INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

PG&E Corporation and the Utility use the asset and liability method of accounting for income taxes.  The income tax provision includes current and deferred income taxes resulting from operations during the year. PG&E Corporation and the Utility estimate current period tax expense in addition to calculating DTAs and liabilities.  DTAs and liabilities result from temporary tax and accounting timing differences, such as those arising from depreciation expense.

PG&E Corporation and the Utility recognize a tax benefit if it is more likely than not that a tax position taken or expected to be taken in a tax return will be sustained upon examination by taxing authorities based on the technical merits of the position.  The tax benefit recognized in the financial statements is measured based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement.  As such, the difference between a tax position taken or expected to be taken in a tax return in future periods and the benefit recognized and measured pursuant to this guidance in the financial statements represents an unrecognized tax benefit.

Investment tax credits are deferred and amortized to income over time.  PG&E Corporation amortizes its investment tax credits over the projected investment recovery period.  The Utility amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment.

PG&E Corporation files a consolidated U.S. federal income tax return that includes the Utility and domestic subsidiaries in which its ownership is 80% or more.  PG&E Corporation files a combined state income tax return in California.  PG&E Corporation and the Utility are parties to a tax-sharing agreement under which the Utility determines its income tax provision (benefit) on a stand-alone basis.

The significant components of income tax provision (benefit) by taxing jurisdiction were as follows:

	PG&E Corporation						Utility
	Year Ended December 31,
(in millions)	2023		2022		2021		2023		2022		2021
Current:
Federal	$	(1)	$	(1)	$	—	$	(1)	$	(1)	$	—
State	—		—		1		—		—		—
Deferred:
Federal	(1,047)		(943)		543		(981)		(852)		588
State	(507)		(389)		296		(477)		(348)		316
Tax credits	(2)		(5)		(4)		(2)		(5)		(4)
Income tax provision (benefit)	$	(1,557)	$	(1,338)	$	836	$	(1,461)	$	(1,206)	$	900

The following tables describe net deferred income tax assets and liabilities:

	PG&E Corporation				Utility
	Year Ended December 31,
(in millions)	2023		2022		2023		2022
Deferred income tax assets:
Tax carryforwards	$	9,132	$	7,156	$	8,740	$	6,868
Compensation	145		157		82		80
GHG allowance	361		239		361		239
Wildfire-related claims (1)	1,069		1,489		1,069		1,489
Operating lease liability	142		368		142		368
Transmission tower wireless licenses	250		254		250		254
Bad debt	134		55		134		55
Other (2)	130		142		109		122
Total deferred income tax assets	$	11,363	$	9,860	$	10,887	$	9,475
Deferred income tax liabilities:
Property-related basis differences	10,058		9,374		10,047		9,363
Regulatory balancing accounts	1,433		1,376		1,433		1,376
Debt financing costs	428		465		428		465
Operating lease ROU asset	142		368		142		368
Income tax regulatory asset (3)	991		764		991		764
Environmental reserve	200		163		200		163
Other (4)	91		82		82		67
Total deferred income tax liabilities	$	13,343	$	12,592	$	13,323	$	12,566
Total net deferred income tax liabilities	$	1,980	$	2,732	$	2,436	$	3,091

(1) Amounts primarily relate to wildfire-related claims, net of estimated insurance recoveries, and legal and other costs related to various wildfires that have occurred in PG&E Corporation’s and the Utility’s service area over the past several years.

(2) Amounts include benefits, state taxes, and customer advances for construction.

(3) Represents the tax gross up portion of the deferred income tax for the cumulative differences between amounts recognized for ratemaking purposes and amounts recognized for tax, including the impact of changes in net deferred taxes associated with a lower federal income tax rate as a result of the TCJA.

(4) Amounts primarily include property taxes and prepaid expense.

The following table reconciles income tax expense at the federal statutory rate to the income tax provision:

	PG&E Corporation						Utility
	Year Ended December 31,
	2023		2022		2021		2023		2022		2021
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) in income tax rate resulting from:
State income tax (net of federal benefit) (1)	(57.9)		(75.8)		31.3		(34.4)		(26.9)		24.1
Effect of regulatory treatment of fixed asset differences (2)	(63.4)		(123.8)		(71.5)		(40.1)		(49.2)		(51.6)
Tax credits	(2.2)		(3.2)		(1.7)		(2.2)		(1.3)		(1.2)
Fire Victim Trust (3)	(126.9)		(160.9)		127.3		(80.2)		(64.0)		91.9
Other, net (4)	2.2		12.9		5.3		1.1		2.2		2.6
Effective tax rate	(227.2)	%	(329.8)	%	111.7	%	(134.8)	%	(118.2)	%	86.8	%

(1) Includes the effect of state flow-through ratemaking treatment.

