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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes [Abstract] |
Income Taxes | Note 8.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) |  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Current: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Federal | ​ | $ | — | ​ | $ | 13 | ​ | $ | — | ​ | $ | — | ​ | $ | 12 | ​ | $ | —
State | ​ |  | (179) | ​ |  | (22) | ​ |  | 6 | ​ |  | (45) | ​ |  | (26) | ​ |  | 14
​ | ​ |  | (179) | ​ |  | (9) | ​ |  | 6 | ​ |  | (45) | ​ |  | (14) | ​ |  | 14
Deferred: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Federal | ​ |  | 83 | ​ |  | (230) | ​ |  | (243) | ​ |  | 83 | ​ |  | (207) | ​ |  | (206)
State | ​ |  | (40) | ​ |  | (66) | ​ |  | (41) | ​ |  | (21) | ​ |  | (56) | ​ |  | (37)
​ | ​ |  | 43 | ​ |  | (296) | ​ |  | (284) | ​ |  | 62 | ​ |  | (263) | ​ |  | (243)
Total | ​ | $ | (136) | ​ | $ | (305) | ​ | $ | (278) | ​ | $ | 17 | ​ | $ | (277) | ​ | $ | (229)
​ The components of net accumulated deferred income tax liability are:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Edison International | ​ | SCE
​ | ​ | December 31,
(in millions) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Deferred tax assets: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Property | ​ | $ | 856 | ​ | $ | 590 | ​ | $ | 835 | ​ | $ | 540
Wildfire-related1 | ​ |  | 558 | ​ |  | 1,134 | ​ |  | 558 | ​ |  | 1,134
Nuclear decommissioning trust assets in excess of nuclear ARO liability | ​ |  | 517 | ​ |  | 515 | ​ |  | 517 | ​ |  | 515
Loss and credit carryforwards2 | ​ |  | 3,078 | ​ |  | 1,991 | ​ |  | 1,697 | ​ |  | 683
Regulatory balances | ​ |  | 652 | ​ |  | 841 | ​ |  | 652 | ​ |  | 841
Pension and postretirement benefits other than pensions, net | ​ |  | 153 | ​ |  | 163 | ​ |  | 30 | ​ |  | 35
Leases5 | ​ | ​ | 543 | ​ | ​ | 307 | ​ | ​ | 543 | ​ | ​ | 307
Other | ​ |  | 165 | ​ |  | 206 | ​ |  | 179 | ​ |  | 220
Sub-total | ​ |  | 6,522 | ​ |  | 5,747 | ​ |  | 5,011 | ​ |  | 4,275
Less: valuation allowance3 | ​ |  | 44 | ​ |  | 35 | ​ |  | 6 | ​ |  | —
Total | ​ |  | 6,478 | ​ |  | 5,712 | ​ |  | 5,005 | ​ |  | 4,275
Deferred tax liabilities: | ​ |  |  | ​ |  |  | ​ |  | ​ | ​ |  |
Property | ​ |  | 9,645 | ​ |  | 8,879 | ​ |  | 9,633 | ​ |  | 8,871
Regulatory balances | ​ |  | 1,242 | ​ |  | 1,111 | ​ |  | 1,242 | ​ |  | 1,111
Nuclear decommissioning trust assets | ​ |  | 517 | ​ |  | 515 | ​ |  | 517 | ​ |  | 515
Leases5 | ​ | ​ | 543 | ​ | ​ | 307 | ​ | ​ | 543 | ​ | ​ | 307
Other | ​ |  | 207 | ​ |  | 207 | ​ |  | 186 | ​ |  | 192
Total | ​ |  | 12,154 | ​ |  | 11,019 | ​ |  | 12,121 | ​ |  | 10,996
Accumulated deferred income tax liability, net4 | ​ | $ | 5,676 | ​ | $ | 5,307 | ​ | $ | 7,116 | ​ | $ | 6,721
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, 2021, unrecognized tax benefits of $277 million and $221 million for Edison International and SCE, respectively, are presented net against the deferred tax asset for the loss and tax credit carryforwards. As of December 31, 2020, the unrecognized tax benefits netted against deferred tax assets were $270 million and $190 million for Edison International and SCE, respectively.
