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Income Taxes (All Registrants)
 12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes (All Registrants)
Income Taxes (All Registrants)
Corporate Tax Reform (All Registrants)
On December 22, 2017, President Trump signed the TCJA into law. The TCJA makes many significant changes to the Internal Revenue Code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) creating a 30% limitation on deductible interest expense (not applicable to regulated utilities); (3) allowing 100% expensing for the cost of qualified property (not applicable to regulated utilities); (4) eliminating the domestic production activities deduction; (5) eliminating the corporate alternative minimum tax and changing how existing alternative minimum tax credits can be realized; and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. The most significant change that impacts the Registrants is the reduction of the corporate federal income tax rate from 35% to 21% beginning January 1, 2018.
Pursuant to the enactment of the TCJA, the Registrants remeasured their existing deferred income tax balances as of December 31, 2017 to reflect the decrease in the corporate income tax rate from 35% to 21%, which resulted in a material decrease to their net deferred income tax liability balances as shown in the table below. Generation recorded a corresponding net decrease to income tax expense, while the Utility Registrants recorded corresponding regulatory liabilities or assets to the extent such amounts are probable of settlement or recovery through customer rates and an adjustment to income tax expense for all other amounts. The amount and timing of potential settlements of the established net regulatory liabilities will be determined by the Utility Registrants’ respective rate regulators, subject to certain IRS “normalization” rules. See Note 3 — Regulatory Matters for further information.
The Registrants have completed their assessment of the majority of the applicable provisions in the TCJA and have recorded the associated impacts as of December 31, 2017. As discussed further below, under SAB 118 issued by the SEC in December 2017, the Registrants have recorded provisional income tax amounts as of December 31, 2017 for changes pursuant to the TCJA related to depreciation for which the impacts could not be finalized upon issuance of the Registrants’ financial statements, but for which reasonable estimates could be determined. 
For property acquired and placed-in-service after September 27, 2017, the TCJA repeals 50% bonus depreciation for all taxpayers and in addition provides for 100% expensing for taxpayers other than regulated utilities. As a result, Generation will be required to evaluate the contractual terms of its fourth quarter 2017 capital additions and determine if they qualify for 100% expensing under the TCJA as compared to 50% bonus depreciation under prior tax law. Similarly, the Utility Registrants will be required to evaluate the contractual terms of their fourth quarter 2017 capital additions to determine whether they still qualify for the prior tax law’s 50% bonus depreciation as compared to no bonus depreciation pursuant to the TCJA. As of December 31, 2017, the Registrants have not completed this analysis but were able to record a reasonable estimate of the effects of these changes based on capital costs incurred at each of the Registrants prior to and after the beginning of the fourth quarter of 2017.
At Generation, any required changes to the provisional estimates during the measurement period related to the above item would result in an adjustment to current income tax expense at 35% and a corresponding adjustment to deferred income tax expense at 21% and such changes could be material to Generation’s future results of operations. At the Utility Registrants, any required changes to the provisional estimates would result in the recording of regulatory assets or liabilities to the extent such amounts are probable of settlement or recovery through customer rates and a net change to income tax expense for any other amounts.
The Registrants expect any final adjustments to the provisional amounts to be recorded by the third quarter of 2018, which could be material to the Registrants’ future results of operations or financial positions. The accounting for all other applicable provisions of the TCJA is considered complete based on our current interpretation of the provisions of the TCJA as enacted as of December 31, 2017.
While the Registrants have recorded the impacts of the TCJA based on their interpretation of the provisions as enacted, it is expected that technical corrections or other forms of guidance will be issued during 2018, which could result in material changes to previously finalized provisions. At this time, most states have not provided guidance regarding TCJA impacts and may issue guidance in 2018 which may impact estimates.
The one-time impacts recorded by the Registrants to remeasure their deferred income tax balances at the 21% corporate federal income tax rate as of December 31, 2017 are presented below:
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon(b)
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Net Decrease to Deferred Income Tax Liability Balances

$8,624
 
$1,895
 
$2,819
 
$1,407
 
$1,120
 
$1,944
 
$968
 
$540
 
$456
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO(c)
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Net Regulatory Liability Recorded(a)
$7,315
 
N/A
 
$2,818
 
$1,394
 
$1,124
 
$1,979
 
$976
 
$545
 
$458
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon(b)
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Net Deferred Income Tax Benefit/(Expense) Recorded
$1,309
 
$1,895
 
$1
 
$13
 
$(4)
 
$(35)
 
$(8)
 
$(5)
 
$(2)
__________
(a)
Reflects the net regulatory liabilities recorded on a pre-tax basis before taking into consideration the income tax benefits associated with the ultimate settlement with customers.
(b)
Amounts do not sum across due to deferred tax adjustments recorded at the Exelon Corporation parent company, primarily related to certain employee compensation plans.
(c)
Given the regulatory treatment of income tax benefits related to electric and gas distribution repairs, PECO remains in an overall net regulatory asset position as of December 31, 2017 after recording the impacts related to the TCJA. Refer to Note 3 - Regulatory Matters for additional information.
The net regulatory liabilities above include (1) amounts subject to IRS “normalization” rules that are required to be passed back to customers generally over the remaining useful life of the underlying assets giving rise to the associated deferred income taxes, and (2) amounts for which the timing of settlement with customers is subject to determinations by the rate regulators. The table below sets forth the Registrants’ estimated categorization of their net regulatory liabilities as of December 31, 2017. The amounts in the table below are shown on an after-tax basis reflecting future net cash outflows after taking into consideration the income tax benefits associated with the ultimate settlement with customers.
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon
 