(2) Includes the effect of federal flow-through ratemaking treatment for certain property-related costs.  For these temporary tax differences, PG&E Corporation and the Utility recognize the deferred tax impact in the current period and record offsetting regulatory assets and liabilities.  Therefore, PG&E Corporation’s and the Utility’s effective tax rates are impacted as these differences arise and reverse.  PG&E Corporation and the Utility recognize such differences as regulatory assets or liabilities as it is probable that these amounts will be recovered from or returned to customers in future rates.  In 2023, 2022, and 2021, the amounts also reflect the impact of the amortization of excess deferred tax benefits to be refunded to customers as a result of the TCJA passed in December 2017.

(3) Includes an adjustment for the tax benefit of the sale of shares by the Fire Victim Trust in 2023 and 2022 and a DTA write-off associated with the grantor trust election for the Fire Victim Trust in 2021.

(4) These amounts primarily represent the impact of tax audit settlements and non-tax deductible penalty costs.

Unrecognized Tax Benefits

The following table reconciles the changes in unrecognized tax benefits:

	PG&E Corporation						Utility
(in millions)	2023		2022		2021		2023		2022		2021
Balance at beginning of year	$	570	$	498	$	437	$	570	$	498	$	437
Additions for tax position taken during a prior year	1		—		—		1		—		—
Reductions for tax position taken during a prior year	—		(1)		(23)		—		(1)		(23)
Additions for tax position taken during the current year	45		73		85		45		73		85
Settlements	—		—		(1)		—		—		(1)
Balance at end of year	$	616	$	570	$	498	$	616	$	570	$	498

The component of unrecognized tax benefits that, if recognized, would affect the effective tax rate at December 31, 2023 for PG&E Corporation and the Utility was $33 million.

PG&E Corporation’s and the Utility’s unrecognized tax benefits may change significantly within the next 12 months based on tax audit progress.

Interest income, interest expense and penalties associated with income taxes are reflected in income tax expense on the Consolidated Statements of Income.  For the years ended December 31, 2023, 2022, and 2021, these amounts were immaterial.

Tax Audits

PG&E Corporation’s tax returns have been accepted through 2015 for federal income tax purposes, except for a few matters, the most significant of which relate to the deductibility of approximately $850 million in repair costs for gas transmission and distribution lines and $400 million in customer bill credits, which the Utility incurred in connection with the decision issued in 2015 for the San Bruno natural gas explosion in September of 2010. The IRS is auditing tax years 2015 through 2018.

PG&E Corporation’s tax returns have been accepted through 2014 for California income tax purposes. Tax years 2015 and thereafter remain subject to examination by the State of California. The State of California is auditing tax years 2015 through 2019.

Carryforwards

The following table describes PG&E Corporation’s operating loss and tax credit carryforward balances:

(in millions)	December 31, 2023		Expiration Year
Federal:
Net operating loss carryforward - Pre-2018	$	3,447	2031 - 2036
Net operating loss carryforward - Post-2017	29,403		N/A
Tax credit carryforward	175		2029 - 2041
State:
Net operating loss carryforward	$	32,583	2039 - 2041
Tax credit carryforward	137		Various

PG&E Corporation does not believe that the Chapter 11 Cases resulted in loss of or limitation on the utilization of any of the tax carryforwards. PG&E Corporation will continue to monitor the status of tax carryforwards.

Other Tax Matters

Under Section 382 of the IRC, if a corporation (or a consolidated group) undergoes an “ownership change,” net operating loss carryforwards and other tax attributes may be subject to certain limitations (which could limit PG&E Corporation’s or the Utility’s ability to use these DTAs to offset taxable income). In general, an ownership change occurs if the aggregate stock ownership of certain shareholders (generally five percent shareholders, applying certain look-through and aggregation rules) increases by more than 50% over such shareholders’ lowest percentage ownership during the testing period (generally three years). The Amended Articles limit Transfers (as defined in the Amended Articles) that increase a person’s or entity’s (including certain groups of persons) ownership of PG&E Corporation’s equity securities to 4.75% or more prior to the Restriction Release Date (as defined in the Amended Articles) without approval by the Board of Directors of PG&E Corporation (the “Ownership Restrictions”).

Furthermore, due to the election to treat the Fire Victim Trust as a grantor trust for income tax purposes, the activities of the Fire Victim Trust are treated as activities of the Utility for tax purposes. Accordingly, PG&E Corporation recognized income tax benefits and the corresponding DTA as the Fire Victim Trust sold shares of PG&E Corporation common stock, and the amounts of such benefits and assets were determined largely by the price at which the Fire Victim Trust sold the shares, rather than the price at the time such shares were transferred to the Fire Victim Trust. From inception through December 31, 2023, the Fire Victim Trust exchanged Plan Shares in the aggregate amount of 477,743,590 for an equal number of New Shares in the manner contemplated by the Share Exchange and Tax Matters Agreement; in each case, the Fire Victim Trust thereafter reported that it sold the applicable New Shares. In the year ended December 31, 2023, the Fire Victim Trust’s sale of PG&E Corporation common stock in the aggregate amount of 247,743,590 shares resulted in an aggregate tax benefit of $1.2 billion recorded in PG&E Corporation’s and the Utility’s Consolidated Financial Statements. For more information, see Note 6 above.