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INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Schedule of income tax rate reconciliation
INCOME TAX RATE RECONCILIATION
Year ended December 31,
2019

2018

2017

(millions of Canadian dollars)
 

 

 

Earnings before income taxes
7,535

3,570

569

Canadian federal statutory income tax rate
15
%
15
%
15
 %
Expected federal taxes at statutory rate
1,130

536

85

Increase/(decrease) resulting from:
 

 

 

Provincial and state income taxes1
415

(24
)
133

Foreign and other statutory rate differentials
129

94

(601
)
Impact of United States tax reform2
—

(2
)
(2,045
)
Effects of rate-regulated accounting3
(63
)
(163
)
(189
)
Foreign allowable interest deductions4
(29
)
(134
)
(124
)
Part VI.1 tax, net of federal Part I deduction5
78

76

68

Impairment of goodwill
—

192

15

United States BEAT tax
67

43

—

Non-taxable portion of gain/(loss) on sale of investment to unrelated party6
—

31

—

Valuation allowance7
26

(172
)
(17
)
Intercorporate investments8
(14
)
(149
)
77

Noncontrolling interests
(13
)
(47
)
(80
)
Other
(18
)
(44
)
(19
)
Income tax (recovery)/expense
1,708

237

(2,697
)
Effective income tax rate
22.7
%
6.6
%
(474.0
)%
1
The change in provincial and state income taxes from 2018 to 2019 reflects the increase in earnings from operations and the impact of state tax rate changes in both the United States and Canada.
2
The amount was related to the enactment of the Tax Cuts and Jobs Act (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 in 2019 included the federal component of the tax effect of the write-off of regulatory assets (Note 7).
4
The decrease in foreign allowable interest deductions in 2019 was due to changes in the related loan portfolio and tax legislative changes in Canada, the United States, and Europe.
5
Part VI.1 tax is a tax levied on preferred share dividends paid in Canada.
6
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.
7
The increase in 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 more likely than not to be realized.
8
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 MATL (Note 8), 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,
2019

2018

2017

(millions of Canadian dollars)
 

 

 

Earnings/(loss) before income taxes
 

 

 

Canada
3,560

118

2,200

United States
3,115

2,582

(2,431
)
Other
860

870

800

 
7,535

3,570

569

Current income taxes
 

 

 

Canada
347

311

129

United States
107

66

46

Other
98

8

5

 
552

385

180

Deferred income taxes
 

 

 

Canada
490

(598
)
299

United States
672

439

(3,160
)
Other
(6
)
11

(16
)
 
1,156

(148
)
(2,877
)
Income tax (recovery)/expense
1,708

237

(2,697
)
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,
2019

2018

(millions of Canadian dollars)
 

 

Deferred income tax liabilities
 

 

Property, plant and equipment
(7,290
)
(7,018
)
Investments
(4,620
)
(4,441
)
Regulatory assets
(1,052
)
(756
)
Other
(40
)
(192
)
Total deferred income tax liabilities
(13,002
)
(12,407
)
Deferred income tax assets
 

 

Financial instruments
679

1,103

Pension and OPEB plans
206

181

Loss carryforwards
1,693

1,820

Other
1,641

1,274

Total deferred income tax assets
4,219

4,378

Less valuation allowance
(84
)
(51
)
Total deferred income tax assets, net
4,135

4,327

Net deferred income tax liabilities
(8,867
)
(8,080
)
Presented as follows:
 
 
Total deferred income tax assets
1,000

1,374

Total deferred income tax liabilities
(9,867
)
(9,454
)
Net deferred income tax liabilities
(8,867
)
(8,080
)
Schedule of unrecognized tax benefits

UNRECOGNIZED TAX BENEFITS
Year ended December 31,
2019

2018

(millions of Canadian dollars)
 
 
Unrecognized tax benefits at beginning of year
139

150

Gross increases for tax positions of current year
1

2

Gross decreases for tax positions of prior year
(1
)
(12
)
Change in translation of foreign currency
(4
)
3

Lapses of statute of limitations
(6
)
(3
)
Settlements
—

(1
)
Unrecognized tax benefits at end of year
129

139