Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Federal Tax Reform

The TCJA was enacted on December 22, 2017. Substantially all of the provisions of the TCJA affecting the Ameren Companies, other than certain transition depreciation rules, are effective for taxable years beginning after December 31, 2017. The TCJA includes significant changes to the Internal Revenue Code, including amendments that significantly change the taxation of business entities and specific provisions related to regulated public utilities. The most significant change that affects the Ameren Companies is the reduction in the federal corporate statutory income tax rate from 35% to 21%. Specific provisions related to regulated public utilities generally allow for the continued deductibility of interest expense, the elimination of accelerated depreciation tax benefits from certain regulated utility capital investments acquired after September 27, 2017, and the continuation of certain rate normalization requirements related to the flow back of excess deferred income taxes. Ameren (parent) is subject to provisions of the TCJA that limit the deductibility of interest expense, but such limitation did not affect Ameren in 2018 or 2019.

In accordance with GAAP, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted. GAAP also requires deferred tax assets and liabilities to be measured at the tax rate that is expected to apply when temporary differences are realized or settled. Thus, in December 2017, the Ameren Companies’ deferred taxes were revalued using the new tax rate. To the extent deferred tax balances are included in rate base, the revaluation of deferred taxes was deferred as a regulatory asset or liability on the balance sheet and will be collected from, or refunded, to customers. For deferred tax balances not included in rate base, the revaluation of deferred taxes was recorded as income tax expense. During the year ended December 31, 2017, Ameren, Ameren Missouri, and Ameren Illinois recorded provisional estimates of $154 million, $32 million, and ($5) million, respectively, of income tax expense (benefit) primarily related to depreciation transition rules and 2017 property, plant, and equipment, compensation, and pension-related deductions. During the year ended December 31, 2018, Ameren, Ameren Missouri, and Ameren Illinois updated their respective provisional estimates in accordance with SEC staff guidance and recorded $13 million, $4 million, and $4 million, respectively, of income tax expense, primarily due to the application of proposed IRS regulations on depreciation transition rules. As of December 31, 2018, Ameren, Ameren Missouri, and Ameren Illinois completed their accounting for certain effects of the TCJA.

For our regulated operations, reductions in accumulated deferred income tax balances due to the reduction in the federal statutory corporate income tax rate to 21% will result in amounts previously collected from utility customers for these deferred taxes being refundable to those customers, generally through reductions in future rates. The TCJA includes provisions related to the IRS normalization rules that address the time period in which certain plant-related components of the excess deferred income taxes are to be reflected in customer rates. This time period for the Ameren Companies is approximately 25 to 65 years. Other components of the excess deferred income taxes will be reflected in customer rates as determined by our state and federal regulators, which could be a shorter time period than that applicable to certain plant-related components.

Missouri Income Tax Rate

In 2018, legislation modifying Missouri tax law was enacted to decrease the state’s corporate income tax rate from 6.25% to 4%, effective January 1, 2020. As a result, in 2018, Ameren’s and Ameren Missouri’s accumulated deferred tax balances were revalued, resulting in a net decrease of $122 million to their accumulated deferred tax liability, which was offset by a regulatory liability. Additionally, Ameren recorded an immaterial amount to income tax expense. Ameren Missouri anticipates that the effect of this tax decrease will be reflected in customer rates upon completion of its current electric service regulatory rate review. Ameren (parent) and nonregistrant subsidiaries do not expect this income tax decrease to have a material impact on net income.

Illinois Income Tax Rate

In July 2017, Illinois enacted a law that increased the state’s corporate income tax rate from 7.75% to 9.5% as of July 1, 2017. The law made the increase in the state’s corporate income tax rate permanent. That rate was previously scheduled to go to 7.3% in 2025. In 2017, Ameren recorded an expense of $14 million at Ameren (parent) due to the revaluation of accumulated deferred taxes and the estimated state apportionment of such taxes. Beyond this expense, Ameren and Ameren Illinois do not expect this tax increase to have a material impact on their net income prospectively. The tax increase is not expected to materially affect the earnings of the Ameren Illinois Electric Distribution, the Ameren Transmission, or the Ameren Illinois Transmission segments, since these businesses operate under formula ratemaking frameworks. The tax increase unfavorably affected the 2017 net income of the Ameren Illinois Natural Gas segment by less than $1 million.

The following table presents the principal reasons for the difference between the effective income tax rate and the federal statutory corporate income tax rate for the years ended December 31, 2019, 2018, and 2017:

	Ameren Missouri		Ameren Illinois		Ameren
2019
Federal statutory corporate income tax rate:	21	%	21	%	21	%
Increases (decreases) from:
Amortization of excess deferred income taxes	(11	)	(4	)	(7	)
Amortization of deferred investment tax credit	(1	)	—		(1	)
State tax	5		7		6
Stock-based compensation	—		—		(1	)
Effective income tax rate	14	%	24	%	18	%
2018
Federal statutory corporate income tax rate:	21	%	21	%	21	%
Increases (decreases) from:
Amortization of excess deferred income taxes	(4	)	(4	)	(4	)
Depreciation differences	—		(1	)	—
Amortization of deferred investment tax credit	(1	)	—		(1	)
State tax	4		7		6
TCJA	1		1		1
Tax credits	(1	)	—		—
Other permanent items	—		—		(1	)
Effective income tax rate	20	%	24	%	22	%
2017
Federal statutory corporate income tax rate:	35	%	35	%	35	%
Increases (decreases) from:
Depreciation differences	1		(1	)	—
Amortization of deferred investment tax credit	(1	)	—		(1	)
State tax	4		6		6
TCJA	6		(1	)	14
Tax credits	(1	)	—		—
Other permanent items	—		(1	)	(2	)
Effective income tax rate	44	%	38	%	52	%

