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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
PG&E Corporation and the Utility use the asset and liability method of accounting for income taxes.  The income tax provision includes current and deferred income taxes resulting from operations during the year. PG&E Corporation and the Utility estimate current period tax expense in addition to calculating DTAs and liabilities.  DTAs and liabilities result from temporary tax and accounting timing differences, such as those arising from depreciation expense.

PG&E Corporation and the Utility recognize a tax benefit if it is more likely than not that a tax position taken or expected to be taken in a tax return will be sustained upon examination by taxing authorities based on the technical merits of the position.  The tax benefit recognized in the financial statements is measured based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement.  As such, the difference between a tax position taken or expected to be taken in a tax return in future periods and the benefit recognized and measured pursuant to this guidance in the financial statements represents an unrecognized tax benefit. 

Investment tax credits are deferred and amortized to income over time.  PG&E Corporation amortizes its investment tax credits over the projected investment recovery period.  The Utility amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment.

PG&E Corporation files a consolidated U.S. federal income tax return that includes the Utility and domestic subsidiaries in which its ownership is 80% or more.  PG&E Corporation files a combined state income tax return in California.  PG&E Corporation and the Utility are parties to a tax-sharing agreement under which the Utility determines its income tax provision (benefit) on a stand-alone basis. 

The significant components of income tax provision (benefit) by taxing jurisdiction were as follows:
 PG&E CorporationUtility
 
Year Ended December 31,
(in millions)202120202019202120202019
Current:      
Federal$— $(26)$1 $— $(26)$4 
State1 (34)101 — (34)94 
Deferred:
Federal543 258 (2,361)588 290 (2,363)
State296 171 (1,136)316 185 (1,137)
Tax credits(4)(7)(5)(4)(7)(5)
Income tax provision (benefit)
$836 $362 $(3,400)$900 $408 $(3,407)
The following tables describe net deferred income tax assets and liabilities:
 PG&E CorporationUtility
 
Year Ended December 31,
(in millions)2021202020212020
Deferred income tax assets:    
Tax carryforwards$5,628 $7,641 $5,425 $7,529 
Compensation185 187 108 109 
Wildfire-related claims (1)
1,723 544 1,723 544 
Operating lease liability
346 489 346 488 
Transmission tower wireless licenses266 — 266 — 
Other (2)
278 212 293 219 
Total deferred income tax assets$8,426 $9,073 $8,161 $8,889 
Deferred income tax liabilities:    
Property related basis differences8,847 8,311 8,835 8,300 
Regulatory balancing accounts1,193 763 1,193 763 
Debt financing costs501 526 501 526 
Operating lease right of use asset346 489 346 488 
Income tax regulatory asset (3)
517 254 517 254 
Other (4)
199 128 178 128 
Total deferred income tax liabilities$11,603 $10,471 $11,570 $10,459 
Total net deferred income tax liabilities$3,177 $1,398 $3,409 $1,570 
(1) Amounts primarily relate to wildfire-related claims, net of estimated insurance recoveries, and legal and other costs related to various wildfires that have occurred in PG&E Corporation’s and the Utility’s service territory over the past several years.
(2) Amounts include benefits, environmental reserve, and customer advances for construction. 
(3) Represents the tax gross up portion of the deferred income tax for the cumulative differences between amounts recognized for ratemaking purposes and amounts recognized for tax, including the impact of changes in net deferred taxes associated with a lower federal income tax rate as a result of the Tax Act.
(4) Amount primarily includes an environmental reserve.
The following table reconciles income tax expense at the federal statutory rate to the income tax provision:
 PG&E CorporationUtility
 Year Ended December 31,
 202120202019202120202019
Federal statutory income tax rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) in income tax rate resulting from:
State income tax (net of federal benefit) (1)
31.3 (15.3)7.5 24.1 19.1 7.5 
Effect of regulatory treatment of fixed asset differences (2)
(71.5)39.0 2.8 (51.6)(44.9)2.8 
Tax credits(1.7)1.5 0.1 (1.2)(1.7)0.1 
Fire Victim Trust (3)
127.3 (44.9)— 91.9 51.7 — 
Bankruptcy and emergence— (37.6)— — 2.4 — 
   Other, net (4)
5.3 (2.1)(0.6)2.6 2.2 (0.5)
Effective tax rate111.7 %(38.4)%30.8 %86.8 %49.8 %30.9 %
(1) Includes the effect of state flow-through ratemaking treatment.
(2) Includes the effect of federal flow-through ratemaking treatment for certain property-related costs.  For these temporary tax differences, PG&E Corporation and the Utility recognize the deferred tax impact in the current period and record offsetting regulatory assets and liabilities.  Therefore, PG&E Corporation’s and the Utility’s effective tax rates are impacted as these differences arise and reverse.  PG&E Corporation and the Utility recognize such differences as regulatory assets or liabilities as it is probable that these amounts will be recovered from or returned to customers in future rates.  In 2021, 2020, and 2019, the amounts also reflect the impact of the amortization of excess deferred tax benefits to be refunded to customers as a result of the Tax Act passed in December 2017.
(3) The Utility includes an adjustment for a DTA write-off associated with the grantor trust election for the Fire Victim Trust in 2021 and an adjustment for the DTA write-off for difference between the liability recorded related to the TCC RSA and the ultimate value of PG&E Corporation stock contributed to the Fire Victim Trust in 2020. PG&E Corporation includes the same adjustment as the Utility in 2021 and 2020 as well as a permanent non-deductible equity backstop premium expense in 2020. This combined with a pre-tax loss and a pre-tax income for PG&E Corporation and the Utility, respectively in 2020, accounts for the remaining difference.
(4) These amounts primarily represent the impact of tax audit settlements and non-tax deductible penalty costs in 2021 and 2020.