3 | As of December 31, 2021, Edison International and SCE have recorded a valuation allowance on deferred tax assets which are estimated to expire before being utilized. The valuation allowance for Edison International includes $33 million for non-California state net operating loss carryforwards, $4 million for California capital losses generated from sale of SoCore Energy in 2018, and $7 million for federal and California charitable contribution carryover from 2017. Valuation allowance for SCE includes $6 million for federal and California charitable contribution carryover from 2017.
4 | Included in "Deferred income taxes and credits" on the consolidated balance sheets.
5 | Lease-related amounts were included in "Other" in the prior year.
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, 2021
​ | ​ | Loss | ​ | Credit | ​ | Loss | ​ | Credit
(in millions) |  | Carryforwards |  | Carryforwards |  | Carryforwards |  | Carryforwards
Expire in 2022 | ​ | $ | 7 | ​ | $ | — | ​ | $ | 7 | ​ | $ | —
Expire between 2023 to 2026 | ​ |  | 30 | ​ |  | — | ​ |  | 25 | ​ |  | —
Expire between 2029 to 2043 | ​ |  | 1,504 | ​ |  | 535 | ​ |  | 702 | ​ |  | 60
No expiration date1 | ​ |  | 1,269 | ​ |  | 10 | ​ |  | 1,124 | ​ |  | —
Total | ​ | $ | 2,810 | ​ | $ | 545 | ​ | $ | 1,858 | ​ | $ | 60
1 | Under the Tax Cut and Jobs Act signed into law on December 22, 2017 ("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 $223 million and $218 million related to Capistrano Wind for 2021 and 2020, respectively. 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 when these tax benefits are 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) |  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019 |
Income from operations before income taxes | ​ | $ | 789 | ​ | $ | 566 | ​ | $ | 1,127 | ​ | $ | 952 | ​ | $ | 665 | ​ | $ | 1,301 | ​
Provision for income tax at federal statutory rate of 21% | ​ |  | 166 | ​ |  | 119 | ​ |  | 237 | ​ |  | 200 | ​ |  | 140 | ​ |  | 273 | ​
Increase (decrease) in income tax from: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​
Items presented with related state income tax, net: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​
State tax, net of federal benefit | ​ |  | (47) | ​ |  | (61) | ​ |  | (22) | ​ |  | (33) | ​ |  | (52) | ​ |  | (13) | ​
Property-related | ​ |  | (233) | ​ |  | (320) | ​ |  | (303) | ​ |  | (233) | ​ |  | (320) | ​ |  | (303) | ​
Change related to uncertain tax position1 | ​ |  | (147) | ​ |  | (15) | ​ |  | — | ​ |  | (37) | ​ |  | (19) | ​ |  | — | ​
Deferred tax re-measurement2 | ​ |  | — | ​ |  | — | ​ |  | (88) | ​ |  | — | ​ |  | — | ​ |  | (88) | ​
2018 GRC Final Decision | ​ |  | — | ​ |  | — | ​ |  | (80) | ​ |  | — | ​ |  | — | ​ |  | (80) | ​
Wildfire related charges3 | ​ | ​ | 31 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 31 | ​ | ​ | — | ​ | ​ | — | ​
Average rate assumption method ("ARAM") adjustment 4 | ​ | ​ | 87 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 87 | ​ | ​ | — | ​ | ​ | — | ​
Corporate-owned life insurance cash surrender value | ​ |  | (8) | ​ |  | (8) | ​ |  | (8) | ​ |  | (8) | ​ |  | (8) | ​ |  | (8) | ​
Other | ​ |  | 15 | ​ |  | (20) | ​ |  | (14) | ​ |  | 10 | ​ |  | (18) | ​ |  | (10) | ​
Total income tax (benefit) expense | ​ | $ | (136) | ​ | $ | (305) | ​ | $ | (278) | ​ | $ | 17 | ​ | $ | (277) | ​ | $ | (229) | ​
Effective tax rate | ​ |  | (17.2) | % |  | (53.9) | % |  | (24.7) | % |  | 1.8 | % |  | (41.7) | % |  | (17.6) | %
1 | In 2021, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board "FTB" for tax years 2007 – 2012. See further discussion in Tax Disputes below. In 2020, Edison International and SCE recognized tax expense and benefit, respectively, primarily due to the re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit.
