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 3: 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 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 + Details
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