ComEd
 
PECO(a)
 
BGE
 
PHI
 
PEPCO
 
DPL
 
ACE
Subject to IRS Normalization Rules
$3,040
 
$1,400
 
$533
 
$459
 
$648
 
$299
 
$195
 
$153
Subject to Rate Regulator Determination
1,694
 
573
 
43
 
324
 
754
 
391
 
194
 
170

Net Regulatory Liabilities
$4,734
 
$1,973
 
$576
 
$783
 
$1,402
 
$690
 
$389
 
$
323

_________
(a)
Given the regulatory treatment of income tax benefits related to electric and gas distribution repairs, PECO remains in an overall net regulatory asset position as of December 31, 2017 after recording the impacts related to the TCJA. As a result, the amount of customer benefits resulting from the TCJA subject to the discretion of PECO's rate regulators are lower relative to the other Utility Registrants. Refer to Note 3 - Regulatory Matters for additional information.
The net regulatory liability amounts subject to the IRS normalization rules generally relate to property, plant and equipment with remaining useful lives ranging from 30 to 40 years across the Utility Registrants.  For the other amounts, rate regulators could require the passing back of amounts to customers over shorter time frames.
Components of Income Tax Expense or Benefit
Income tax expense (benefit) from continuing operations is comprised of the following components:
 
For the year ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
 Exelon
 
 Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Included in operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
$
194

 
$
584

 
$
(191
)
 
$
71

 
$
74

 
$
(60
)
 
$
(20
)
 
$
(24
)
 
$
(12
)
Deferred
(469
)
 
(2,003
)
 
523

 
28

 
101

 
250

 
114

 
82

 
34

Investment tax credit amortization
(25
)
 
(21
)
 
(2
)
 
—

 
(1
)
 
(1
)
 
—

 
—

 
—

State
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Current
14

 
65

 
(49
)
 
14

 
(5
)
 
(4
)
 
(2
)
 
—

 
—

Deferred
161

 
—

 
136

 
(9
)
 
49

 
32

 
13

 
13

 
4

Total
$
(125
)
 
$
(1,375
)
 
$
417

 
$
104

 
$
218

 
$
217

 
$
105

 
$
71

 
$
26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
Predecessor
 
For the Year Ended December 31, 2016
 
March 24, 2016 to December 31, 2016
 
 
January 1, 2016 to March 23, 2016
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
Pepco
 
DPL
 
ACE
 
PHI
 
 
PHI
Included in operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
$
60

 
$
513

 
$
(135
)
 
$
63

 
$
51

 
$
(118
)
 
$
(88
)
 
$
(26
)
 
$
(281
)
 
 
$
—

Deferred
607

 
(247
)
 
379

 
72

 
88

 
136

 
97

 
22

 
283

 
 
10

Investment tax credit amortization
(24
)
 
(20
)
 
(2
)
 
—

 
(1
)
 
—

 
—

 
—

 
(1
)
 
 
—

State
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Current
39

 
45

 
(4
)
 
9

 
5

 
7

 
1

 
—

 
(11
)
 
 
—

Deferred
79

 
(1
)
 
63

 
5

 
31

 
16

 
12

 
—

 
13

 
 
7

Total
$
761

 
$
290

 
$
301

 
$
149

 
$
174

 
$
41

 
$
22

 
$
(4
)
 
$
3

 
 
$
17

 
For the Year Ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Predecessor
 
 
 
 
 
 
 
 Exelon
 
 Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Included in operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
$
407

 
$
546

 
$
(80
)
 
$
64

 
$
25

 
$
12

 
$
(54
)
 
$
(27
)
 
$
(2
)
Deferred
566

 
16

 
310

 
69

 
126

 
103

 
126

 
73

 
27

Investment tax credit amortization
(22
)
 
(19
)
 
(2
)
 
—

 
(1
)
 
(1
)
 
—

 
—

 
—

State
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
(86
)
 
(90
)
 
7

 
(10
)
 
—

 
17

 
6

 
2

 
3

Deferred
208

 
49

 
45

 
20

 
39

 
32

 
24

 
1

 
5

Total
$
1,073


$
502


$
280


$
143


$
189


$
163


$
102


$
49


$
33


Rate Reconciliation
The effective income tax rate from continuing operations varies from the U.S. Federal statutory rate principally due to the following:
 
For the Year Ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
U.S. Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
Increase (decrease) due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State income taxes, net of Federal income tax benefit
2.3

 
3.0

 
5.7

 
0.6

 
5.4

 
4.8

 
3.2

 
5.4

 
5.6

Qualified nuclear decommissioning trust fund income
3.8

 
10.0

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Amortization of investment tax credit, including deferred taxes on basis difference
(0.9
)
 
(2.2
)
 
(0.2
)
 
(0.1
)
 
(0.1
)
 
(0.2
)
 
(0.1
)
 
(0.2
)
 
(0.4
)
Plant basis differences(a)
(1.7
)
 
—

 
0.3

 
(13.8
)
 
0.1

 
1.1

 
(0.4
)
 
2.0

 
3.6

Production tax credits and other credits
(1.8
)
 
(4.8
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Noncontrolling interests
0.1

 
0.3

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Like-kind exchange
(1.2
)
 
