Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Consolidated Appropriations Act

On December 27, 2020, President Trump signed the Consolidated Appropriations Act (CAA) into law. In addition to the CAA providing funding for government operations, it also provided tax provisions to assist with COVID-19 relief, including extending certain expiring tax provisions. The Company has reviewed the provisions of the CAA and has determined that there is no material impact on the 2020 financial statements as a result of the CAA being signed into law.

CARES Act

On March 27, 2020, the CARES Act was enacted. The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic. Among other provisions, the CARES Act accelerates the remaining AMT credit refund allowances resulting in taxpayers being able to immediately claim a refund in full for any AMT credit carryforwards and deferral of certain 2020 payroll taxes. In the third quarter of 2020, Duke Energy received $572 million related to these AMT credit carryforwards and $19 million of interest income. In addition, the Company has deferred approximately $117 million of payroll taxes, with 50% payable by December 31, 2021, and the remaining 50% payable by December 31, 2022. The other provisions within the CARES Act do not materially impact Duke Energy's income tax accounting. See Note 1 for information on COVID-19.

Tax Act

On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35% to 21%, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate AMT and stipulates a refund of 50% of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019, and 2020, with all remaining AMT credits to be refunded in tax year 2021.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin (SAB) 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with SAB 118, a company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC Topic 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, a company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined.

As of December 31, 2018, the accounting for the effects of the Tax Act was complete. During the year ended December 31, 2018, Duke Energy recorded the following measurement period adjustments in accordance with SAB 118:

•Additional tax expense of $23 million related to the completion of the analysis of Duke Energy’s existing regulatory liability related to deferred taxes;

•A $10 million tax benefit for the remeasurement of deferred tax assets and deferred tax liabilities primarily related to the guidance on bonus depreciation issued by the IRS in August 2018, affecting the computation of the Company's 2017 Federal income tax liability;

•Additional tax expense of $7 million related to the portion of the deferred tax asset as of December 31, 2017, that represents nondeductible long-term incentives under the Tax Act’s limitation on the deductibility of executive compensation; and

•During the fourth quarter of 2018, the Company released the $76 million valuation allowance that it recorded in the first quarter of 2018 as a result of additional guidance published by the IRS that stated refundable AMT credits would not be subject to sequestration.

•The majority of Duke Energy’s operations are regulated and it is expected that the Subsidiary Registrants will ultimately pass on the savings associated with the amount representing the remeasurement of deferred tax balances related to regulated operations to customers. For Duke Energy's regulated operations, where the reduction is expected to be returned to customers in future rates, the remeasurement has been deferred as a regulatory liability. During 2018, Duke Energy recorded an additional regulatory liability of $83 million, representing the revaluation of those deferred tax balances. The Subsidiary Registrants continue to respond to requests from regulators in various jurisdictions to determine the timing and magnitude of savings they will pass on to customers.

In addition, during 2018, Duke Energy reclassified $573 million of AMT credit carryforwards from noncurrent deferred tax liabilities to a current federal income tax receivable. In 2019, Duke Energy received a refund of $573 million related to AMT credit carryforwards based on the filing of Duke Energy's 2018 income tax return in 2019 and reclassified $286 million of AMT credits from noncurrent deferred tax liabilities to a current federal income tax receivable.

Income Tax Expense

Components of Income Tax Expense

	Year Ended December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Current income taxes
Federal	$	(281)	$	314	$	280	$	181	$	148	$	10	$	48	$	(27)
State	(9)		35		29		17		24		1		7		(8)
Foreign	1		—		—		—		—		—		—		—
Total current income taxes	(289)		349		309		198		172		11		55		(35)
Deferred income taxes
Federal	155		(171)		(167)		(180)		1		30		12		60
State	(92)		(86)		(24)		(49)		25		2		17		(7)
Total deferred income taxes(a)	63		(257)		(191)		(229)		26		32		29		53
ITC amortization	(10)		(4)		(5)		(5)		—		—		—		—
Income tax (benefit) expense from continuing operations	(236)		88		113		(36)		198		43		84		18
Tax expense from discontinued operations	2		—		—		—		—		—		—		—
Total income tax (benefit) expense included in Consolidated Statements of Operations	$	(234)	$	88	$	113	$	(36)	$	198	$	43	$	84	$	18

(a)     Total deferred income taxes includes the generation of NOL carryforwards and tax credit carryforwards of $20 million at Duke Energy Carolinas, $3 million at Duke Energy Progress, $8 million at Duke Energy Indiana, and $11 million at Piedmont. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $39 million at Progress Energy, $30 million at Duke Energy Florida and $79 million at Duke Energy.

