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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Current and Deferred Taxes The components of income tax (benefit) expense by location of taxing jurisdiction are:
| Edison International |  | SCE
| Years ended December 31,
(in millions) | 2019 |  | 2018 |  | 2017 |  | 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | — |  |  | $ | (57 | ) |  | $ | (221 | ) |  | $ | — |  |  | $ | (51 | ) |  | $ | (253 | )
State | 6 |  |  | (155 | ) |  | 4 |  |  | 14 |  |  | (93 | ) |  | (81 | )
| 6 |  |  | (212 | ) |  | (217 | ) |  | 14 |  |  | (144 | ) |  | (334 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |
Federal | (243 | ) |  | (386 | ) |  | 570 |  |  | (206 | ) |  | (354 | ) |  | 265 |
State | (41 | ) |  | (141 | ) |  | (72 | ) |  | (37 | ) |  | (198 | ) |  | 39 |
| (284 | ) |  | (527 | ) |  | 498 |  |  | (243 | ) |  | (552 | ) |  | 304 |
Total continuing operations | (278 | ) |  | (739 | ) |  | 281 |  |  | (229 | ) |  | (696 | ) |  | (30 | )
Discontinued operations 1 | — |  |  | (34 | ) |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | (278 | ) |  | $ | (773 | ) |  | $ | 281 |  |  | $ | (229 | ) |  | $ | (696 | ) |  | $ | (30 | )
1 | In the fourth quarter of 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board for tax years 1994 – 2006. See further discussion in Tax Disputes below.
The components of net accumulated deferred income tax liability are:
| Edison International |  | SCE
| December 31,
(in millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Deferred tax assets: |  |  |  |  |  |  |
Property | $ | 478 |  |  | $ | 399 |  |  | $ | 435 |  |  | $ | 388 |
Wildfire-related 1 | 847 |  |  | 709 |  |  | 847 |  |  | 709 |
Nuclear decommissioning trust assets in excess of nuclear ARO liability | 449 |  |  | 323 |  |  | 449 |  |  | 323 |
Loss and credit carryforwards 2 | 1,515 |  |  | 1,375 |  |  | 253 |  |  | 154 |
Regulatory asset | 739 |  |  | 798 |  |  | 739 |  |  | 798 |
Pension and postretirement benefits other than pensions, net | 170 |  |  | 171 |  |  | 40 |  |  | 46 |
Other | 408 |  |  | 188 |  |  | 416 |  |  | 184 |
Sub-total | 4,606 |  |  | 3,963 |  |  | 3,179 |  |  | 2,602 |
Less: valuation allowance 3 | 35 |  |  | 36 |  |  | — |  |  | — |
Total | 4,571 |  |  | 3,927 |  |  | 3,179 |  |  | 2,602 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property | 8,244 |  |  | 7,685 |  |  | 8,234 |  |  | 7,685 |
Regulatory liability | 570 |  |  | 367 |  |  | 570 |  |  | 367 |
Nuclear decommissioning trust assets | 449 |  |  | 323 |  |  | 449 |  |  | 323 |
Other | 320 |  |  | 57 |  |  | 310 |  |  | 54 |
Total | 9,583 |  |  | 8,432 |  |  | 9,563 |  |  | 8,429 |
Accumulated deferred income tax liability, net 4 | $ | 5,012 |  |  | $ | 4,505 |  |  | $ | 6,384 |  |  | $ | 5,827 |
1 | Relates to accrued estimated losses for wildfire-related claims, net of expected recoveries from insurance and FERC customers, and contributions to the Wildfire Insurance Fund. For further information, see Note 12 and Note 1.
2 | As of December 31, 2019, deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $212 million and $130 million for Edison International and SCE, respectively.
3 | As of December 31, 2019, Edison International has recorded a valuation allowance of $30 million for non-California state net operating loss carryforwards, and $5 million for California capital losses generated from sale of SoCore Energy in 2018, which are estimated to expire before being utilized.