—

 
1.3

 
—

 
—

 
—

 
—

 
—

 
—

Merger expenses
(3.7
)
 
(1.3
)
 
—

 
—

 
—

 
(9.5
)
 
(6.3
)
 
(7.8
)
 
(19.8
)
FitzPatrick bargain purchase gain
(2.2
)
 
(5.7
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Tax Cut and Jobs Act of 2017(b)
(33.1
)
 
(130.1
)
 
0.1

 
(2.3
)
 
0.9

 
6.4

 
2.7

 
2.5

 
1.6

Other
0.1

 
(0.4
)
 
0.2

 
(0.1
)
 
0.2

 
(0.1
)
 
(0.2
)
 
0.1

 
(0.4
)
Effective income tax rate
(3.3
)%
 
(96.2
)%
 
42.4
 %
 
19.3
 %
 
41.5
 %
 
37.5
 %
 
33.9
 %
 
37.0
 %
 
25.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
Predecessor
 
For the Year Ended December 31, 2016
 
March 24, 2016 to December 31, 2016
 
 
January 1, 2016 to March 23, 2016
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
Pepco
 
DPL (c)
 
ACE (c)
 
PHI (c)
 
 
PHI
U.S. Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
 
35.0
 %
Increase (decrease) due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

State income taxes, net of Federal income tax benefit (d)
3.3

 
3.3

 
5.6

 
1.3

 
5.0

 
15.7

 
52.7

 
6.2

 
5.8

 
 
11.9

Qualified nuclear decommissioning trust fund income
3.4

 
7.8

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
—

Amortization of investment tax credit, including deferred taxes on basis difference
(1.2
)
 
(2.3
)
 
(0.3
)
 
(0.1
)
 
(0.1
)
 
(0.2
)
 
(3.7
)
 
0.8

 
1.4

 
 
(0.9
)
Plant basis differences
(4.8
)
 
—

 
(0.6
)
 
(9.6
)
 
(2.7
)
 
(22.8
)
 
(25.5
)
 
10.3

 
39.0

 
 
(13.5
)
Production tax credits and other credits
(3.6
)
 
(8.2
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
—

Noncontrolling interests
(0.2
)
 
(0.3
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
—

Statute of limitations expiration
(0.4
)
 
(1.7
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
—

Penalties
1.9

 
—

 
4.5

 
—

 
—

 
—

 
—

 
—

 
(0.7
)
 
 
—

Merger Expenses
5.5

 
1.1

 
—

 
—

 
—

 
23.5

 
112.9

 
(44.9
)
 
(89.0
)
 
 
11.1

Other (e)
(0.6
)
 
(1.5
)
 
0.1

 
(1.2
)
 
—

 
(1.8
)
 
(2.2
)
 
1.3

 
3.3

 
 
3.6

Effective income tax rate
38.3
 %
 
33.2
 %
 
44.3
 %
 
25.4
 %
 
37.2
 %

49.4
 %

169.2
 %

8.7
 %

(5.2
)%

 
47.2
 %

 
For the Year Ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Predecessor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE 
 
PHI
 
Pepco
 
DPL
 
ACE
U.S. Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
Increase (decrease) due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State income taxes, net of Federal income tax benefit
3.7

 
1.0

 
4.9

 
1.0

 
5.3

 
6.6

 
6.7

 
1.7

 
5.7

Qualified nuclear decommissioning trust fund loss
(0.4
)
 
(0.8
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Domestic production activities deduction
(0.7
)
 
(1.3
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Health care reform legislation
—

 
—

 
—

 
—

 
0.1

 
—

 
—

 
—

 
—

Amortization of investment tax credit, including deferred taxes on basis difference
(0.9
)
 
(1.5
)
 
(0.3
)
 
(0.1
)
 
(0.1
)
 
(0.2
)
 
(0.1
)
 
(0.4
)
 
(0.6
)
Plant basis differences
(1.5
)
 
—

 
(0.1
)
 
(8.7
)
 
(0.7
)
 
(4.3
)
 
(5.8
)
 
(2.3
)
 
(1.3
)
Production tax credits and other credits
(1.9
)
 
(3.4
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Noncontrolling interests
0.3

 
0.5

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Statute of limitations expiration
(1.4
)
 
(2.4
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other (f)
—

 
—

 
0.2

 
0.2

 
—

 
(3.2
)
 
(0.5
)
 
5.2

 
6.4

Effective income tax rate
32.2
 %

27.1
 %

39.7
 %

27.4
 %

39.6
 %

33.9
 %

35.3
 %

39.2
 %

45.2
 %
__________
(a)
Includes the charges related to the transmission-related income tax regulatory asset for Exelon, ComEd, BGE, PHI, Pepco, DPL, and ACE of $35 million, $3 million, $5 million, $27 million, $14 million, $6 million, and $7 million, respectively (See Footnote 3 - Regulatory Matters).
(b)
Included are impacts for TJCA other than the corporate rate change, including revisions further limiting tax deductions for compensation of certain highest paid executives, the write-off of foreign tax credit carryforwards, and loss of a 2015 domestic production activities deduction due to an NOL carryback.
(c)
DPL and ACE recognized a loss before income taxes for the year ended December 31, 2016, and PHI recognized a loss before income taxes for the period of March 24, 2016, through December 31, 2016. As a result, positive percentages represent an income tax benefit for the periods presented.
(d)
Includes a remeasurement of uncertain state income tax positions for Pepco and DPL.
(e)
At PECO, includes a cumulative adjustment related to an anticipated gas repairs tax return accounting method change. The method change request was filed and accepted in 2017. No change to the results recorded as of December 31, 2016.
(f)
Includes impacts of the PHI Global Settlement for Pepco, DPL, ACE and PHI.
Tax Differences and Carryforwards
The tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred tax assets (liabilities), as of December 31, 2017 and 2016 are presented below:
 
