Income Taxes

On December 22, 2017, tax reform legislation was signed into law which, among other things, reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, NEE, including FPL, performed an analysis to preliminarily revalue its deferred income taxes and included an estimate of changes in the balances in NEE's and FPL's December 31, 2017 financial statements. At December 31, 2017, the revaluation reduced NEE’s net deferred income tax liabilities by approximately $6.5 billion, of which $4.5 billion related to net deferred income tax liabilities at FPL and the remaining $2 billion related to net deferred income tax liabilities at NEER. The $2 billion reduction in NEER’s deferred income tax liabilities increased NEER’s 2017 net income. The $4.5 billion reduction in FPL’s deferred income tax liabilities was recorded as a regulatory liability. At December 31, 2018, NEE and FPL have completed the accounting for all of the enactment-date income tax effects of tax reform resulting in no material adjustments in 2018 to the initial provisional amounts recorded. The U.S. Department of Treasury has also released proposed regulations related to the business interest expense limitations and foreign tax credits associated with tax reform. These proposed regulations are not final and are subject to change in the regulatory review process. Effective January 1, 2018, NEE early adopted an accounting standards update that provided entities the option to reclassify certain effects of tax reform from AOCI to retained earnings. Upon adoption, NEE reclassified approximately $16 million of tax benefits from AOCI to retained earnings.

The components of income taxes are as follows:



	NEE							FPL
	Years Ended December 31,							Years Ended December 31,
	2018		2017^(a)			2016^(a)		2018		2017		2016
	(millions)
Federal:
Current	$	30	$	100		$	72	$	251	$	168	$	72
Deferred	1,153		(1,047		)	1,071		134		776		830
Total federal	1,183		(947		)	1,143		385		944		902
State:
Current	63		88			76		91		29		57
Deferred	330		199			160		63		133		92
Total state	393		287			236		154		162		149
Total income tax expense (benefit)	$	1,576	$	(660	)	$	1,379	$	539	$	1,106	$	1,051

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(a)	Prior period amounts have been retrospectively adjusted as discussed in Note 14.

A reconciliation between the effective income tax rates and the applicable statutory rate is as follows:



	NEE						FPL
	Years Ended December 31,						Years Ended December 31,
	2018		2017^(a)		2016^(a)		2018		2017		2016
Statutory federal income tax rate	21.0	%	35.0	%	35.0	%	21.0	%	35.0	%	35.0	%
Increases (reductions) resulting from:
State income taxes - net of federal income tax benefit	4.2		2.9		3.5		4.5		3.5		3.5
Tax reform impact on differential membership interests	1.4		—		—		—		—		—
Tax reform rate change	—		(41.3	)	—		—		(0.5	)	—
PTCs and ITCs - NEER	(3.0	)	(8.4	)	(3.9	)	—		—		—
Amortization of deferred regulatory credit	(1.8	)	—		—		(5.0	)	(0.1	)	(0.1	)
Convertible ITCs - NEER	—		0.6		(1.7	)	—		—		—
Adjustments associated with Canadian assets	—		—		(0.7	)	—		—		—
Other - net	(0.4	)	(3.0	)	(0.7	)	(0.6	)	(0.9	)	(0.6	)
Effective income tax rate	21.4	%	(14.2	)%	31.5	%	19.9	%	37.0	%	37.8	%

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(a)	Prior period amounts have been retrospectively adjusted as discussed in Note 14.

The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:



	NEE						FPL
	December 31,						December 31,
	2018			2017^(a)			2018		2017
	(millions)
Deferred tax liabilities:
Property-related	$	9,315		$	9,030		$	6,113	$	6,045
Pension	374			364			357		342
Investments in partnerships and joint ventures	1,925			442			—		—
Other	1,505			1,370			791		584
Total deferred tax liabilities	13,119			11,206			7,261		6,971
Deferred tax assets and valuation allowance:
Decommissioning reserves	313			306			278		271
Net operating loss carryforwards	350			482			3		3
Tax credit carryforwards	3,259			3,126			—		—
ARO and accrued asset removal costs	310			210			237		146
Regulatory liabilities	1,277			1,267			1,283		1,273
Other	751			720			295		273
Valuation allowance^(b)	(273		)	(252		)	—		—
Net deferred tax assets	5,987			5,859			2,096		1,966
Net deferred income taxes	$	7,132		$	5,347		$	5,165	$	5,005

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(a)	Prior period amounts have been retrospectively adjusted as discussed in Note 14.


(b)	Reflects a valuation allowance related to the solar projects in Spain, deferred state tax credits and state operating loss carryforwards.

Deferred tax assets and liabilities are included on the consolidated balance sheets as follows:



	NEE						FPL
	December 31,						December 31,
	2018			2017^(a)			2018			2017
				(millions)
Noncurrent other assets	$	235		$	417		$	—		$	—
Deferred income taxes - noncurrent liabilities	(7,367		)	(5,764		)	(5,165		)	(5,005		)
Net deferred income taxes	$	(7,132	)	$	(5,347	)	$	(5,165	)	$	(5,005	)

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(a)	Prior period amounts have been retrospectively adjusted as discussed in Note 14.

The components of NEE's deferred tax assets relating to net operating loss carryforwards and tax credit carryforwards at December 31, 2018 are as follows:



	Amount			Expiration Dates
	(millions)
Net operating loss carryforwards:
State	269			2019-2038
Foreign	81		^(a)	2019-2038
Net operating loss carryforwards	$	350
Tax credit carryforwards:
Federal	$	2,915		2028-2038
State	344		^(b)	2019-2044
Tax credit carryforwards	$	3,259

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(a)	Includes $60 million of net operating loss carryforwards with an indefinite expiration period.


(b)	Includes $188 million of ITC carryforwards with an indefinite expiration period.