Income Taxes

The components of Houston Electric’s income tax expense were as follows:



	Year Ended December 31,
	2016			2015		2014
	(in millions)
Current income tax expense:
Federal	$	165		$	106	$	136
State	18			21		19
Total current expense	183			127		155
Deferred income tax expense (benefit):
Federal	(34		)	18		(24		)
Total deferred expense (benefit)	(34		)	18		(24		)
Total income tax expense	$	149		$	145	$	131

A reconciliation of income tax expense using the federal statutory income tax rate to the actual income tax expense and resulting effective income tax rate is as follows:



	Year Ended December 31,
	2016			2015			2014
	(in millions)
Income before income taxes	$	425		$	406		$	383
Federal statutory income tax rate	35		%	35		%	35		%
Expected federal income tax expense	149			142			134
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	12			14			12
Other, net	(12		)	(11		)	(15		)
Total	—			3			(3		)
Total income tax expense	$	149		$	145		$	131
Effective tax rate	35		%	36		%	34		%

In 2014, Houston Electric recognized a $6 million reversal of previously accrued taxes as a result of final 2013 income tax returns filed in 2014.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:



	December 31,
	2016		2015
	(in millions)
Deferred tax assets:
Benefits and compensation	$	47	$	69
Loss and credit carryforwards	—		6
AROs	12		13
Other	4		7
Total deferred tax assets	63		95

Deferred tax liabilities:
Property, plant, and equipment	1,541		1,447
Regulatory assets/liabilities, net	525		680
Total deferred tax liabilities	2,066		2,127
Net deferred tax liabilities	$	2,003	$	2,032

Houston Electric is a member of the U.S. federal consolidated income tax return of CenterPoint Energy. Houston Electric reports its income tax provision on a separate entity basis pursuant to a tax sharing agreement with CenterPoint Energy.

Uncertain Income Tax Positions. Houston Electric reported no uncertain tax liability as of December 31, 2016, 2015 and 2014. Houston Electric expects no significant change to the uncertain tax liability over the next twelve months ending December 31, 2017.

Tax Audits and Settlements. Tax years through 2014 have been audited and settled with the IRS. For the 2015, 2016 and 2017 tax years, CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process.