As of December 31, 2017 (a)
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Plant basis differences
$
(12,490
)
 
$
(2,819
)
 
$
(3,825
)
 
$
(1,762
)
 
$
(1,368
)
 
$
(2,521
)
 
$
(1,152
)
 
$
(717
)
 
$
(607
)
Accrual based contracts
150

 
(66
)
 
—

 
—

 
—

 
216

 
—

 
—

 
—

Derivatives and other financial instruments
(85
)
 
(66
)
 
(2
)
 
—

 
—

 
3

 
—

 
—

 
—

Deferred pension and postretirement obligation
1,463

 
(205
)
 
(285
)
 
(15
)
 
(29
)
 
(130
)
 
(78
)
 
(51
)
 
(18
)
Nuclear decommissioning activities
(553
)
 
(553
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Deferred debt refinancing costs
217

 
26

 
(8
)
 
(1
)
 
(3
)
 
203

 
(4
)
 
(2
)
 
(1
)
Regulatory assets and liabilities
(688
)
 
—

 
489

 
(90
)
 
136

 
(184
)
 
39

 
88

 
86

Tax loss carryforward
344

 
76

 
33

 
9

 
11

 
156

 
40

 
68

 
35

Tax credit carryforward
861

 
868

 
1

 
—

 
—

 
6

 
—

 
—

 
—

Investment in partnerships
(434
)
 
(416
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other, net
746

 
78

 
141

 
71

 
13

 
193

 
94

 
14

 
16

Deferred income tax liabilities (net)
$
(10,469
)
 
$
(3,077
)
 
$
(3,456
)
 
$
(1,788
)
 
$
(1,240
)

$
(2,058
)

$
(1,061
)

$
(600
)

$
(489
)
Unamortized investment tax credits
(732
)
 
(705
)
 
(13
)
 
(1
)
 
(4
)
 
(8
)
 
(2
)
 
(3
)
 
(4
)
Total deferred income tax liabilities (net) and
unamortized investment tax credits
$
(11,201
)
 
$
(3,782
)
 
$
(3,469
)
 
$
(1,789
)
 
$
(1,244
)

$
(2,066
)

$
(1,063
)

$
(603
)

$
(493
)
__________
(a) Includes remeasurement impacts related to the TCJA.
 
As of December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Plant basis differences
$
(17,966
)
 
$
(4,192
)
 
$
(5,034
)
 
$
(3,095
)
 
$
(1,977
)
 
$
(3,586
)
 
$
(1,678
)
 
$
(973
)
 
$
(869
)
Accrual based contracts
434

 
(115
)
 
—

 
—

 
—

 
548

 
—

 
—

 
—

Derivatives and other financial instruments
(179
)
 
(162
)
 
(3
)
 
—

 
—

 
(1
)
 
—

 
—

 
—

Deferred pension and postretirement obligation
2,287

 
(316
)
 
(453
)
 
(18
)
 
(43
)
 
(111
)
 
(122
)
 
(74
)
 
(21
)
Nuclear decommissioning activities
(509
)
 
(509
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Deferred debt refinancing costs
325

 
44

 
(13
)
 
(1
)
 
(3
)
 
293

 
(7
)
 
(4
)
 
(2
)
Regulatory assets and liabilities
(3,319
)
 
—

 
(226
)
 
10

 
(240
)
 
(1,205
)
 
(194
)
 
(75
)
 
(69
)
Tax loss carryforward
189

 
61

 
29

 
—

 
22

 
77

 
27

 
39

 
14

Tax credit carryforward
446

 
493

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Investment in partnerships
(650
)
 
(650
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other, net
1,485

 
403

 
351

 
99

 
27

 
225

 
66

 
34

 
34

Deferred income tax liabilities (net)
$
(17,457
)
 
$
(4,943
)
 
$
(5,349
)
 
$
(3,005
)
 
$
(2,214
)

$
(3,760
)

$
(1,908
)

$
(1,053
)

$
(913
)
Unamortized investment tax credits
(658
)
 
(626
)
 
(15
)
 
(1
)
 
(5
)
 
(9
)
 
(2
)
 
(3
)
 
(4
)
Total deferred income tax liabilities (net) and
unamortized investment tax credits
$
(18,115
)
 
$
(5,569
)
 
$
(5,364
)
 
$
(3,006
)
 
$
(2,219
)

$
(3,769
)

$
(1,910
)

$
(1,056
)

$
(917
)
The following table provides the Registrants’ carryforwards and any corresponding valuation allowances as of December 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
 
Federal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal net operating loss
$
624

(a)  

$
—

 
$
156

 
$
7

 
$
—

 
$
261

 
$
82

 
$
81

 
$
63

 
Deferred taxes on Federal net operating loss
131

 
—

 
33

 
1

 
—

 
55

 
17

 
17

 
13

 
Federal general business credits carryforwards
861

(b) 
868


1

 
—


1

 
5

 
—

 
—

 
—

 
State
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State net operating losses
3,555

