Income and Other Taxes (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2015

Dec. 31, 2014

Components of Income Tax Expense (Benefit) From Continuing Operations

Selected information regarding Talen Energy’s income tax provision for the periods ended June 30 was as follows:

	Six Months
	2015			2014
Income (Loss) from Continuing Operations Before Income Taxes	$	131		$	(114	)
Income Taxes		10			(58	)
Effective Tax Rate		8	%		51	%

PPL Energy Supply LLC [Member]

Components of Deferred Tax Assets and Liabilities

Significant components of PPL Energy Supply’s deferred income tax assets and liabilities were as follows:

	2014			2013
Deferred Tax Assets
Deferred investment tax credits (a)	$	11		$	84
Accrued pension costs		98			39
Federal loss carryforwards		22			28
Federal tax credit carryforwards (a)		13			131
State loss carryforwards		79			80
Other		79			69
Valuation allowances		(78	)		(78	)
Total deferred tax assets		224			353
Deferred Tax Liabilities
Plant - net (a)		1,374			1,392
Unrealized gain on qualifying derivatives		28			38
Other		42			46
Total deferred tax liabilities		1,444			1,476
Net deferred tax liability	$	1,220		$	1,123

(a) During 2014, PPL accepted U.S. government grants for hydroelectric plant expansions resulting in reductions of investment tax credits previously claimed and reductions in the carrying value of the related plants. See Note 4 for additional information.

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, PPL Energy Supply had the following loss and tax credit carryforwards.

	2014		Expiration
Loss carryforwards
Federal net operating losses	$	63		2031-2032
State net operating losses (a)		1,228		2018-2034
Credit carryforwards
Federal AMT credit		6		Indefinite
Federal – other		7		2031-2034

(a) A valuation allowance of $78 million has been recorded against the deferred tax assets for these losses.

Schedule of Valuation and Qualifying Accounts of Deferred Tax Assets

Valuation allowances have been established for the amount that, more likely than not, will not be realized. The changes in deferred tax valuation allowances were:

			Additions
	Balance at Beginning of Period		Charged to Income		Charged to Other Accounts	Deductions	Balance at End of Period
2014	$	78					$	78
2013		74	$	4				78
2012		72		2				74

Components of Income Tax Expense (Benefit) From Continuing Operations

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to “Income (Loss) from Continuing Operations Before Income Taxes” to income taxes for reporting purposes, and details of “Taxes, other than income” were as follows:

	2014			2013			2012
Income Tax Expense (Benefit)
Current – Federal	$	28		$	118		$	74
Current – State		13			16			19
Total Current Expense		41			134			93
Deferred – Federal		66			(285	)		187
Deferred – State		11			(27	)		7
Total Deferred Expense (Benefit), excluding operating loss carryforwards		77			(312	)		194
Investment tax credit, net – federal		(2	)		(3	)		(2	)
Tax expense (benefit) of operating loss carryforwards
Deferred – Federal (a)					22			(48	)
Deferred – State								(1	)
Total Tax Expense (Benefit) of Operating Loss Carryforwards					22			(49	)
Total income taxes (benefits) from continuing operations (b)	$	116		$	(159	)	$	236
Total income tax expense (benefit) – Federal	$	92		$	(148	)	$	211
Total income tax expense (benefit) – State		24			(11	)		25
Total income taxes (benefits) from continuing operations (b)	$	116		$	(159	)	$	236

(a) A 2012 federal income tax return adjustment was recorded in 2013 related to a reduction in the 2012 net operating loss recorded in the filed return. The reduction was primarily due to PPL’s decision, at the time of filing, to utilize regular Modified Accelerated Cost Recovery System depreciation rates for certain non-regulated assets otherwise eligible for bonus tax depreciation.

(b) Excludes current and deferred federal and state tax expense recorded to Discontinued Operations of $109 million, $17 million and $27 million in 2014, 2013 and 2012. Also excludes federal and state tax expense (benefit) recorded to OCI of $(56) million, $47 million and $(267) million in 2014, 2013, and 2012.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate

	2014			2013			2012
Reconciliation of Income Tax Expense
Federal income tax on Income (Loss) from Continuing Operations Before Income Taxes at statutory tax rate – 35%	$	106		$	(147	)	$	233
Increase (decrease) due to:
State income taxes, net of federal income tax benefit		17			(24	)		30
State deferred tax rate change (a)		(1	)		15			(19	)
Federal income tax credits (b)					(8	)		(11	)
Other		(6	)		5			3
Total increase (decrease)		10			(12	)		3
Total income taxes from continuing operations	$	116		$	(159	)	$	236
Effective income tax rate		38.3	%		37.9	%		35.5	%

(a) During 2014, 2013 and 2012, PPL Energy Supply recorded adjustments related to its December 31 state deferred tax liabilities as a result of annual changes in state apportionment and the impact on the future estimated state income tax rate.

(b) During 2013 and 2012, PPL Energy Supply recorded a deferred tax benefit related to investment tax credits on progress expenditures related to the Holtwood hydroelectric plant expansions. See Note 4 for additional information.

Details of Taxes Other Than Income

	2014		2013		2012
Taxes, other than income
State gross receipts	$	45	$	37	$	35
State capital stock		1		1		5
Property and other		11		15		15
Total	$	57	$	53	$	55

Unrecognized Tax Benefits

Changes to unrecognized tax benefits were as follows:

	2014		2013
Beginning of period	$	15	$	30
Reductions based on tax positions of prior years				(15	)
End of period	$	15	$	15

The following interest expense (benefit) was recognized in income taxes.

2014	2013	2012
(1)	$5	$(4)

Summary of Income Tax Examinations

With few exceptions, at December 31, 2014, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows:

U.S. (federal)	1997 and prior
Pennsylvania (state)	2010 and prior
Montana (state)	2010 and prior