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Income Taxes | 12 Months Ended
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Dec. 31, 2016
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) |  | 2016 |  | 2015 |  | 2014
Income from continuing operations before income taxes |  | $ | 1,590 |  |  | $ | 1,568 |  |  | $ | 1,979 |
Income (loss) from discontinued operations before income taxes |  | 1 |  |  | 15 |  |  | (525 | )
Income before income tax |  | $ | 1,591 |  |  | $ | 1,583 |  |  | $ | 1,454 |
The components of income tax expense (benefit) by location of taxing jurisdiction are:
| Edison International |  | SCE
| Years ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | (46 | ) |  | $ | 18 |  |  | $ | (99 | ) |  | $ | 75 |  |  | $ | 72 |  |  | $ | (89 | )
State | 33 |  |  | 19 |  |  | 20 |  |  | 93 |  |  | 127 |  |  | 101 |
| (13 | ) |  | 37 |  |  | (79 | ) |  | 168 |  |  | 199 |  |  | 12 |
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | 176 |  |  | 340 |  |  | 454 |  |  | 112 |  |  | 298 |  |  | 476 |
State | 14 |  |  | 109 |  |  | 68 |  |  | (24 | ) |  | 10 |  |  | (14 | )
| 190 |  |  | 449 |  |  | 522 |  |  | 88 |  |  | 308 |  |  | 462 |
Total continuing operations | 177 |  |  | 486 |  |  | 443 |  |  | 256 |  |  | 507 |  |  | 474 |
Discontinued operations 1 | (11 | ) |  | (21 | ) |  | (710 | ) |  | — |  |  | — |  |  | — |
Total | $ | 166 |  |  | $ | 465 |  |  | $ | (267 | ) |  | $ | 256 |  |  | $ | 507 |  |  | $ | 474 |
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) | 2016 |  | 2015 |  | 2016 |  | 2015
Deferred tax assets: |  |  |  |  |  |  |
Property and software related | $ | 549 |  |  | $ | 675 |  |  | $ | 548 |  |  | $ | 675 |
Nuclear decommissioning trust assets in excess of nuclear ARO liability | 348 |  |  | 360 |  |  | 348 |  |  | 360 |
Loss and credit carryforwards | 1,418 |  |  | 1,388 |  |  | — |  |  | — |
Regulatory balancing accounts | 15 |  |  | 21 |  |  | 15 |  |  | 21 |
Pension and PBOPs | 300 |  |  | 337 |  |  | 93 |  |  | 154 |
Other | 419 |  |  | 499 |  |  | 408 |  |  | 411 |
Sub-total | 3,049 |  |  | 3,280 |  |  | 1,412 |  |  | 1,621 |
Less valuation allowance | 24 |  |  | 32 |  |  | — |  |  | — |
Total | 3,025 |  |  | 3,248 |  |  | 1,412 |  |  | 1,621 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property-related | 10,330 |  |  | 9,606 |  |  | 10,330 |  |  | 9,600 |
Capitalized software costs | 237 |  |  | 207 |  |  | 237 |  |  | 207 |
Regulatory balancing accounts | 134 |  |  | 202 |  |  | 134 |  |  | 202 |
Nuclear decommissioning trust assets | 348 |  |  | 360 |  |  | 348 |  |  | 360 |
PBOPs | 13 |  |  | 71 |  |  | 13 |  |  | 71 |
Other | 202 |  |  | 189 |  |  | 148 |  |  | 161 |
Total | 11,264 |  |  | 10,635 |  |  | 11,210 |  |  | 10,601 |
Accumulated deferred income tax liability, net 1 | $ | 8,239 |  |  | $ | 7,387 |  |  | $ | 9,798 |  |  | $ | 8,980 |
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, 2016
(in millions) | Loss Carryforwards |  | Credit Carryforwards |  | Loss Carryforwards |  | Credit Carryforwards
Expire between 2017 to 2035 | $ | 1,095 |  |  | $ | 430 |  |  | $ | 20 |  |  | $ | 25 |
No expiration date | — |  |  | 69 |  |  | — |  |  | 37 |
Total 1 | $ | 1,095 |  |  | $ | 499 |  |  | $ | 20 |  |  | $ | 62 |
1 | Deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $176 million and $82 million for Edison International and SCE, respectively.
