Income Taxes

Income Tax Expense

The relative split between current and deferred taxes is due to a variety of factors, including true-ups of prior year tax returns, and most importantly, the timing of our property-related deductions. Components of income tax expense on the Consolidated Statements of Income are shown in the following table.



In millions	2015			2014			2013
Current income taxes
Federal ⁽¹⁾	$	(11	)	$	113		$	164
State	10			38			35
Deferred income taxes
Federal	198			184			(8		)
State	18			17			(11		)
Amortization of investment tax credits	(2		)	(2		)	(3		)
Total income tax expense	$	213		$	350		$	177


(1)	We incurred an $11 million federal net operating loss in 2015, which will be carried back and fully utilized against prior year income tax.

The reconciliations between the statutory federal income tax rate of 35%, the effective rate and the related amount of income tax expense for the years ended December 31, on our Consolidated Statements of Income are presented in the following table.



In millions	2015			2014			2013
Computed tax expense at statutory rate	$	205		$	325		$	165
State income tax, net of federal income tax benefit	21			36			20
Tax effect of net income attributable to the noncontrolling interest	(8		)	(7		)	(7		)
Amortization of investment tax credits	(2		)	(2		)	(3		)
Affordable housing credits	(1		)	(2		)	(2		)
Flexible dividend deduction	(2		)	(2		)	(2		)
Sale of Compass Energy	—			—			6
Other	—			2			—
Total income tax expense	$	213		$	350		$	177

Accumulated Deferred Income Tax Assets and Liabilities

We report some of our assets and liabilities differently for financial accounting purposes than we do for income tax purposes. We report the tax effects of the differences in those items as deferred income tax assets or liabilities on our Consolidated Balance Sheets. We measure the assets and liabilities using income tax rates that are currently in effect. The current portion of our deferred income taxes is recognized within current assets on our Consolidated Balance Sheets. We have provided a valuation allowance for some of these items that reduce our net deferred tax assets to amounts we believe are more likely than not to be realized in future periods. With respect to our continuing operations, we have net operating losses in various jurisdictions. Components that give rise to the net current and long-term accumulated deferred income tax liability are as follows.



	As of December 31,
In millions	2015			2014
Current accumulated deferred income tax liabilities
Mark-to-market	$	37		$	33
Inventory	53			26
Total current accumulated deferred income tax liabilities	90			59
Current accumulated deferred income tax assets
Compensation accruals	30			30
Lower of cost or market	6			26
Allowance for doubtful accounts	8			12
Other	19			21
Total current accumulated deferred income tax assets	63			89
Valuation allowances ⁽¹⁾	(4		)	(6		)
Total current accumulated deferred income tax assets, net of valuation allowances	59			83
Net current accumulated deferred income tax (liability) asset	$	(31	)	$	24
Long-term accumulated deferred income tax liabilities
Property - accelerated depreciation and other property-related items	$	2,019		$	1,801
Investments in partnerships	12			16
Acquisition intangibles	12			14
Mark-to-market	1			12
Other	102			85
Total long-term accumulated deferred income tax liabilities	2,146			1,928
Long-term accumulated deferred income tax assets
Unfunded pension and retiree welfare benefit obligation	120			117
Deferred investment tax credits	5			6
Other	124			95
Total long-term accumulated deferred income tax assets	249			218
Valuation allowances ⁽¹⁾	(15		)	(14		)
Total long-term accumulated deferred income tax assets, net of valuation allowances	234			204
Net long-term accumulated deferred income tax liability	$	1,912		$	1,724

(1)

The total valuation allowance in 2015 and 2014 is $19 million and $20 million, respectively. For 2015, the valuation allowance is related to our investment in Triton. For 2014, the total is composed of $1 million due to net operating losses in New Jersey of a former non-operating facility that are not allowed in New Jersey and $19 million related to our investment in Triton. New Jersey net operating losses expired in 2014, resulting in a reduction of the valuation allowance.

Tax Benefits

As of December 31, 2015 and December 31, 2014, we did not have a liability for unrecognized tax benefits. Based on current information, we do not anticipate that this will change materially in 2016. As of December 31, 2015, we did not have a liability recorded for payment of interest or penalties associated with uncertainty in income taxes, nor did we have any such interest or penalties during 2015 or 2014.

We file a U.S. federal consolidated income tax return and various state income tax returns. We are no longer subject to income tax examinations by the Internal Revenue Service or in any state for years before 2012.