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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
INCOME TAX RATE RECONCILIATION
Year ended December 31,202220212020
(millions of Canadian dollars)   
Earnings before income taxes4,5427,7294,190
Canadian federal statutory income tax rate15 %15 %15 %
Expected federal taxes at statutory rate6811,159629
Increase/(decrease) resulting from:   
Provincial and state income taxes1
108228288
Foreign and other statutory rate differentials2
295134(53)
Effects of rate-regulated accounting3
(122)(139)(145)
Foreign allowable interest deductions——(4)
Part VI.1 tax, net of federal Part I deduction4
767376
US Minimum Tax5
107—44
Non-taxable portion of gain on sale of investment6
—(23)—
Valuation allowance65(6)
Accounting impairment of non-deductible goodwill7
370——
Noncontrolling interests8
9(17)(8)
Other9
74(5)(47)
Income tax expense1,6041,415774
Effective income tax rate35.3 %18.3 %18.5 %
1The change in provincial and state income taxes from 2021 to 2022 reflects the decrease in earnings from Canadian operations and the effect of the reduction in the Pennsylvania corporate income tax rate in the US, partially offset by the increase in earnings from US operations before the non-deductible goodwill impairment relating to the Gas Transmission reporting unit in combination with state tax apportionment changes. Refer to Note 16 - Goodwill.
2The change in foreign and other statutory rate differentials from 2021 to 2022 reflects the increase in earnings from US operations, before the goodwill impairment relating to the Gas Transmission reporting unit. Refer to Note 16 - Goodwill.
3The amount in 2022 relates to the federal component of the tax impact relating to the 2022 variable consideration attributable to the Canadian Mainline. Refer to Note 4 - Revenue.
4Part VI.1 tax is a tax levied on preferred share dividends paid in Canada.
5There was no US Minimum Tax in 2021 as a result of tax losses from bonus tax depreciation.
6The amount in 2021 relates to the federal impact of the gain on sale of the investment in Noverco.
7The amount in 2022 relates to the federal impact of the non-deductible goodwill impairment relating to the Gas Transmission reporting unit. Refer to Note 16 - Goodwill.
8The amount in 2022 includes the federal tax impact of an impairment to Magic Valley attributable to noncontrolling interests. Refer to Note 11 - Property, Plant and Equipment.
9The amount in 2022 includes the federal component of the tax impact relating to the 2021 variable consideration attributable to the Canadian Mainline. Refer to Note 4 - Revenue.
COMPONENTS OF PRETAX EARNINGS AND INCOME TAXES
Year ended December 31,202220212020
(millions of Canadian dollars)   
Earnings before income taxes    
Canada583 3,399 2,789 
US2,865 3,336 407 
Other1,094 994 994 
 4,542 7,729 4,190 
Current income taxes   
Canada360 162 165 
US201 80 64 
Other86 82 98 
 647 324 327 
Deferred income taxes   
Canada(358)344 378 
US1,309 741 66 
Other6 6 3 
 957 1,091 447 
Income tax expense1,604 1,415 774 

COMPONENTS OF DEFERRED INCOME TAXES
Deferred income tax assets and liabilities are recognized for the future tax consequences of differences between carrying amounts of assets and liabilities and their respective tax bases. Major components of deferred income tax assets and liabilities are as follows:
December 31,20222021
(millions of Canadian dollars)  
Deferred income tax liabilities  
Property, plant and equipment(9,096)(8,721)
Investments(7,099)(6,097)
Regulatory assets(1,291)(1,245)
Pension and OPEB plans(30)— 
Other(46)(208)
Total deferred income tax liabilities(17,562)(16,271)
Deferred income tax assets  
Financial instruments456 315 
Pension and OPEB plans— 110 
Loss carryforwards2,259 3,081 
Other1,753 1,648 
Total deferred income tax assets4,468 5,154 
Less valuation allowance(215)(84)
Total deferred income tax assets, net4,253 5,070 
Net deferred income tax liabilities(13,309)(11,201)
Presented as follows:
Total deferred income tax assets472 488 
Total deferred income tax liabilities(13,781)(11,689)
Net deferred income tax liabilities(13,309)(11,201)

A valuation allowance has been established for certain loss and credit carryforwards, and outside basis temporary differences on investments that reduce deferred income tax assets to an amount that will more likely than not be realized.
 
As at December 31, 2022, we recognized the benefit of unused tax loss carryforwards of $2.1 billion (2021 - $1.9 billion) in Canada which expire in 2030 and beyond.

As at December 31, 2022, we recognized the benefit of unused tax loss carryforwards of $8.1 billion (2021 - $11.0 billion) in the US. Unused tax loss carryforwards of $0.2 billion (2021 - $3.5 billion) begin to expire in 2023, and unused tax loss carryforwards of $7.9 billion (2021 - $7.5 billion) have no expiration.

We have not provided for deferred income taxes on the difference between the carrying value of substantially all of our foreign subsidiaries and their corresponding tax basis as the earnings of those subsidiaries are intended to be permanently reinvested in their operations. As such, these investments are not anticipated to give rise to income taxes in the foreseeable future. The difference between the carrying values of the investments and their tax bases is largely a result of unremitted earnings and currency translation adjustments. The unremitted earnings and currency translation adjustment for which no deferred taxes have been recognized in respect of foreign subsidiaries were $8.0 billion and $4.3 billion for the periods ended December 31, 2022 and 2021, respectively. If such earnings are remitted, in the form of dividends or otherwise, we may be subject to income taxes and foreign withholding taxes. The determination of the amount of unrecognized deferred income tax liabilities applicable to such amounts is not practicable.

Enbridge and certain of our subsidiaries are subject to taxation in Canada, the US and other foreign jurisdictions. The material jurisdictions in which we are subject to potential examinations include the US (Federal) and Canada (Federal, Alberta and Québec). We are open to examination by Canadian tax authorities for the 2015 to 2022 tax years and by US tax authorities for the 2019 to 2022 tax years. We are currently under examination for income tax matters in Canada for the 2016 to 2019 tax years. We are not currently under examination for income tax matters in any other material jurisdiction where we are subject to income tax.

UNRECOGNIZED TAX BENEFITS
Year ended December 31,20222021
(millions of Canadian dollars)
Unrecognized tax benefits at beginning of year76 121 
Gross increases for tax positions of current year— 1 
Gross decreases for tax positions of prior year(17)(26)
Change in translation of foreign currency1 (1)
Lapses of statute of limitations(5)(19)
Unrecognized tax benefits at end of year55 76 
 
The unrecognized tax benefits as at December 31, 2022, if recognized, would impact our effective income tax rate. We do not anticipate further adjustments to the unrecognized tax benefits during the next 12 months that would have a material impact on our consolidated financial statements.

We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income taxes. Interest and penalties included in income taxes for the years ended December 31, 2022 and 2021 were a $1 million expense and $5 million recovery, respectively. As at December 31, 2022 and 2021, interest and penalties of $13 million and $12 million, respectively, have been accrued.