Edison International has recorded a valuation allowance of $24 million for state net operating loss carryforwards estimated to expire unused. In 2016, Edison International determined that $8 million of the assets subject to a valuation allowance, had no expectation of recovery and were written off. At December 31, 2015, Edison International and SCE had $42 million and $6 million, respectively, of 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. In March 2016, the FASB issued an accounting standards update to simplify the accounting for share-based payments. As part of this new guidance adopted in 2016, Edison International and SCE recorded an increase to beginning retained earnings for these amounts. Refer to Note 1 for further information. Edison International consolidates for federal income tax purposes, but not for financial accounting 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 $242 million and $210 million related to Capistrano Wind at December 31, 2016 and 2015, respectively. 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) | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Income from continuing operations before income taxes | $ | 1,590 |  |  | $ | 1,568 |  |  | $ | 1,979 |  |  | $ | 1,755 |  |  | $ | 1,618 |  |  | $ | 2,039 |
Provision for income tax at federal statutory rate of 35% | 556 |  |  | 549 |  |  | 693 |  |  | 614 |  |  | 566 |  |  | 714 |
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 | 29 |  |  | 5 |  |  | 56 |  |  | 43 |  |  | 34 |  |  | 55 |
Property-related 2 | (362 | ) |  | (341 | ) |  | (252 | ) |  | (362 | ) |  | (341 | ) |  | (252 | )
Change related to uncertain tax positions | (4 | ) |  | (67 | ) |  | 5 |  |  | (8 | ) |  | (94 | ) |  | 12 |
San Onofre OII settlement | — |  |  | — |  |  | (23 | ) |  | — |  |  | — |  |  | (23 | )
Share-based compensation 3 | (28 | ) |  | — |  |  | — |  |  | (13 | ) |  | — |  |  | — |
Other | (14 | ) |  | (42 | ) |  | (36 | ) |  | (18 | ) |  | (40 | ) |  | (32 | )
Total income tax expense from continuing operations | $ | 177 |  |  | $ | 486 |  |  | $ | 443 |  |  | $ | 256 |  |  | $ | 507 |  |  | $ | 474 |
Effective tax rate | 11.1 | % |  | 31.0 | % |  | 22.4 | % |  | 14.6 | % |  | 31.3 | % |  | 23.2 | %
1 Includes federal and state.
2 | Includes incremental repair benefits. See discussion of repair deductions below.
3 | Includes state taxes of $(4) million and $(1) million for Edison International and SCE, respectively. Refer to Note 1 for further information.
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 GRC proceedings. Incremental repair deductions for the years 2012 – 2014 resulted in additional income tax benefits of $133 million in 2014. 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 in 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. The amount of tax repair deductions the CPUC used to establish the rate base offset was based on SCE's forecast of 2012 – 2014 tax repair deductions from the Notice of Intent filed in the 2015 GRC. The amount of tax repair deductions included in the Notice of Intent was less than the actual tax repair deductions SCE reported on its 2012 through 2014 income tax returns. In April 2016, the CPUC granted SCE's request to reduce SCE's BRRBA by $234 million in future periods subject to the timing and final outcome of audits that may be conducted by tax authorities. The refunds will result in flowing incremental tax benefits for 2012 – 2014 to customers. SCE refunded $133 million ($79 million after-tax) during the second quarter of 2016. SCE did not record a gain or loss from this reduction. Regulatory assets recorded from flow through tax benefits are recovered through SCE's general rate case proceedings. 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) | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Balance at January 1, | $ | 529 |  |  | $ | 576 |  |  | $ | 815 |  |  | $ | 353 |  |  | $ | 441 |  |  | $ | 532 |
Tax positions taken during the current year: |  |  |  |  |  |  |  |  |  |  |
Increases | 36 |  |  | 54 |  |  | 65 |  |  | 36 |  |  | 48 |  |  | 57 |
Tax positions taken during a prior year: |  |  |  |  |  |  |  |  |  |  |
Increases | 2 |  |  | 66 |  |  | 1 |  |  | — |  |  | 23 |  |  | — |
Decreases 1 | (96 | ) |  | (165 | ) |  | (143 | ) |  | (18 | ) |  | (159 | ) |  | (93 | )
Decreases for settlements during the period 2 | — |  |  | (2 | ) |  | (162 | ) |  | — |  |  | — |  |  | (55 | )
Balance at December 31, | $ | 471 |  |  | $ | 529 |  |  | $ | 576 |  |  | $ | 371 |  |  | $ | 353 |  |  | $ | 441 |
1 | Decreases in prior year tax positions for 2016 relate to state tax receivables on various claims. Due to the tax risks associated with these claims, the tax benefits were fully reserved at the time the asset was recorded. During 2016, the Company has determined that it will not recognize these assets so the tax benefit and related tax reserve were written off. Decreases in tax positions for 2015 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 | In the fourth quarter of 2014, Edison International has settled all open tax positions with the IRS for taxable years 2003 through 2006.
As of December 31, 2016 and 2015, if recognized, $347 million and $440 million, respectively, of the unrecognized tax benefits would impact Edison International's effective tax rate; and $243 million and $256 million, respectively, of the unrecognized tax benefits would impact SCE's effective tax rate. Tax Disputes Tax Years 2007 – 2012 Edison International has reached a tentative settlement agreement with the IRS for the 2007 – 2012 tax years. The final agreement, when approved, is not expected to have a material impact on the financial statements. During 2015, the Company received the IRS Revenue Agent Report for the 2010 – 2012 tax years. Edison International's and SCE's tax reserves were re-measured at that time and $94 million and $100 million, respectively, of income tax benefits were recorded in the comparable quarter for the prior year. 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) | 2016 |  | 2015 |  | 2016 |  | 2015
Accrued interest and penalties | $ | 128 |  |  | $ | 122 |  |  | $ | 41 |  |  | $ | 40 |
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) | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Net after-tax interest and penalties tax benefit | $ | 6 |  |  | $ | 9 |  |  | $ | 41 |  |  | $ | 2 |  |  | $ | 14 |  |  | $ | 16 |

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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