The following table presents the components of income tax expense for the years ended December 31, 2019, 2018, and 2017:

	Ameren Missouri			Ameren Illinois			Other			Ameren
2019
Current taxes:
Federal	$	65		$	19		$	(88	)	$	(4	)
State	22			11			(14		)	19
Deferred taxes:
Federal	37			66			82			185
State	5			29			25			59
Amortization of excess deferred income taxes	(56		)	(15		)	(1		)	(72		)
Amortization of deferred investment tax credits	(5		)	—			—			(5		)
Total income tax expense	$	68		$	110		$	4		$	182
2018
Current taxes:
Federal	$	104		$	4		$	(118	)	$	(10	)
State	29			6			(12		)	23
Deferred taxes:
Federal	22			75			123			220
State	(2		)	28			23			49
Amortization of excess deferred income taxes	(24		)	(15		)	(1		)	(40		)
Amortization of deferred investment tax credits	(5		)	—			—			(5		)
Total income tax expense	$	124		$	98		$	15		$	237
2017
Current taxes:
Federal	$	149		$	(34	)	$	(110	)	$	5
State	23			29			(20		)	32
Deferred taxes:
Federal	76			185			250			511
State	11			(13		)	36			34
Amortization of deferred investment tax credits	(5		)	(1		)	—			(6		)
Total income tax expense	$	254		$	166		$	156		$	576

The following table presents the accumulated deferred income tax assets and liabilities recorded as a result of temporary differences and accumulated deferred investment tax credits at December 31, 2019 and 2018:

	Ameren Missouri			Ameren Illinois			Other			Ameren
2019
Accumulated deferred income taxes, net liability (asset):
Plant-related	$	2,000		$	1,423		$	193		$	3,616
Regulatory assets and liabilities, net	(310		)	(214		)	(24		)	(548		)
Deferred employee benefit costs	(59		)	7			(59		)	(111		)
Tax carryforwards	(25		)	(3		)	(70		)	(98		)
Other	(33		)	11			43			21
Total net accumulated deferred income tax liabilities (assets)	$	1,573		$	1,224		$	83		$	2,880
Accumulated deferred investment tax credits	39			—			—			39
Accumulated deferred income taxes and investment tax credits	$	1,612		$	1,224		$	83		$	2,919
2018
Accumulated deferred income taxes, net liability (asset):
Plant-related	$	2,010		$	1,345		$	179		$	3,534
Regulatory assets and liabilities, net	(343		)	(221		)	(25		)	(589		)
Deferred employee benefit costs	(58		)	(4		)	(64		)	(126		)
Tax carryforwards	(35		)	(26		)	(166		)	(227		)
Other	(40		)	24			47			31
Total net accumulated deferred income tax liabilities (assets)	$	1,534		$	1,118		$	(29	)	$	2,623
Accumulated deferred investment tax credits	42			1			—			43
Accumulated deferred income taxes and investment tax credits	$	1,576		$	1,119		$	(29	)	$	2,666

The following table presents the components of accumulated deferred income tax assets relating to net operating loss carryforwards, tax credit carryforwards, and charitable contribution carryforwards at December 31, 2019 and 2018:

	Ameren Missouri		Ameren Illinois		Other			Ameren
2019
Tax credit carryforwards:
Federal(a)	$	25	$	3	$	67		$	95
State(b)	—		—		3			3
Total tax credit carryforwards	$	25	$	3	$	70		$	98
Charitable contribution carryforwards(c)	$	—	$	—	$	3		$	3
Valuation allowance(c)	—		—		(3		)	(3		)
Total charitable contribution carryforwards	$	—	$	—	$	—		$	—
2018
Net operating loss carryforwards:
Federal	$	—	$	23	$	55		$	78
State	—		—		13			13
Total net operating loss carryforwards	$	—	$	23	$	68		$	91
Tax credit carryforwards:
Federal	$	35	$	3	$	79		$	117
State	—		—		10			10
Total tax credit carryforwards	$	35	$	3	$	89		$	127
Charitable contribution carryforwards	$	—	$	—	$	14		$	14
Valuation allowance	—		—		(5		)	(5		)
Total charitable contribution carryforwards	$	—	$	—	$	9		$	9

(a) Will expire between 2029 and 2039.

(b) Will expire between 2022 and 2024.

(c) See Schedule II under Part IV, Item 15, in this report for information on changes in the valuation allowance.

Uncertain Tax Positions

As of December 31, 2019 and 2018, the Ameren Companies did not record any uncertain tax positions.

The Internal Revenue Service is currently examining Ameren’s 2018 federal income tax return. State income tax returns are generally subject to examination for a period of three years after filing. The state impact of any federal changes remains subject to examination by various states for up to one year after formal notification to the states. The Ameren Companies currently do not have material income tax issues under examination, administrative appeals, or litigation.

Ameren Missouri has an uncertain tax position tracker. Under Missouri’s regulatory framework, uncertain tax positions do not reduce Ameren Missouri’s electric rate base. When an uncertain income tax position liability is resolved, the MoPSC requires, through the uncertain tax position tracker, the creation of a regulatory asset or regulatory liability to reflect the time value, with a return at the applicable WACC included in each of the electric rate orders in effect before the tax position was resolved, of the difference between the uncertain tax position liability that was excluded from rate base and the final tax liability. The resulting regulatory asset or liability will affect earnings in the year it is created. It will then be amortized over three years, beginning on the effective date of new rates established in the next electric service regulatory rate review.