Unrecognized Tax Benefits

The following table reconciles the changes in unrecognized tax benefits:
 PG&E CorporationUtility
(in millions)202120202019202120202019
Balance at beginning of year$437 $420 $377 $437 $420 $377 
Reductions for tax position taken during a prior year(23)(43)(1)(23)(43)(1)
Additions for tax position taken during the current year85 60 44 85 60 44 
Settlements(1)— — (1)— — 
Balance at end of year
$498 $437 $420 $498 $437 $420 

The component of unrecognized tax benefits that, if recognized, would affect the effective tax rate at December 31, 2021 for PG&E Corporation and the Utility was $30 million.

PG&E Corporation’s and the Utility’s unrecognized tax benefits are not likely to change significantly within the next 12 months.

Interest income, interest expense and penalties associated with income taxes are reflected in income tax expense on the Consolidated Statements of Income.  For the years ended December 31, 2021, 2020, and 2019, these amounts were immaterial.
Tax Settlements

PG&E Corporation’s tax returns have been accepted through 2015 for federal income tax purposes, except for a few matters, the most significant of which relate to deductible repair costs for gas transmission and distribution lines of business and tax deductions claimed for regulatory fines and fees assessed as part of the penalty decision issued in 2015 for the San Bruno natural gas explosion in September of 2010.

PG&E Corporation’s tax returns have been accepted through 2014 for California income tax purposes. Tax years 2015 and thereafter remain subject to examination by the State of California.

Carryforwards

The following table describes PG&E Corporation’s operating loss and tax credit carryforward balances:
(in millions)December 31, 2021Expiration
Year
Federal:  
Net operating loss carryforward - Pre-2018$3,600 2031 - 2036
Net operating loss carryforward - Post-201717,467 N/A
Tax credit carryforward144 2029 - 2041
State:
Net operating loss carryforward$18,853 2039 - 2041
Tax credit carryforward122 Various

PG&E Corporation does not believe that the Chapter 11 Cases resulted in loss of or limitation on the utilization of any of the tax carryforwards. PG&E Corporation will continue to monitor the status of tax carryforwards.

Other Tax Matters

PG&E Corporation’s and the Utility’s unrecognized tax benefits are not likely to change significantly within the next 12 months. At December 31, 2021, it is reasonably possible that within the next 12 months, unrecognized tax benefits will decrease. The amount is not expected to be material.

As of the date of this report, it is more likely than not that PG&E Corporation has not undergone an ownership change, and consequently, its net operating loss carryforwards and other tax attributes are not limited by Section 382 of the Internal Revenue Code.

In March 2020, Congress passed, and the President signed into law the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. Under the CARES Act, PG&E Corporation and the Utility have deferred the payment of 2020 payroll taxes for the remainder of the year to 2021 and 2022. Half of the payment was paid in 2021.

During June 2020, the State of California enacted AB 85, which increases taxes on corporations over a three-year period beginning in 2020 by suspension of the net operating loss deduction and a limit of $5 million per year on business tax credits. PG&E Corporation and the Utility do not anticipate any material impacts to PG&E Corporation’s Consolidated Financial Statements due to this legislation.
Additionally, as a result of the grantor trust election, the Utility’s tax deductions occur when the Fire Victim Trust pays the fire victims, rather than when the Utility transferred cash and other property (including PG&E Corporation common stock) to the Fire Victim Trust. Therefore, $5.4 billion of cash and $4.54 billion of PG&E Corporation common stock, in the aggregate $10.0 billion, that were transferred to the Fire Victim Trust in 2020, will not be deductible for tax purposes by the Utility until the Fire Victim Trust pays the fire victims. Furthermore, the activities of the Fire Victim Trust are treated as activities of the Utility for tax purposes. PG&E Corporation’s net operating loss has decreased by approximately $10.0 billion, which will be offset by payments made by the Fire Victim Trust to the fire victims (which totaled approximately $1.67 billion in 2021) and the net activities of the Fire Victim Trust to date. Additionally, there was a $1.3 billion charge, net of tax, decreasing net DTAs for the payment made to the Fire Victim Trust in PG&E Corporation common stock on its Consolidated Financial Statements for activity through December 31, 2020. PG&E Corporation will recognize income tax benefits and the corresponding DTA as the Fire Victim Trust sells shares of PG&E Corporation common stock, and the amounts of such benefits and assets will be impacted by the price at which the Fire Victim Trust sells the shares, rather than the price at the time such shares were transferred to the Fire Victim Trust. As of December 31, 2021, to the knowledge of PG&E Corporation, the Fire Victim Trust had not sold any shares of PG&E Corporation common stock, resulting in no tax impact in PG&E Corporation’s and the Utility’s consolidated financial statements for the year ended December 31, 2021. On January 31, 2022, the Fire Victim Trust initiated an exchange of 40,000,000 Plan Shares for an equal number of New Shares in the manner contemplated by the Share Exchange and Tax Matters Agreement and announced that it had entered into a transaction for the sale of these shares. For more information, see Note 6 above.