INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2016

Differences between Income Tax Expense and Amount Obtained by Multiplying Pre-Tax Income by U.S. Statutory Federal Income Tax Rate

Income tax expense differs from the amount of income tax determined by applying the United States statutory federal income tax rate of 35% to pre-tax income due to the following:



	Years Ended December 31,
(in millions)	2016			2015			2014
Federal Income Tax Expense at Statutory Rate	$	64		$	70		$	56
State Income Tax Expense, Net of Federal Deduction	6			8			7
Federal/State Tax Credits	(8		)	(8		)	(5		)
Allowance for Equity Funds Used During Construction	(1		)	(1		)	(2		)
Deferred Tax Asset Valuation Allowance	(2		)	1			—
Other	—			2			2
Total Federal and State Income Tax Expense	$	59		$	72		$	58

Schedule Of Income Tax Reconciliation Table

Income tax expense included in the income statements consists of the following:



	Years Ended December 31,
(in millions)	2016			2015			2014
Current Tax Expense (Benefit)
Federal	$	—		$	—		$	(1	)
State	—			—			—
Total Current Tax Expense (Benefit)	—			—			(1		)
Deferred Tax Expense (Benefit)
Federal	60			66			54
Federal Investment Tax Credits	(6		)	(6		)	(4		)
State	5			12			9
Total Deferred Tax Expense (Benefit)	59			72			59
Total Federal and State Income Tax Expense	$	59		$	72		$	58

Schedule of Deferred Tax Assets and Liabilities

The significant components of deferred income tax assets and liabilities consist of the following:



	December 31,
(in millions)	2016			2015
Gross Deferred Income Tax Assets
Capital Lease Obligations	$	35		$	27
Net Operating Loss Carryforwards	129			156
Customer Advances and Contributions in Aid of Construction	20			20
Alternative Minimum Tax Credit	25			24
Accrued Postretirement Benefits	23			23
Emission Allowance Inventory	9			9
Investment Tax Credit Carryforward	32			32
Other	60			53
Total Gross Deferred Income Tax Assets	333			344
Deferred Tax Assets Valuation Allowance	—			(4		)
Gross Deferred Income Tax Liabilities
Plant, Net	(774		)	(750		)
Capital Lease Assets, Net	(24		)	(12		)
Pensions	(26		)	(27		)
Other	(38		)	(19		)
Total Gross Deferred Income Tax Liabilities	(862		)	(808		)
Net Deferred Income Tax Liabilities	$	529		$	468

Summary Of Details Of Tax Carryforwards Table

As of December 31, 2016, TEP had the following carryforward amounts:



(in millions)	Amount		Expiring Year
Federal Net Operating Loss	$	364	2031-34
State Credits	10		2017-29
Alternative Minimum Tax Credit	25		None
Investment Tax Credits	32		2032-36

Summary of Income Tax Contingencies

A reconciliation of the beginning and ending balances of unrecognized tax benefits follows:



	December 31,
(in millions)	2016		2015
Beginning of Period	$	5	$	4
Additions Based on Tax Positions Taken in the Current Year	7		1
End of Period	$	12	$	5