Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.

Entergy Arkansas [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.

Entergy Louisiana [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.

Entergy Mississippi [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.

Entergy New Orleans [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.

Entergy Texas [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.

System Energy [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017, 2016, and 2015 for Entergy Corporation and Subsidiaries consist of the following:

	2017			2016			2015
	(In Thousands)
Current:
Federal		$29,595			$45,249			$77,166
Foreign	—			68			97
State	15,478			(14,960		)	157,829
Total	45,073			30,357			235,092
Deferred and non-current - net	505,010			(840,465		)	(864,799		)
Investment tax credit adjustments - net	(7,513		)	(7,151		)	(13,220		)
Income taxes		$542,570			($817,259	)		($642,927	)

Income taxes for 2017, 2016, and 2015 for Entergy’s Registrant Subsidiaries consist of the following:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$66,966			$101,382			$25,628			($9,346	)		$53,313			($63,302	)
State	6,265			35,406			6,832			1,784			2,450			26,755
Total	73,231			136,788			32,460			(7,562		)	55,763			(36,547		)
Deferred and non-current - net	(31,463		)	47,220			31,149			32,890			(17,599		)	93,491
Investment tax credit adjustments - net	(1,227		)	(5,337		)	(1,737		)	(138		)	(914		)	(3,867		)
Income taxes		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

	2017			2016			2015
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$411,612			($583,618	)		($176,562	)
Preferred dividend requirements of subsidiaries	13,741			19,115			19,828
Consolidated net income (loss)	425,353			(564,503		)	(156,734		)
Income taxes	542,570			(817,259		)	(642,927		)
Income (loss) before income taxes		$967,923			($1,381,762	)		($799,661	)
Computed at statutory rate (35%)		$338,773			($483,617	)		($279,881	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	44,179			40,581			29,944
Regulatory differences - utility plant items	39,825			33,581			32,089
Equity component of AFUDC	(33,282		)	(23,647		)	(18,191		)
Amortization of investment tax credits	(10,204		)	(10,889		)	(11,136		)
Flow-through / permanent differences	8,727			(19,307		)	(7,872		)
Tax legislation enactment (a)	560,410			—			—
Louisiana business combination	—			—			(333,655		)
Entergy Wholesale Commodities restructuring (b)	(373,277		)	(237,760		)	—
Act 55 financing settlement (d)	—			(63,477		)	—
FitzPatrick disposition	(44,344		)	—			—
Provision for uncertain tax positions (c) (d)	8,756			(67,119		)	(56,683		)
Valuation allowance	—			11,411			—
Other - net	3,007			2,984			2,458
Total income taxes as reported		$542,570			($817,259	)		($642,927	)
Effective Income Tax Rate	56.1		%	59.1		%	80.4		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for 2015.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017, 2016, and 2015 are:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (a)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (b)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (b)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$74,272			$446,639			$92,708			$44,925			$69,625			$111,318
Income taxes	40,541			178,671			61,872			25,190			37,250			53,077
Pretax income		$114,813			$625,310			$154,580			$70,115			$106,875			$164,395
Computed at statutory rate (35%)		$40,185			$218,859			$54,103			$24,540			$37,406			$57,538
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	6,643			23,650			5,219			2,887			1,621			6,403
Regulatory differences - utility plant items	7,299			3,013			2,383			2,201			3,703			12,167
Equity component of AFUDC	(4,979		)	(5,420		)	(1,083		)	(451		)	(1,987		)	(2,973		)
Amortization of investment tax credits	(1,201		)	(5,252		)	(160		)	(111		)	(900		)	(3,476		)
Flow-through / permanent differences	(4,062		)	2,460			431			(4,539		)	530			618
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (c)	(3,978		)	(15,377		)	756			525			(3,365		)	(17,313		)
Other - net	634			1,396			223			138			242			113
Total income taxes as reported		$40,541			$178,671			$61,872			$25,190			$37,250			$53,077
Effective Income Tax Rate	35.3		%	28.6		%	40.0		%	35.9		%	34.9		%	32.3		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the tax legislation enactment.

(b) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

(c) See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items for Entergy Louisiana and System Energy.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:

	2017			2016
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,963,798	)		($6,362,905	)
Regulatory assets	—			(584,572		)
Nuclear decommissioning trusts/receivables	(1,657,808		)	(1,739,977		)
Pension, net funding	(350,743		)	(429,896		)
Combined unitary state taxes	(24,645		)	(33,063		)
Power purchase agreements	(19,621		)	(993		)
Other	(249,327		)	(251,719		)
Total	(6,265,942		)	(9,403,125		)
Deferred tax assets:
Nuclear decommissioning liabilities	964,945			1,399,468
Regulatory liabilities	841,370			255,272
Pension and other post-employment benefits	343,817			539,456
Sale and leaseback	122,397			135,866
Compensation	75,217			99,300
Accumulated deferred investment tax credit	59,285			92,375
Provision for allowances and contingencies	126,391			188,390
Net operating loss carryforwards	467,255			334,025
Capital losses and miscellaneous tax credits	16,738			18,470
Valuation allowance	(137,283		)	(104,277		)
Other	54,058			59,079
Total	2,934,190			3,017,424
Non-current accrued taxes (including unrecognized tax benefits)	(956,547		)	(991,704		)
Accumulated deferred income taxes and taxes accrued		($4,288,299	)		($7,377,405	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses	$10.7 billion	2023-2037
State net operating losses	$9.6 billion	2018-2037
Miscellaneous federal and state credits	$96.6 million	2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,857,554	)		($2,357,599	)		($820,971	)		($177,242	)		($835,671	)		($651,394	)
Regulatory assets	(109,241		)	(219,750		)	(25,309		)	(36,301		)	(153,914		)	(39,879		)
Nuclear decommissioning trusts	(144,250		)	(119,544		)	—			—			—			(83,891		)
Pension, net funding	(123,889		)	(122,465		)	(34,284		)	(16,307		)	(28,371		)	(29,357		)
Deferred fuel	(14,774		)	(1,778		)	(12,770		)	(5,229		)	(2,808		)	(1,137		)
Power purchase agreements	—			—			—			—			—			—
Other	(47,785		)	(22,136		)	(12,474		)	(18,536		)	(8,812		)	(2,051		)
Total	(2,297,493		)	(2,843,272		)	(905,808		)	(253,615		)	(1,029,576		)	(807,709		)
Deferred tax assets:
Regulatory liabilities	5,768			175,973			18,833			25,240			15,814			13,644
Nuclear decommissioning liabilities	124,206			55,408			—			—			—			53,113
Pension and other post-employment benefits	(24,467		)	145,401			(8,042		)	(12,070		)	(19,096		)	(1,182		)
Sale and leaseback	—			33,383			—			—			—			102,483
Accumulated deferred investment tax credit	13,848			54,509			3,315			239			4,527			15,936
Provision for allowances and contingencies	(1,497		)	124,309			21,817			36,466			5,904			—
Power purchase agreements	(3,094		)	29,827			1,905			—			140			—
Unbilled/deferred revenues	6,799			(35,006		)	5,085			3,751			11,902			—
Compensation	2,787			5,309			1,492			685			1,587			360
Net operating loss carryforwards	69,524			17,125			—			—			—			—
Capital losses and miscellaneous tax credits	2,074			—			4,487			—			—			—
Other	174			17,110			1,152			496			2,955			—
Total	196,122			623,348			50,044			54,807			23,733			184,354
Non-current accrued taxes (including unrecognized tax benefits)	(85,252		)	(471,194		)	(5,567		)	(136,145		)	(21,804		)	(489,510		)
Accumulated deferred income taxes and taxes accrued		($2,186,623	)		($2,691,118	)		($861,331	)		($334,953	)		($1,027,647	)		($1,112,865	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$77 million	$4.3 billion	$86.6 million	$1.1 billion	—	—
Year(s) of expiration	2030-2037	2035-2037	2030-2037	2037	N/A	N/A
State net operating losses	—	$5 billion	—	$1.2 billion	—	—
Year(s) of expiration	N/A	2029-2037	N/A	2037	N/A	N/A
Misc. federal credits	$2.7 million	$1.7 million	$2.7 million	$2.1 million	$0.6 million	$2.5 million
Year(s) of expiration	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036	2029-2036
State credits	—	—	$4.9 million	—	$3.2 million	$10 million
Year(s) of expiration	N/A	N/A	2018-2021	N/A	2026	2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2017			2016			2015
	(In Thousands)
Gross balance at January 1		$3,909,855			$2,611,585			$4,736,785
Additions based on tax positions related to the current year	1,120,687			1,532,782			1,850,705
Additions for tax positions of prior years	283,683			368,404			59,815
Reductions for tax positions of prior years (a)	(442,379		)	(265,653		)	(3,966,535		)
Settlements	—			(337,263		)	(68,227		)
Lapse of statute of limitations	—			—			(958		)
Gross balance at December 31	4,871,846			3,909,855			2,611,585
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(3,945,524		)	(2,922,085		)	(1,264,483		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	—
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)		$916,322			$977,770			$1,347,102

(a) The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “Income Tax Audits - 2008-2009 IRS Audit” below.

(b) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $1,462 million, $1,240 million, and $955 million as of December 31, 2017, 2016, and 2015, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million, $2,670 million, and $1,657 million as of December 31, 2017, 2016, and 2015, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017, 2016, and 2015 accrued balance for the possible payment of interest is approximately $38 million, $30 million, and $27 million, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017, 2016, and 2015 is as follows:

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

2015	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2015		$362,912			$1,205,929			$20,144			$53,763			$17,264			$258,242
Additions based on tax positions related to the current year (b)	2,196			1,367,058			566			472			657			472,304
Additions for tax positions of prior years	1,057			7,992			8,140			48			2,914			913
Reductions for tax positions of prior years	(340,720		)	(859,430		)	—			(386		)	(3,981		)	(253,141		)
Settlements	—			(30,888		)	(9,368		)	—			(3,392		)	—
Gross balance at December 31, 2015	25,445			1,690,661			19,482			53,897			13,462			478,318
Offsets to gross unrecognized tax benefits:
Loss carryovers	(3,613		)	(893,764		)	(1,016		)	(506		)	(276		)	(133,611		)
Unrecognized tax benefits net of unused tax attributes and payments		$21,832			$796,897			$18,466			$53,391			$13,186			$344,707

(a) The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

(b) The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$2.6		$3.6		$4.5
Entergy Louisiana		$575.8		$473.3		$692.7
Entergy Mississippi		$—		$—		$8.1
Entergy New Orleans		$31.7		$33.6		$50.7
Entergy Texas		$4.4		$7.0		$5.2
System Energy		$—		$—		$0.7

The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:

	December 31,
	2017		2016		2015
	(In Millions)
Entergy Arkansas		$1.6		$1.4		$1.3
Entergy Louisiana		$14.1		$8.4		$9.3
Entergy Mississippi		$1.0		$0.8		$0.4
Entergy New Orleans		$2.1		$1.5		$1.8
Entergy Texas		$0.4		$1.2		$1.2
System Energy		$8.5		$3.7		$0.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million, including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million; Entergy Louisiana, $725 million; Entergy Mississippi, $411 million; Entergy New Orleans, $119 million; Entergy Texas, $413 million; and System Energy, $246 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million. In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.

Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million. See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.