4 | Included in "Deferred income taxes and credits" on the consolidated balance sheets.
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, 2019
(in millions) | Loss Carryforwards |  | Credit Carryforwards |  | Loss Carryforwards |  | Credit Carryforwards
Expire between 2029 to 2037 | $ | 1,024 |  |  | $ | 482 |  |  | $ | 229 |  |  | $ | 30 |
Expire between 2021 to 2024 | 29 |  |  | — |  |  | 24 |  |  | — |
No expiration date 1 | 182 |  |  | 10 |  |  | 100 |  |  | — |
Total | $ | 1,235 |  |  | $ | 492 |  |  | $ | 353 |  |  | $ | 30 |
1 | Under the Tax Reform, net operating losses generated after December 31, 2017 can carryforward indefinitely.
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 $212 million related to Capistrano Wind for both 2019 and 2018. Under a tax allocation agreement, Edison International has recorded a corresponding 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) | 2019 |  | 2018 |  | 2017 |  | 2019 |  | 2018 |  | 2017
Income (loss) from continuing operations before income taxes | $ | 1,127 |  |  | $ | (1,089 | ) |  | $ | 949 |  |  | $ | 1,301 |  |  | $ | (885 | ) |  | $ | 1,106 |
Provision for income tax at federal statutory rate of 21% for 2019 and 2018, and 35% for 2017 1 | 237 |  |  | (229 | ) |  | 332 |  |  | 273 |  |  | (186 | ) |  | 387 |
Increase in income tax from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items presented with related state income tax, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State tax, net of federal benefit | (22 | ) |  | (168 | ) |  | 2 |  |  | (13 | ) |  | (155 | ) |  | 8 |
Property-related | (303 | ) |  | (275 | ) |  | (439 | ) |  | (303 | ) |  | (275 | ) |  | (439 | )
Change related to uncertain tax positions 2 | — |  |  | (66 | ) |  | (18 | ) |  | — |  |  | (71 | ) |  | (13 | )
Revised San Onofre Settlement Agreement 3 | — |  |  | — |  |  | 25 |  |  | — |  |  | — |  |  | 25 |
Share-based compensation 4 | (4 | ) |  | (2 | ) |  | (55 | ) |  | (3 | ) |  | (1 | ) |  | (11 | )
Deferred tax re-measurement 5 | (88 | ) |  | — |  |  | 466 |  |  | (88 | ) |  | — |  |  | 33 |
2018 GRC Final Decision | (80 | ) |  | — |  |  | — |  |  | (80 | ) |  | — |  |  | — |
Other | (18 | ) |  | 1 |  |  | (32 | ) |  | (15 | ) |  | (8 | ) |  | (20 | )
Total income tax (benefit) expense from continuing operations | $ | (278 | ) |  | $ | (739 | ) |  | $ | 281 |  |  | $ | (229 | ) |  | $ | (696 | ) |  | $ | (30 | )
Effective tax rate | (24.7 | )% |  | (67.9 | )% |  | 29.6 | % |  | (17.6 | )% |  | (78.6 | )% |  | (2.7 | )%
1 Tax Reform reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. 2 In 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board for tax years 1994 – 2006. See further discussion in Tax Disputes below. 3 Includes the write-off of an unrecovered tax regulatory asset related to the Revised San Onofre Order Instituting Investigation Settlement Agreement among SCE, SDG&E and various intervening parties, dated January 30, 2018 and modified on August 2, 2018 ("Revised San Onofre Settlement Agreement").
4 | Includes state taxes of $(11) million for Edison International and $(2) million for SCE for the year ended December 31, 2017.
5 | In 2017, Edison International and SCE recorded a charge to earnings related to the re-measurement of deferred taxes resulting from Tax Reform. This charge was updated in 2019 to conform to a CPUC resolution which finalized the re-measurement amounts belonging to shareholders and those amounts are charged to earnings.
