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INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Schedule of income tax rate reconciliation
INCOME TAX RATE RECONCILIATION
Year ended December 31,
2018

2017

2016

(millions of Canadian dollars)
 

 

 

Earnings before income taxes
3,570

569

2,451

Canadian federal statutory income tax rate
15
%
15
 %
15
%
Expected federal taxes at statutory rate
536

85

368

Increase/(decrease) resulting from:
 

 

 

Provincial and state income taxes1
(24
)
133

34

Foreign and other statutory rate differentials
94

(601
)
(56
)
Impact of United States tax reform2
(2
)
(2,045
)
—

Effects of rate-regulated accounting
(163
)
(189
)
(116
)
Foreign allowable interest deductions
(134
)
(124
)
(107
)
Part VI.1 tax, net of federal Part I deduction
76

68

56

Impairment of goodwill3
192

15

—

Intercompany sale of investment4
—

—

6

United States BEAT tax
43

—

—

Non-taxable portion of gain/(loss) on sale of investment to unrelated party5
31

—

(61
)
Valuation allowance6
(172
)
(17
)
22

    Intercorporate investments7
(149
)
77

—

Noncontrolling interests
(47
)
(80
)
(15
)
Other
(44
)
(19
)
11

Income tax (recovery)/expense
237

(2,697
)
142

Effective income tax rate
6.6
%
(474.0
)%
5.8
%
1
The change in provincial and state income taxes from 2017 to 2018 reflects the increase in earnings from the Canadian operations, the impact of the US tax reform on state income tax expense, and the impact of changes to the unitary state income tax rate in 2018.
2
The amount was due to the enactment of the TCJA by the United States on December 22, 2017, which included a reduction in the federal corporate income tax rate from 35% to 21% effective for taxation years beginning after December 31, 2017.
3
The amount relates to the federal component for the tax effect of impairment of goodwill.
4
In November 2016, certain assets were sold to entities under common control. The intercompany gains realized on these transfers were eliminated. However, because these transactions involved the sale of partnership units, tax consequences were recognized in earnings.
5
The amount represents the federal component of the non-taxable portion of the gain on the sales of the Canadian Natural Gas Gathering and Processing Businesses in 2018 and the South Prairie Region assets in 2016 to unrelated parties.
6
The increase from 2017 to 2018 is due to the federal component of the tax effect of a valuation allowance on the deferred tax assets related to an outside basis temporary difference that, in 2018, was now more likely than not to be realized.
7
The amount relates to the federal component of changes in assertions regarding the manner of recovery of intercorporate investments such that deferred tax related to outside basis temporary differences was required to be recorded for Renewable Assets in 2018 and for EIPLP in 2017.
Schedule of components of pretax earnings and income taxes
COMPONENTS OF PRETAX EARNINGS AND INCOME TAXES
Year ended December 31,
2018

2017

2016

(millions of Canadian dollars)
 

 

 

Earnings/(loss) before income taxes
 

 

 

Canada
118

2,200

2,034

United States
2,582

(2,431
)
(333
)
Other
870

800

750

 
3,570

569

2,451

Current income taxes
 

 

 

Canada
311

129

74

United States
66

46

21

Other
8

5

4

 
385

180

99

Deferred income taxes
 

 

 

Canada
(598
)
299

188

United States
439

(3,160
)
(151
)
Other
11

(16
)
6

 
(148
)
(2,877
)
43

Income tax (recovery)/expense
237

(2,697
)
142
Schedule of major components of deferred income tax assets and liabilities
Major components of deferred income tax assets and liabilities are as follows:
December 31,
2018

2017

(millions of Canadian dollars)
 

 

Deferred income tax liabilities
 

 

Property, plant and equipment
(7,018
)
(4,089
)
Investments
(4,441
)
(6,596
)
Regulatory assets
(756
)
(977
)
Other
(192
)
(50
)
Total deferred income tax liabilities
(12,407
)
(11,712
)
Deferred income tax assets
 

 

Financial instruments
1,103

697

Pension and OPEB plans
181

258

Loss carryforwards
1,820

1,781

Other
1,274

1,057

Total deferred income tax assets
4,378

3,793

Less valuation allowance
(51
)
(286
)
Total deferred income tax assets, net
4,327

3,507

Net deferred income tax liabilities
(8,080
)
(8,205
)
Presented as follows:
 
 
Total deferred income tax assets
1,374

1,090

Total deferred income tax liabilities
(9,454
)
(9,295
)
Net deferred income tax liabilities
(8,080
)
(8,205
)
Schedule of unrecognized tax benefits
UNRECOGNIZED TAX BENEFITS
Year ended December 31,
2018

2017

(millions of Canadian dollars)
 
 
Unrecognized tax benefits at beginning of year
150

84

Gross increases for tax positions of current year
2

15

Gross increases for tax positions of prior year
—

65

Gross decreases for tax positions of prior year
(12
)
—

Change in translation of foreign currency
3

(2
)
Lapses of statute of limitations
(3
)
(8
)
Settlements
(1
)
(4
)
Unrecognized tax benefits at end of year
139

150