INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of Income Tax Rate Reconciliation

INCOME TAX RATE RECONCILIATION


Year ended December 31,	2022		2021		2020
(millions of Canadian dollars)
Earnings before income taxes	4,542		7,729		4,190
Canadian federal statutory income tax rate	15	%	15	%	15	%
Expected federal taxes at statutory rate	681		1,159		629
Increase/(decrease) resulting from:
Provincial and state income taxes1	108		228		288
Foreign and other statutory rate differentials2	295		134		(53)

Effects of rate-regulated accounting3	(122)		(139)		(145)
Foreign allowable interest deductions	—		—		(4)
Part VI.1 tax, net of federal Part I deduction4	76		73		76

US Minimum Tax5	107		—		44
Non-taxable portion of gain on sale of investment6	—		(23)		—
Valuation allowance	6		5		(6)
Accounting impairment of non-deductible goodwill7	370		—		—

Noncontrolling interests8	9		(17)		(8)
Other9	74		(5)		(47)
Income tax expense	1,604		1,415		774
Effective income tax rate	35.3	%	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.

Schedule of Components of Pretax Earnings and Income Taxes

COMPONENTS OF PRETAX EARNINGS AND INCOME TAXES


Year ended December 31,	2022	2021	2020
(millions of Canadian dollars)
Earnings before income taxes
Canada	583	3,399	2,789
US	2,865	3,336	407
Other	1,094	994	994
	4,542	7,729	4,190
Current income taxes
Canada	360	162	165
US	201	80	64
Other	86	82	98
	647	324	327
Deferred income taxes
Canada	(358)	344	378
US	1,309	741	66
Other	6	6	3
	957	1,091	447
Income tax expense	1,604	1,415	774

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,	2022	2021
(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 instruments	456	315
Pension and OPEB plans	—	110
Loss carryforwards	2,259	3,081
Other	1,753	1,648
Total deferred income tax assets	4,468	5,154
Less valuation allowance	(215)	(84)
Total deferred income tax assets, net	4,253	5,070
Net deferred income tax liabilities	(13,309)	(11,201)
Presented as follows:
Total deferred income tax assets	472	488
Total deferred income tax liabilities	(13,781)	(11,689)
Net deferred income tax liabilities	(13,309)	(11,201)

Schedule of Unrecognized Tax Benefits

UNRECOGNIZED TAX BENEFITS


Year ended December 31,	2022	2021
(millions of Canadian dollars)
Unrecognized tax benefits at beginning of year	76	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 currency	1	(1)
Lapses of statute of limitations	(5)	(19)

Unrecognized tax benefits at end of year	55	76