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. For further information, see Note 11. 2017 Tax Reform In December 2017, Tax Reform was signed into law. This comprehensive reform of tax law reduces the federal corporate income tax rate from 35% to 21% and is generally effective beginning January 1, 2018. GAAP requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at December 31, 2017, Edison International and SCE's deferred taxes were re-measured based upon the new tax rate. While the re-measurement of deferred taxes at Edison International Parent and Other were recorded to earnings, the re-measurement of deferred taxes at SCE was allocated between customers and shareholders. Customer amounts were recorded to regulatory assets and liabilities while shareholder-funded activities were charged to earnings. In the absence of regulatory guidance at the time, SCE used judgment to interpret prior CPUC decisions when determining which re-measurement amounts belong to customers and shareholders. In February of 2019, the CPUC issued a final resolution holding that customers are only entitled to the re-measurement of deferred taxes that were included when setting rates (i.e. included in rate base) and that all other deferred tax re-measurements belong to shareholders. As a result of the resolution, SCE recorded an income tax benefit of approximately $88 million in the year 2019. 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 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) | 2019 |  | 2018 |  | 2017 |  | 2019 |  | 2018 |  | 2017
Balance at January 1, | $ | 338 |  |  | $ | 432 |  |  | $ | 471 |  |  | $ | 249 |  |  | $ | 331 |  |  | $ | 371 |
Tax positions taken during the current year: |  |  |  |  |  |  |  |  |  |  |
Increases | 46 |  |  | 41 |  |  | 51 |  |  | 47 |  |  | 42 |  |  | 51 |
Tax positions taken during a prior year: |  |  |  |  |  |  |  |  |  |  |
Increases | 6 |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |
Decreases 1 | (20 | ) |  | (108 | ) |  | (7 | ) |  | (20 | ) |  | (121 | ) |  | (13 | )
Settlements with taxing authorities 2 | — |  |  | (27 | ) |  | (83 | ) |  | — |  |  | (3 | ) |  | (78 | )
Balance at December 31, | $ | 370 |  |  | $ | 338 |  |  | $ | 432 |  |  | $ | 282 |  |  | $ | 249 |  |  | $ | 331 |
1 | Decrease in 2018 was related to re-measurement as a result of a settlement with the California Franchise Tax Board for tax years 1994 – 2006.
2 | In 2018, Edison International reached a settlement with the California Franchise Tax Board for tax years 1994 – 2006. In 2017, Edison International settled all open tax positions with the IRS for taxable years 2007 – 2012.
As of December 31, 2019, if recognized, $192 million of unrecognized tax benefits would impact Edison International's effective tax rate and $104 million of the unrecognized tax benefits would impact SCE's effective tax rate. Tax Disputes Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2016 – 2018 and 2010 – 2018, respectively. Edison International has settled all open tax positions with the IRS for taxable years prior to 2013. In the fourth quarter of 2018, Edison International recorded the impacts of a settlement reached with the California Franchise Tax Board for tax years 1994 – 2006 that resulted in a $65 million refund of tax and interest. This refund was received in the second quarter of 2019. Tax years 2007 – 2009 are currently under protest with the California Franchise Tax Board. 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) | 2019 |  | 2018 |  | 2019 |  | 2018
Accrued interest and penalties | $ | 56 |  |  | $ | 37 |  |  | $ | 29 |  |  | $ | 6 |
The net after-tax interest and penalties recognized in income tax expense (benefit) for continuing and discontinued operations are:
| Edison International |  | SCE
| December 31,
(in millions) | 2019 |  | 2018 |  | 2017 |  | 2019 |  | 2018 |  | 2017
Net after-tax interest and penalties tax expense (benefit) | $ | 4 |  |  | $ | (62 | ) |  | $ | 6 |  |  | $ | 3 |  |  | $ | (25 | ) |  | $ | 4 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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