Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Sources of Income (Loss) Before Income Taxes

Edison International's sources of income before income taxes are:



	Years ended December 31,
(in millions)	2018			2017		2016
(Loss) income from continuing operations before income taxes	$	(1,089	)	$	949	$	1,590
Income from discontinued operations before income taxes	—			—		1
(Loss) income before income tax	$	(1,089	)	$	949	$	1,591

Components of Income Tax (Benefit) Expense by Location of Taxing Jurisdiction

The components of income tax (benefit) expense by location of taxing jurisdiction are:



	Edison International									SCE
	Years ended December 31,
(in millions)	2018			2017			2016			2018			2017			2016
Current:
Federal	$	(57	)	$	(221	)	$	(46	)	$	(51	)	$	(253	)	$	75
State	(155		)	4			33			(93		)	(81		)	93
	(212		)	(217		)	(13		)	(144		)	(334		)	168
Deferred:
Federal	(386		)	570			176			(354		)	265			112
State	(141		)	(72		)	14			(198		)	39			(24		)
	(527		)	498			190			(552		)	304			88
Total continuing operations	(739		)	281			177			(696		)	(30		)	256
Discontinued operations¹	(34		)	—			(11		)	—			—			—
Total	$	(773	)	$	281		$	166		$	(696	)	$	(30	)	$	256


¹	In the fourth quarter of 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board for tax years 1994 – 2006. See further discussion in Tax Disputes below.

Components of Net Accumulated Deferred Income Tax Liability

The components of net accumulated deferred income tax liability are:



	Edison International				SCE
	December 31,
(in millions)	2018		2017		2018		2017
Deferred tax assets:
Property and software related	$	399	$	358	$	388	$	357
Wildfire reserve¹	709		—		709		—
Nuclear decommissioning trust assets in excess of nuclear ARO liability	323		404		323		404
Loss and credit carryforwards²	1,375		1,346		154		150
Regulatory asset³	798		812		798		812
Pension and postretirement benefits other than pensions, net	171		178		46		50
Other	188		277		184		236
Sub-total	3,963		3,375		2,602		2,009
Less: valuation allowance⁴	36		28		—		—
Total	3,927		3,347		2,602		2,009
Deferred tax liabilities:
Property-related	7,497		6,970		7,497		6,962
Capitalized software costs	188		160		188		160
Regulatory liability	367		158		367		158
Nuclear decommissioning trust assets	323		404		323		404
Other	57		140		54		133
Total	8,432		7,832		8,429		7,817
Accumulated deferred income tax liability, net⁵	$	4,505	$	4,485	$	5,827	$	5,808


¹	Relates to a charge recorded for wildfire-related claims, net of expected recoveries from insurance and FERC customers. For further information, see Note 12.


²	As of December 31, 2018, deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $178 million and $97 million for Edison International and SCE, respectively.

³ Includes deferred tax asset of $788 million and $809 million, for December 31, 2018 and 2017, respectively, related to certain regulatory liabilities established as part of Tax Reform discussed below.


⁴	As of December 31, 2018 Edison International has recorded a valuation allowance of $32 million for non-California state net operating loss carryforwards and $4 million for California capital loss generated from sale of SoCore Energy in 2018, which are estimated to expire before being utilized.


⁵	Included in deferred income taxes and credits on the consolidated balance sheets.

Summary of Net Operating Loss and Tax Credit Carryforwards

The amounts of net operating loss and tax credit carryforwards (after-tax) are as follows:



	Edison International				SCE
	December 31, 2018
(in millions)	Loss Carryforwards		Credit Carryforwards		Loss Carryforwards		Credit Carryforwards
Expire between 2021 to 2038	$	1,073	$	469	$	203	$	26
No expiration date	—		11		—		22
Total	$	1,073	$	480	$	203	$	48

Reconciliation of Income Tax Expense

The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:



