Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes Note [Abstract]

Income Taxes

INCOME TAXES

Income tax expense/(benefit) consists of the following (in millions):

	Years Ended December 31,
	2021		2020		2019
Current:
Federal	$	4	$	6	$	9
State and local	14		17		12
	18		23		21
Deferred:
Federal	—		(22)		(2)
State and local	5		(1)		8
	5		(23)		6
Income tax expense	$	23	$	—	$	27

The significant differences between the U.S. Federal statutory rate and PGE’s Effective tax rate for financial reporting purposes are as follows:

	Years Ended December 31,
	2021		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
Federal tax credits (1)	(11.9)		(20.5)		(13.4)
State and local taxes, net of federal tax benefit (2)	8.9		10.1		6.5
Flow through depreciation and cost basis differences	(0.2)		(4.9)		1.5
Local tax flow-through adjustment	(3.2)		—		—
Amortization of excess deferred income tax (3)	(4.8)		(4.7)		(3.7)
Other	(1.2)		(1.0)		(0.7)
Effective tax rate	8.6	%	—	%	11.2	%

(1)    Federal tax credits consist primarily of production tax credits (PTCs) earned from Company-owned wind-powered generating facilities. The federal PTCs are earned based on a per-kilowatt hour rate, and as a result, the annual amount of PTCs earned will vary based on weather conditions and availability of the facilities. The PTCs are generated for 10 years from the corresponding facilities’ in-service dates. PGE’s PTC generation ended or will end at various dates between 2017 and 2030.

(2) In 2019, Oregon enacted HB 3427, which imposed a new gross receipts tax on companies with annual revenues in excess of $1 million and applies to tax years beginning on or after January 1, 2020. The legislation defines that the tax applies to commercial activities sourced in Oregon, less certain deductions. The resulting amount is taxed at 0.57%.

(3) The majority of excess deferred income taxes related to remeasurement under the TCJA is subject to IRS normalization rules and will be amortized over the remaining regulatory life of the assets using the average rate assumption method.

Deferred income tax assets and liabilities consist of the following (in millions):

	As of December 31,
	2021		2020
Deferred income tax assets:
Employee benefits	$	114	$	136
Price risk management	—		29
Regulatory liabilities	39		23
Tax credits	98		77
Total deferred income tax assets	251		265
Deferred income tax liabilities:
Depreciation and amortization	536		504
Regulatory assets	121		128
Other	7		7
Total deferred income tax liabilities	664		639
Deferred income tax liability, net	$	413	$	374

As of December 31, 2021, PGE has federal credit carryforwards of $98 million, consisting of PTCs, which will expire at various dates through 2041. PGE believes that it is more likely than not that its deferred income tax assets as of December 31, 2021 and 2020 will be realized; accordingly, no valuation allowance has been recorded. As of December 31, 2021, and 2020, PGE had no material unrecognized tax benefits.

PGE and its subsidiaries file a consolidated federal income tax return. The Company also files income tax returns in the states of Oregon, California, and Montana, and in certain local jurisdictions. The Internal Revenue Service (IRS) has completed its examination of all tax years through 2010 and all issues were resolved related to those years. The Company does not believe that any open tax years for federal or state income taxes could result in any adjustments that would be significant to the consolidated financial statements.

Local tax flow-through adjustment

The Company is subject to a local tax that is recovered through a supplemental tariff based on current tax expense, but for which the Company has also recognized deferred income tax expenses over time. Because it is probable that the local deferred taxes will be flowed through future customer prices in accordance with the supplemental tariff, PGE determined a corresponding regulatory asset should have been recorded. In the first quarter of 2021, PGE recognized a regulatory asset to defer previously recorded deferred income tax expenses in the amount of $9 million with a corresponding credit to Income tax expense reflected in the consolidated statements of income for the year ended December 31, 2021.