(c) 
1,479

(c) 
—

 
98

(e)  
177

(d) 
1,440

(f) 
347

(g) 
753

(h) 
299

(i) 
Deferred taxes on state tax attributes (net)
233

 
97

 
—

 
8

 
12

 
98

 
23

 
51

 
21

 
Valuation allowance on state tax attributes
29

 
23

 
—

 
—

 
1

 
5

 
—

 
—

 
—

 
__________
(a)
Exelon's federal net operating loss will begin expiring in 2034.
(b)
Exelon’s federal general business credit carryforwards will begin expiring in 2033.
(c)
Exelon’s and Generation's state net operating losses and credit carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2018.
(d)
BGE's state net operating loss carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2026.
(e)
PECO's state net operating loss carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2031.
(f)
PHI's state net operating loss carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2036.
(g)
Pepco's state net operating loss carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2028.
(h)
DPL's state net operating loss carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2027.
(i)
ACE's state net operating loss carryforwards, which are presented on a post-apportioned basis, will begin expiring in 2031.
Tabular Reconciliation of Unrecognized Tax Benefits
The following tables provide a reconciliation of the Registrants’ unrecognized tax benefits as of December 31, 2017, 2016 and 2015: 
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Unrecognized tax benefits at January 1, 2017
$
916

 
$
490

 
$
(12
)
 
$
—

 
$
120

 
$
172

 
$
80

 
$
37

 
$
22

Increases based on tax positions related to 2017
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Decreases based on tax positions related to 2017
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Change to positions that only affect timing
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Increases based on tax positions prior to 2017
28

 
—

 
14

 
—

 
—

 
14

 
—

 
—

 
14

Decreases based on tax positions prior to 2017
(196
)
 
(17
)
 
—

 
—

 
—

 
(61
)
 
(21
)
 
(16
)
 
(22
)
Decrease from settlements with taxing authorities
(5
)
 
(5
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Decreases from expiration of statute of limitations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Unrecognized tax benefits at December 31, 2017
$
743

 
$
468

 
$
2

 
$
—

 
$
120


$
125


$
59


$
21


$
14

 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 

 

Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Unrecognized tax benefits at January 1, 2016
$
1,078

 
$
534

 
$
142

 
$
—

 
$
120

 
$
22

 
$
8

 
$
3

 
$
—

Merger balance transfer
22

 
5

 
—

 
—

 
—

 
(5
)
 
—

 
—

 
—

Increases based on tax positions related to 2016
108

 
10

 
—

 
—

 
—

 
59

 
21

 
16

 
22

Decreases based on tax positions related to 2016
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Change to positions that only affect timing
(332
)
 
(12
)
 
(154
)
 
—

 
—

 
—

 
—

 
—

 
—

Increases based on tax positions prior to 2016
88

 
—

 
—

 
—

 
—

 
96

 
51

 
18

 
—

Decreases based on tax positions prior to 2016
(21
)
 
(20
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Decrease from settlements with taxing authorities
(27
)
 
(27
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Decreases from expiration of statute of limitations
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Unrecognized tax benefits at December 31, 2016
$
916


$
490


$
(12
)

$
—


$
120


$
172


$
80


$
37


$
22

 
 
 
 
 
 
 
 
 
 
 
Predecessor
 
 
 
 
 
 
 
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
Unrecognized tax benefits at January 1, 2015
$
1,829

 
$
1,357

 
$
149

 
$
44

 
$
—

 
$
702

 
$
—

 
$
—

 
$
—

Increases based on tax positions related to 2015
108

 
—

 
—

 
—

 
106

 
—

 
—

 
—

 
—

Decreases based on tax positions related to 2015
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Change to positions that only affect timing
(705
)
 
(659
)
 
(7
)
 
(44
)
 
—

 
(688
)
 
—

 
—

 
—

Increases based on tax positions prior to 2015
79

 
65

 
—

 
—

 
14

 
11

 
8

 
3

 
—

Decreases based on tax positions prior to 2015
(116
)
 
(112
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Decreases from settlements with taxing authorities
(31
)
 
(31
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Decreases from expiration of statute of limitations
(86
)
 
(86
)
 
—

 
—

 
—

 
(3
)
 