	Edison International									SCE
	Years ended December 31,
(in millions)	2018			2017			2016			2018			2017			2016
(Loss) income from continuing operations before income taxes	$	(1,089	)	$	949		$	1,590		$	(885	)	$	1,106		$	1,755
Provision for income tax at federal statutory rate of 21% and 35%, respectively¹	(229		)	332			556			(186		)	387			614
Increase in income tax from:
Items presented with related state income tax, net:
State tax, net of federal benefit	(168		)	2			29			(155		)	8			43
Property-related	(275		)	(439		)	(362		)	(275		)	(439		)	(362		)
Change related to uncertain tax positions²	(66		)	(18		)	(4		)	(71		)	(13		)	(8		)
Revised San Onofre Settlement Agreement³	—			25			—			—			25			—
Share-based compensation⁴	(2		)	(55		)	(28		)	(1		)	(11		)	(13		)
Deferred tax re-measurement⁵	—			466			—			—			33			—
Other	1			(32		)	(14		)	(8		)	(20		)	(18		)
Total income tax (benefit) expense from continuing operations	$	(739	)	$	281		$	177		$	(696	)	$	(30	)	$	256
Effective tax rate	(67.9		)%	29.6		%	11.1		%	(78.6		)%	(2.7		)%	14.6		%

¹Tax Reform reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018.

² In the fourth quarter of 2018, Edison International and SCE recognized tax benefits related to a settlement with the California Franchise Tax Board for tax years 1994 – 2006. See further discussion in Tax Disputes below.

³ Includes the write-off of an unrecovered tax regulatory asset related to the Revised San Onofre Settlement Agreement. See Note 12 for further information.


⁴	Includes state taxes of $(11) million and $(4) million for Edison International and $(2) million and $(1) million for SCE for the years ended December 31, 2017 and 2016, respectively.


⁵	In 2017, Edison International and SCE recorded a charge to earnings related to the re-measurement of deferred taxes resulting from Tax Reform. See further discussion above.

Reconciliation of Unrecognized Tax Benefits

The following table provides a reconciliation of unrecognized tax benefits for continuing and discontinued operations:



	Edison International									SCE
	December 31,
(in millions)	2018			2017			2016			2018			2017			2016
Balance at January 1,	$	432		$	471		$	529		$	331		$	371		$	353
Tax positions taken during the current year:
Increases	41			51			36			42			51			36
Tax positions taken during a prior year:
Increases	—			—			2			—			—			—
Decreases¹	(108		)	(7		)	(96		)	(121		)	(13		)	(18		)
Decreases for settlements during the period²	(27		)	(83		)	—			(3		)	(78		)	—
Balance at December 31,	$	338		$	432		$	471		$	249		$	331		$	371

Decrease in 2018 was related to re-measurement as a result of a settlement with the California Franchise Tax Board for tax years 1994 – 2006. Decrease in 2016 was related to state tax receivables on various claims. Due to the tax risks associated with these claims, the tax benefits were fully reserved at the time the asset was recorded. During 2016, the Company determined that it will not recognize these assets, so the tax benefit and related tax reserve were written off.


²	In 2018, Edison International reached a settlement with the California Franchise Tax Board for tax years 1994 – 2006. In 2017, Edison International settled all open tax positions with the IRS for taxable years 2007 – 2012. See Tax Disputes below for further details.

Schedule of Interest and Penalties Related to Income Tax Liabilities

The total amount of accrued interest and penalties related to income tax liabilities for continuing and discontinued operations are:



	Edison International				SCE
	Years ended December 31,
(in millions)	2018		2017		2018		2017
Accrued interest and penalties	$	37	$	115	$	6	$	41

The net after-tax interest and penalties recognized in income tax (benefit) expense for continuing and discontinued operations are:



	Edison International							SCE
	December 31,
(in millions)	2018			2017		2016		2018			2017		2016
Net after-tax interest and penalties tax (benefit) expense	$	(62	)	$	6	$	6	$	(25	)	$	4	$	2