2 | Relates to changes in the allocation of deferred tax re-measurement between customers and shareholders as a result of a CPUC resolution issued in February 2019. The resolution determined that customers are only entitled to excess deferred taxes which were included when setting rates, while other deferred tax re-measurement belongs to the shareholders.
3 | Relates to the non-tax deductible portions of the SED Agreement (as defined in Note 12). See Note 12 for further discussion under 2017/2018 Wildfire/Mudslide Events.
4 | In July 2021, SCE received the IRS' response to its private letter ruling request, regarding the scope of the deferred tax normalization requirements and the computations required to comply with the average rate assumption method. As a result, SCE's estimate changed and a cumulative true-up of $87 million reduction in tax benefits was recorded in the third quarter of 2021, for the period of January 1, 2018 to June 30, 2021.
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. 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:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Edison International | ​ | SCE
(in millions) |  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Balance at January 1, | ​ | $ | 679 | ​ | $ | 370 | ​ | $ | 338 | ​ | $ | 320 | ​ | $ | 282 | ​ | $ | 249
Tax positions taken during the current year: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Increases | ​ |  | 53 | ​ |  | 55 | ​ |  | 46 | ​ |  | 53 | ​ |  | 56 | ​ |  | 47
Tax positions taken during a prior year: | ​ |  | ​ | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |  |
Increases1 | ​ |  | 3 | ​ |  | 274 | ​ |  | 6 | ​ |  | 1 | ​ |  | 4 | ​ |  | 6
Decreases2 | ​ |  | (118) | ​ |  | (20) | ​ |  | (20) | ​ |  | (29) | ​ |  | (22) | ​ |  | (20)
Settlements with taxing authorities3 | ​ |  | (4) | ​ |  | — | ​ |  | — | ​ |  | (5) | ​ |  | — | ​ |  | —
Balance at December 31, | ​ | $ | 613 | ​ | $ | 679 | ​ | $ | 370 | ​ | $ | 340 | ​ | $ | 320 | ​ | $ | 282
1 | Edison International recorded favorable tax positions in 2020 in connection with the Edison Mission Energy bankruptcy that required a revaluation of the reserve for uncertain tax positions.
2 | Decrease in 2021 was related to re-measurement as a result of a settlement with the FTB for tax years 2007 – 2012.
3 | In 2021, Edison International reached a settlement with the FTB for tax years 2007 – 2012.
As of December 31, 2021, if recognized, $344 million of unrecognized tax benefits would impact Edison International's effective tax rate and $71 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 FTB are 2016 – 2020 and 2013 – 2020, respectively. In the fourth quarter of 2021, Edison International recorded the impacts of a settlement with the FTB for tax years 2007 – 2012 and has updated its uncertain tax positions to reflect this settlement. This update resulted in income tax benefits of $146 million and $36 million at Edison International and SCE, respectively. As a result of the settlement, Edison International expects a refund of tax and interest from the FTB in the amount of $60 million. Accrued Interest and Penalties The total amount of accrued interest and penalties related to income tax liabilities are:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Edison International | ​ | SCE
​ | ​ | December 31,
(in millions) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Accrued interest and penalties | ​ | $ | — | ​ | $ | 52 | ​ | $ | 20 | ​ | $ | 23
​ The net after-tax interest and penalties recognized in income tax (benefit) expense are:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Edison International | ​ | SCE
​ | ​ | Years ended December 31,
(in millions) |  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Net after-tax interest and penalties tax (benefit) expense | ​ | $ | (41) | ​ | $ | 4 | ​ | $ | 4 | ​ | $ | (2) | ​ | $ | 6 | ​ | $ | 3
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