INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

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)	2017			2016			2015
Federal Income Tax Expense at Statutory Rate	$	97		$	64		$	70
State Income Tax Expense, Net of Federal Deduction	9			6			8
Federal/State Tax Credits	(9		)	(8		)	(8		)
Allowance for Equity Funds Used During Construction	(2		)	(1		)	(1		)
Deferred Tax Asset Valuation Allowance	—			(2		)	1
Impact of Enactment, TCJA	7			—			—
Other	(1		)	—			2
Total Federal and State Income Tax Expense	$	101		$	59		$	72

Schedule Of Income Tax Reconciliation Table

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



	Years Ended December 31,
(in millions)	2017			2016			2015
Current Income Tax Expense
Federal	$	—		$	—		$	—
State	—			—			—
Total Current Income Tax Expense	—			—			—
Deferred Income Tax Expense
Federal	98			60			66
Federal Investment Tax Credits	(6		)	(6		)	(6		)
State	9			5			12
Total Deferred Income Tax Expense	101			59			72
Total Federal and State Income Tax Expense	$	101		$	59		$	72

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)	2017			2016
Gross Deferred Income Tax Assets
Capital Lease Obligations	$	10		$	35
Operating Loss Carryforwards, Net	56			129
Customer Advances and Contributions in Aid of Construction	14			20
Alternative Minimum Tax Credit	26			25
Other Postretirement Benefits	15			23
Emission Allowance Inventory	3			9
Investment Tax Credit Carryforward	34			32
Income Taxes Recoverable Through Future Rates	88			—
Other	47			60
Total Gross Deferred Income Tax Assets	293			333
Deferred Tax Assets Valuation Allowance	—			—
Gross Deferred Income Tax Liabilities
Plant, Net	(518		)	(774		)
Plant Abandonments	(21		)	—
Capital Lease Assets, Net	(5		)	(24		)
Pensions	(16		)	(26		)
Income Taxes Payable Through Future Rates	(10		)	—
Other	(23		)	(38		)
Total Gross Deferred Income Tax Liabilities	(593		)	(862		)
Deferred Income Taxes, Net	$	(300	)	$	(529	)

Summary Of Details Of Tax Carryforwards Table

As of December 31, 2017, TEP had the following carryforward amounts:



(in millions)	Amount		Expiring Year
Federal Net Operating Loss	$	263	2031-35
State Credits	8		2021-29
Alternative Minimum Tax Credit	26		None
Investment Tax Credits	34		2031-37

Summary of Income Tax Contingencies

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



	December 31,
(in millions)	2017			2016
Beginning of Period	$	12		$	5
Additions Based on Tax Positions Taken in the Current Year	7			7
Reduction to Positions, TCJA	(6		)	—
End of Period	$	13		$	12