—

 
—

 
—

Unrecognized tax benefits at December 31, 2015
$
1,078

 
$
534

 
$
142

 
$
—

 
$
120


$
22


$
8


$
3


$
—


Exelon established a liability for an uncertain tax position associated with the tax deductibility of certain merger commitments incurred by Exelon in connection with the acquisitions of Constellation in 2012 and PHI in 2016.  In the first quarter 2017, as a part of its examination of Exelon’s return, the IRS National Office issued guidance concurring with Exelon’s position that the merger commitments were deductible. As a result, Exelon, Generation, PHI, Pepco, DPL, and ACE decreased their liability for unrecognized tax benefits by $146 million, $19 million, $59 million, $21 million, $16 million, and $22 million, respectively, in the first quarter of 2017 resulting in a benefit to Income taxes on Exelon’s, Generation’s, PHI’s, Pepco’s, DPL’s and ACE’s Consolidated Statements of Operations and Comprehensive Income and corresponding decreases in their effective tax rates.
Exelon reduced the liability related to the uncertain tax position associated with the like-kind exchange in the second quarter of 2017. Please see the Other Income Tax Matters section below for additional details related to the like-kind exchange adjustments made in the second quarter of 2017.
Exelon and Generation have $7 million of unrecognized tax benefits at December 31, 2017 for which the ultimate tax benefit is highly certain, but for which there is uncertainty about the timing of such benefits.
Exelon, Generation, and ComEd had $83 million, $7 million, and $(12) million of unrecognized tax benefits at December 31, 2016 for which the ultimate tax benefit is highly certain, but for which there is uncertainty about the timing of such benefits.
Exelon, Generation, and ComEd had $415 million, $20 million and $142 million of unrecognized tax benefits at December 31, 2015 for which the ultimate tax benefit is highly certain, but for which there is uncertainty about the timing of such benefits.
The disallowance of such positions would not materially affect the annual effective tax rate but would accelerate the payment of cash to, or defer the receipt of the cash tax benefit from, the taxing authority to an earlier or later period respectively.
Unrecognized tax benefits that if recognized would affect the effective tax rate
Exelon, Generation, ComEd and PHI have $523 million, $461 million, $2 million, and $32 million, respectively, of unrecognized tax benefits at December 31, 2017 that, if recognized, would decrease the effective tax rate. BGE, PHI, Pepco, DPL, and ACE have $120 million, $94 million, $59 million, $21 million, and $14 million of unrecognized tax benefits at December 31, 2017 that, if recognized, may be included in future base rates and that portion would have no impact to the effective tax rate.
Exelon, Generation, PHI, Pepco, DPL, and ACE had $633 million, $483 million, $93 million, $21 million, $16 million, and $22 million, respectively, of unrecognized tax benefits at December 31, 2016 that, if recognized, would decrease the effective tax rate. BGE, PHI, Pepco and DPL had $120 million, $80 million, $59 million, and $21 million of unrecognized tax benefits at December 31, 2016 that, if recognized, may be included in future base rates and that portion would have no impact to the effective tax rate.
Exelon, Generation, and PHI had $538 million, $509 million, and $11 million, respectively, of unrecognized tax benefits at December 31, 2015 that, if recognized, would decrease the effective tax rate. BGE, PHI, Pepco and DPL had $120 million, $11 million, $8 million and $3 million of unrecognized tax benefits at December 31, 2015 that, if recognized, may be included in future base rates and that portion would have no impact to the effective tax rate.
Reasonably possible the total amount of unrecognized tax benefits could significantly increase or decrease within 12 months after the reporting date
Like-Kind Exchange
As of December 31, 2017, Exelon and ComEd have approximately $39 million and $2 million, respectively, of unrecognized federal and state income tax benefits that could significantly decrease within the 12 months after the reporting date due to a final resolution of the like-kind exchange litigation described below. The recognition of these unrecognized tax benefits would decrease Exelon and ComEd's effective tax rate.
Settlement of Income Tax Audits, Refund Claims, and Litigation
As of December 31, 2017, Exelon, Generation, BGE, PHI, Pepco, DPL, and ACE have approximately $683 million, $469 million, $120 million, $94 million, $59 million, $21 million, $14 million respectively, of unrecognized federal and state tax benefits that could significantly decrease within the 12 months after the reporting date as a result of completing audits, potential settlements, refund claims, and the outcomes of pending court cases. Of the above unrecognized tax benefits, Exelon and Generation have $462 million that, if recognized, would decrease the effective tax rate. The unrecognized tax benefit related to BGE, Pepco, DPL and ACE, if recognized, may be included in future base rates and that portion would have no impact to the effective tax rate.
Total amounts of interest and penalties recognized
The following tables represent the net interest and penalties receivable (payable), including interest and penalties related to tax positions reflected in the Registrants’ Consolidated Balance Sheets.
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
Net interest receivable (payable) as of
Exelon(a)
 
Generation
 
ComEd(a)
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
December 31, 2017
$
233

 
$
(3
)
 
$
4

 
$
—

 
$
—

 
$
2

 
$
—

 
$
—

 
$
—

December 31, 2016
(507
)
 
46

 
(384
)
 
8

 
(1
)
 
2

 
1

 
—

 
1

 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
 
 
 
 
Net penalties receivable (payable) as of
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
PHI
 
Pepco
 
DPL
 
ACE
December 31, 2017
$
(17
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

December 31, 2016
(106
)
 
—

 
(86
)
 
—

 
—

 
—

 
—

 
—

 
—

__________
(a)
Change in balance attributable to Like-Kind Exchange interest payments, see Other Tax Matters for further discussion.
The following tables set forth the net interest and penalty expense, including interest and penalties related to tax positions, recognized in Interest expense, net and Other, net in Other income and deductions in the Registrants’ Consolidated Statements of Operations and Comprehensive Income.
Net interest expense (income) for the years ended
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
Pepco
 
DPL
 
ACE
December 31, 2017
$
37

 
$
(1
)
 
$
11

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

December 31, 2016
165

 
(13
)
 
117

 
—

 
—

 
6

 
—

 
(1
)
December 31, 2015
(13
)
 
(31
)
 
7

 
—

 
—

 
(4
)
 
—

 
—

Net penalty expense (income) for the years ended
Exelon
 
Generation
 
ComEd
 
PECO
 
BGE
 
Pepco
 
DPL
 
ACE
December 31, 2017
$
(2
)
 
