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INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Schedule of income tax rate reconciliation
INCOME TAX RATE RECONCILIATION
Year ended December 31,202020192018
(millions of Canadian dollars)   
Earnings before income taxes4,190 7,535 3,570 
Canadian federal statutory income tax rate15 %15 %15 %
Expected federal taxes at statutory rate629 1,130 536 
Increase/(decrease) resulting from:   
Provincial and state income taxes1
288 415 (24)
Foreign and other statutory rate differentials2
(53)129 94 
Impact of US tax reform— — (2)
Effects of rate-regulated accounting3
(145)(63)(163)
Foreign allowable interest deductions4
(4)(29)(134)
Part VI.1 tax, net of federal Part I deduction5
76 78 76 
Impairment of goodwill
— — 192 
US BEAT44 67 43 
Non-taxable portion of gain on sale of investment to
unrelated party6
— — 31 
Valuation allowance7
(6)26 (172)
Intercorporate investments8
— (14)(149)
Noncontrolling interests
(8)(13)(47)
Other
(47)(18)(44)
Income tax expense774 1,708 237 
Effective income tax rate18.5 %22.7 %6.6 %
1.The change in provincial and state income taxes from 2019 to 2020 reflects the decrease in earnings from operations and the impact of state tax apportionment and rate changes in both the US and Canada.
2.The change in foreign and other statutory rate differentials from 2019 to 2020 reflects the decrease in earnings from US operations.
3.The amount in 2019 included the federal component of the tax benefit of the write-off of regulatory assets.
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 US, 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 decrease in 2020 is due to the federal component of the tax effect of a valuation allowance on the deferred tax assets that, in 2019, were not more likely than not to be realized.
8.The amounts in 2019 and 2018 relate 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 and for Renewable Assets, respectively.
Schedule of components of pretax earnings and income taxes
COMPONENTS OF PRETAX EARNINGS AND INCOME TAXES
Year ended December 31,202020192018
(millions of Canadian dollars)   
Earnings before income taxes    
Canada2,789 3,560 118 
US407 3,115 2,582 
Other994 860 870 
 4,190 7,535 3,570 
Current income taxes   
Canada165 347 311 
US64 107 66 
Other98 98 8 
 327 552 385 
Deferred income taxes   
Canada378 490 (598)
US66 672 439 
Other3 (6)11 
 447 1,156 (148)
Income tax expense774 1,708 237 
Schedule of major components of deferred income tax assets and liabilities Major components of deferred income tax assets and liabilities are as follows:
December 31,20202019
(millions of Canadian dollars)  
Deferred income tax liabilities  
Property, plant and equipment(7,786)(7,290)
Investments(4,649)(4,620)
Regulatory assets(1,156)(1,052)
Other(127)(40)
Total deferred income tax liabilities(13,718)(13,002)
Deferred income tax assets  
Financial instruments518 679 
Pension and OPEB plans251 206 
Loss carryforwards2,005 1,693 
Other1,461 1,641 
Total deferred income tax assets4,235 4,219 
Less valuation allowance(79)(84)
Total deferred income tax assets, net4,156 4,135 
Net deferred income tax liabilities(9,562)(8,867)
Presented as follows:
Total deferred income tax assets770 1,000 
Total deferred income tax liabilities(10,332)(9,867)
Net deferred income tax liabilities(9,562)(8,867)
Schedule of unrecognized tax benefits
UNRECOGNIZED TAX BENEFITS
Year ended December 31,20202019
(millions of Canadian dollars)
Unrecognized tax benefits at beginning of year129 139 
Gross increases for tax positions of current year1 1 
Gross decreases for tax positions of prior year(1)(1)
Change in translation of foreign currency(3)(4)
Lapses of statute of limitations(5)(6)
Unrecognized tax benefits at end of year121 129