INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income tax expense differs from the amount of income tax determined by applying the United States 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 21% to pre-tax income due to the following:

	Years Ended December 31,
(in millions)	2021		2020		2019
Federal Income Tax Expense at Statutory Rate	$	49	$	49	$	46
State Income Tax Expense, Net of Federal Deduction	9		9		9
Federal/State Tax Credits (1)	(10)		(3)		(6)
Allowance for Equity Funds Used During Construction	(3)		(7)		(3)
Excess Deferred Income Taxes	(14)		(7)		(9)
Impact of AMT Sequestration	—		—		(2)
Other	1		—		(1)
Total Income Tax Expense	$	32	$	41	$	34

(1)In 2021, TEP realized PTC benefits of $7 million related to Oso Grande being placed in service in May 2021.

Schedule of income tax reconciliation

Income Tax Expense included on the Consolidated Statements of Income consists of the following:

	Years Ended December 31,
(in millions)	2021		2020		2019
Current Income Tax Expense
Federal	$	(2)	$	(2)	$	(8)
State	—		1		—
Total Current Income Tax Expense	(2)		(1)		(8)
Deferred Income Tax Expense
Federal	27		37		41
Federal Investment Tax Credits	(1)		(1)		(4)
State	8		6		5
Total Deferred Income Tax Expense	34		42		42
Total Income Tax Expense	$	32	$	41	$	34

Schedule of components of deferred income tax assets and liabilities

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

	December 31,
(in millions)	2021		2020
Gross Deferred Income Tax Assets
Customer Advances and Contributions in Aid of Construction	$	20	$	19
Other Postretirement Benefits	15		15
Investment Tax Credit Carryforward	23		19
Income Taxes Payable Through Future Rates	67		74
Other	93		76
Total Gross Deferred Income Tax Assets	218		203
Gross Deferred Income Tax Liabilities
Plant, Net	(682)		(639)
PPFAC	(23)		(6)
Plant Abandonments	(8)		(11)
Pensions	(18)		(17)
Income Taxes Recoverable Through Future Rates	(4)		(7)
Other	(32)		(16)
Total Gross Deferred Income Tax Liabilities	(767)		(696)
Deferred Income Taxes, Net	$	(549)	$	(493)

TEP had the following carryforward amounts

As of December 31, 2021, TEP had the following carryforward amounts:

($ in millions)	Amount		Expiring Year
State Net Operating Loss	$	1	2026
State Credits	9		2023 - 29
Investment Tax Credits	22		2034 - 41
Other Federal Credits	8		2034 - 41

Summary of reconciliation of the beginning and ending balances of unrecognized tax benefits

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

	December 31,
(in millions)	2021		2020
Beginning of Period	$	19	$	18
Additions Based on Tax Positions Taken in the Current Year	—		1
Reductions Based on Positions Taken in Prior Years	(18)		—
End of Period	$	1	$	19