$
—

 
$
—

$
—

$
—

 
$
—

 
$
—

 
$
—

 
$
—

December 31, 2016
106

 
—

 
86

 
—

 
—

 
—

 
—

 
—

December 31, 2015
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—


 
Successor
 
 
Predecessor
PHI
December 31, 2017
 
March 24, 2016 to December 31, 2016
 
 
January 1, 2016 to March 23, 2016
 
December 31, 2015
Net interest expense (income)
$
—

 
$
(2
)
 
 
$
—

 
$
(34
)
Description of tax years open to assessment by major jurisdiction
Taxpayer
Open Years
Exelon (and predecessors) and subsidiaries consolidated Federal income tax returns
1999, 2001-2016
PHI Holdings and subsidiaries consolidated Federal income tax returns
2013-2016
Exelon and subsidiaries Illinois unitary income tax returns
2013-2016
Constellation Illinois unitary income tax returns
2011-March 2012
Constellation combined New York corporate income tax returns
2010-March 2012
Exelon combined New York corporate income tax returns

2011-2016
Exelon New Jersey corporate income tax returns
2013-2015
Various separate company (excluding PECO) Pennsylvania corporate net income tax returns
2011-2016
PECO Pennsylvania separate company returns
2010-2016

DPL Delaware separate company returns
Same as Federal
ACE New Jersey separate company returns
2013-2016
Exelon and subsidiaries District of Columbia corporate income tax returns
2014-2016
PHI Holdings and subsidiaries District of Columbia corporate income tax returns
2014-2016
Various separate company Maryland corporate net income tax returns
Same as Federal
Other Tax Matters
Like-Kind Exchange
Exelon, through its ComEd subsidiary, took a position on its 1999 income tax return to defer approximately $1.2 billion of tax gain on the sale of ComEd’s fossil generating assets. The gain was deferred by reinvesting a portion of the proceeds from the sale in qualifying replacement property under the like-kind exchange provisions of the IRC. The like-kind exchange replacement property purchased by Exelon included interests in three municipal-owned electric generation facilities which were properly leased back to the municipalities.
The IRS disagreed with this position and asserted that the entire gain of approximately $1.2 billion was taxable in 1999. Exelon was unable to reach agreement with the IRS regarding the dispute over the like-kind exchange position. The IRS asserted that the Exelon purchase and leaseback transaction was substantially similar to a leasing transaction, known as a SILO, which the IRS does not respect as the acquisition of an ownership interest in property. A SILO is a “listed transaction” that the IRS has identified as a potentially abusive tax shelter under guidance issued in 2005. Accordingly, the IRS asserted that the sale of the fossil plants followed by the purchase and leaseback of the municipal owned generation facilities did not qualify as a like-kind exchange and the gain on the sale is fully subject to tax. The IRS also asserted a penalty of approximately $90 million for a substantial understatement of tax.
On September 30, 2013, the IRS issued a notice of deficiency to Exelon for the like-kind exchange position. Exelon filed a petition on December 13, 2013 to initiate litigation in the United States Tax Court (Tax Court) and the trial took place in August of 2015. Exelon was not required to remit any part of the asserted tax or penalty in order to litigate the issue.
On September 19, 2016, the Tax Court rejected Exelon’s position in the case and ruled that Exelon was not entitled to defer gain on the transaction. In addition, contrary to Exelon’s evaluation that the penalty was unwarranted, the Tax Court ruled that Exelon is liable for the penalty and interest due on the asserted penalty. In June of 2017, the IRS finalized its computation of tax, penalties and interest owed by Exelon pursuant to the Tax Court’s decision. In September of 2017, Exelon appealed this decision to the U.S. Court of Appeals for the Seventh Circuit.
In the first quarter of 2013, Exelon concluded that it was no longer more likely than not that the like-kind exchange position would be sustained and recorded charges to earnings representing the amount of interest expense (after-tax) and incremental state income tax expense that would be payable in the event Exelon is unsuccessful in litigation. Exelon agreed to hold ComEd harmless from any unfavorable impacts on ComEd’s equity of the after-tax interest and penalty amounts.
Prior to the Tax Court’s decision, however, Exelon did not believe it was likely a penalty would be assessed based on applicable case law and the facts of the transaction.  As a result, no charge had been recorded for the penalty or for after-tax interest on the penalty. While it has strong arguments on appeal with respect to both the merits and the penalty, Exelon has determined that, pursuant to the applicable authoritative guidance, it is no longer more likely than not to avoid ultimate imposition of the penalty. As a result, in the third quarter of 2016, Exelon and ComEd recorded a charge to earnings of approximately $106 million and $86 million, respectively, of penalty and approximately $94 million and $64 million, respectively, of after-tax interest. Exelon and ComEd recorded the penalty and pre-tax interest due on the asserted penalty to Other, net and Interest expense, net, respectively, on their Consolidated Statements of Operations. Consistent with Exelon’s agreement to continue to hold ComEd harmless from any unfavorable impact on its equity from the like-kind exchange position, ComEd recorded on its Consolidated Balance Sheets as of September 30, 2016, an additional $150 million receivable and non-cash equity contributions from Exelon.
As a result of the IRS’s finalization of its computation in the second quarter of 2017, Exelon recorded a benefit to earnings of approximately $26 million, consisting of an income tax benefit of $50 million and a reduction of penalties of $2 million, partially offset by after-tax interest expense of $26 million, while ComEd recorded a charge to earnings of approximately $23 million, consisting of income tax expense of $15 million and after-tax interest expense of $8 million.
In the second quarter of 2017, Exelon amended its agreement with ComEd to also hold ComEd harmless for the unfavorable impacts on its equity from the additional income tax amounts owed by ComEd as a result of the IRS’s finalization of its computation related to the like-kind exchange position. Accordingly, in the second quarter of 2017, ComEd recorded an additional receivable and non-cash equity contribution from Exelon for the total $23 million. As of June 30, 2017, ComEd had a total receivable from Exelon pursuant to the hold harmless agreement of $369 million, which was included in Current Receivables from Affiliates on ComEd’s Consolidated Balance Sheet.
In the fourth quarter of 2017, the IRS assessed the tax, penalties and interest of approximately $1.3 billion related to the like-kind exchange, including $300 million attributable to ComEd. While Exelon will receive a tax benefit of approximately $350 million associated with the deduction for the interest, Exelon currently has a net operating loss carryforward and thus does not expect to realize the cash benefit until 2018. After taking into account these interest deduction tax benefits, the total net cash outflow for the like-kind exchange is approximately $950 million, of which approximately $300 million is attributable to ComEd after giving consideration to Exelon’s agreement to hold ComEd harmless from any unfavorable impacts on ComEd’s equity from the like-kind exchange position. Following a final appellate decision, which is expected in 2018, Exelon expects to receive approximately $60 million related to final interest computations.
Of the above amounts payable, Exelon deposited with the IRS $1.25 billion in October of 2016. Exelon funded the $1.25 billion deposit with a combination of cash on hand and short-term borrowings. As a result of the IRS’s assessment of the tax, penalties and interest in the fourth quarter of 2017, the deposit is no longer available to Exelon and thus was reclassified from a current asset and is now reflected as an offset to the related liabilities for the tax, penalties, and interest that are included on Exelon’s balance sheet as current liabilities. The remaining amount due of approximately $20 million was paid in the fourth quarter of 2017. The $300 million payable discussed above attributable to ComEd, net of ComEd’s receivable pursuant to the hold harmless agreement, was settled with Exelon in the third quarter of 2017. No recovery will be sought from ComEd customers for any interest, penalty, or additional income tax payment amounts resulting from the like-kind exchange tax position.
As previously disclosed, in the first quarter of 2014, Exelon entered into an agreement to terminate its investment in one of the three municipal-owned electric generation properties in exchange for a net early termination amount of $335 million. In the first quarter of 2016, Exelon terminated its interests in the remaining two municipal-owned electric generation properties in exchange for $360 million.
 Long-Term State Tax Apportionment (Exelon, Generation and PHI)
 Exelon, Generation and PHI periodically review events that may significantly impact how income is apportioned among the states and, therefore, the calculation of their respective deferred state income taxes. Events that may require Exelon, Generation and PHI to update their long-term state tax apportionment include significant changes in tax law and/or significant operational changes. Exelon's, PHI's and Pepco's long-term marginal state income tax rate were revised in the first quarter of 2017 as a result of a statutory rate change in Washington, D.C. As a result, Exelon, PHI and Pepco recorded a one-time decrease to Deferred income tax liability of $28 million, $8 million and $8 million, respectively, on their Consolidated Balance Sheets. Because income taxes are recovered through customer rates, Exelon, PHI and Pepco recorded a corresponding regulatory liability of $8 million, in the Consolidated Balance Sheets. In addition, Exelon recorded a decrease to Income tax expense of $20 million, net of federal taxes, in the Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2017.
In the third quarter of 2017, Exelon reviewed and updated its marginal state income tax rates based on 2016 state apportionment rates. In addition, Exelon, Generation and ComEd recorded the impacts of Illinois’ statutory rate change, which increased the total corporate income tax rate from 7.75% to 9.5% effective July 1, 2017. As a result of the rate changes, in the third quarter of 2017, Exelon, Generation and ComEd recorded a one-time increase to Deferred income taxes of approximately $250 million, $20 million and $270 million, respectively, on their Consolidated Balance Sheets. Because income taxes are recovered through customer rates, each of Exelon and ComEd recorded a corresponding regulatory asset of $272 million. Further, Exelon recorded a decrease to Income tax expense of approximately $20 million and Generation recorded an increase to Income tax expense of approximately $20 million (each net of federal taxes) in their Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2017. The Illinois statutory rate increase is not expected to have a material ongoing impact to Exelon’s, Generation’s or ComEd’s future results of operations.
Allocation of Tax Benefits (All Registrants)
Generation, ComEd, PECO, BGE, PHI, Pepco, DPL and ACE are all party to an agreement with Exelon and other subsidiaries of Exelon that provides for the allocation of consolidated tax liabilities and benefits (Tax Sharing Agreement). The Tax Sharing Agreement provides that each party is allocated an amount of tax similar to that which would be owed had the party been separately subject to tax. In addition, any net benefit attributable to Exelon is reallocated to the other Registrants. That allocation is treated as a contribution to the capital of the party receiving the benefit. During 2017, Generation, PECO, BGE, and PHI recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of $102 million, $16 million, $10 million and $7 million respectively. ComEd, Pepco, DPL, and ACE did not record an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.
During 2016, Generation, PECO and BGE recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of $94 million, $18 million and $8 million respectively. ComEd did not record an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss. PHI, Pepco, DPL and ACE did not record an allocation of Federal tax benefits from Exelon as they were not a part of Exelon's 2015 consolidated tax return.
During 2015, Generation, PECO and BGE recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of $57 million, $16 million and $7 million respectively. ComEd did not record an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.