	Year Ended December 31, 2019
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Current income taxes
Federal	$	(299)	$	164	$	(173)	$	(36)	$	(43)	$	(41)	$	(23)	$	(92)
State	10		13		(7)		(3)		18		(1)		1		(1)
Foreign	2		—		—		—		—		—		—		—
Total current income taxes	(287)		177		(180)		(39)		(25)		(42)		(22)		(93)
Deferred income taxes
Federal	855		175		422		220		153		77		128		133
State	(38)		(37)		17		(18)		27		5		28		3
Total deferred income taxes(a)	817		138		439		202		180		82		156		136
ITC amortization	(11)		(4)		(6)		(6)		—		—		—		—
Income tax expense from continuing operations	519		311		253		157		155		40		134		43
Tax benefit from discontinued operations	(2)		—		—		—		—		—		—		—
Total income tax expense included in Consolidated Statements of Operations	$	517	$	311	$	253	$	157	$	155	$	40	$	134	$	43

(a)    Total deferred income taxes includes the generation of tax credit carryforwards of $8 million at Duke Energy Carolinas. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $243 million at Progress Energy, $35 million at Duke Energy Progress, $152 million at Duke Energy Florida, $25 million at Duke Energy Ohio, $60 million at Duke Energy Indiana, $90 million at Piedmont and $775 million at Duke Energy.

	Year Ended December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Current income taxes
Federal	$	(647)	$	(8)	$	(135)	$	(71)	$	(49)	$	20	$	29	$	67
State	(11)		6		(5)		(5)		(10)		(1)		3		1
Foreign	3		—		—		—		—		—		—		—
Total current income taxes	(655)		(2)		(140)		(76)		(59)		19		32		68
Deferred income taxes
Federal	1,064		299		341		256		115		21		74		(36)
State	49		11		20		(17)		45		3		22		5
Total deferred income taxes(a)(b)	1,113		310		361		239		160		24		96		(31)
ITC amortization	(10)		(5)		(3)		(3)		—		—		—		—
Income tax expense from continuing operations	448		303		218		160		101		43		128		37
Tax benefit from discontinued operations	(26)		—		—		—		—		—		—		—
Total income tax expense included in Consolidated Statements of Operations	$	422	$	303	$	218	$	160	$	101	$	43	$	128	$	37

(a)    Includes benefits of NOL carryforwards and tax credit carryforwards of $22 million at Duke Energy Carolinas, $293 million at Progress Energy, $59 million at Duke Energy Progress, $219 million at Duke Energy Florida, $17 million at Duke Energy Ohio, $21 million at Duke Energy Indiana and $39 million at Piedmont. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $18 million at Duke Energy.

(b)    For the year ended December 31, 2018, the Company has revised the December 31, 2017, estimates of the income tax effects of the Tax Act, in accordance with SAB 118. See the Statutory Rate Reconciliation section below for additional information on the Tax Act's impact on income tax expense    .

Duke Energy Income from Continuing Operations before Income Taxes

	Years Ended December 31,
(in millions)	2020		2019		2018
Domestic	$	826	$	4,053	$	3,018
Foreign	13		44		55
Income from continuing operations before income taxes	$	839	$	4,097	$	3,073

Statutory Rate Reconciliation

The following tables present a reconciliation of income tax expense at the U.S. federal statutory tax rate to the actual tax expense from continuing operations.

	Year Ended December 31, 2020
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Income tax expense, computed at the statutory rate of 21%	$	176		$	219		$	243		$	80		$	204		$	62		$	103		$	61
State income tax, net of federal income tax effect	(80)			(40)			4			(25)			39			2			19			(12)
Amortization of excess deferred income tax	(276)			(82)			(118)			(68)			(49)			(20)			(36)			(21)
AFUDC equity income	(48)			(13)			(9)			(6)			(3)			(2)			(4)			(10)
AFUDC equity depreciation	103			19			10			5			5			1			4			—
Noncontrolling Interests	62			—			—			—			—			—			—			—
Renewable energy PTCs	(110)			—			—			—			—			—			—			—
Other tax credits	(37)			(13)			(16)			(14)			(2)			(1)			(3)			(2)
Tax true up	(12)			(3)			1			(5)			5			—			(1)			1
Other items, net	(14)			1			(2)			(3)			(1)			1			2			1
Income tax (benefit) expense from continuing operations	$	(236)		$	88		$	113		$	(36)		$	198		$	43		$	84		$	18
Effective tax rate	(28.1)		%	8.4		%	9.7		%	(9.5)		%	20.4		%	14.6		%	17.1		%	6.2		%

	Year Ended December 31, 2019
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Income tax expense, computed at the statutory rate of 21%	$	860		$	360		$	332		$	202		$	178		$	59		$	120		$	51
State income tax, net of federal income tax effect	(22)			(19)			8			(17)			35			3			22			2
Amortization of excess deferred income tax	(121)			(29)			(64)			(10)			(54)			(12)			(6)			(10)
AFUDC equity income	(52)			(9)			(14)			(13)			(1)			(3)			(3)			—
AFUDC equity depreciation	34			19			10			5			5			1			4			—
Renewable energy PTCs	(120)			—			—			—			—			—			—			—
Other tax credits	(23)			(11)			(9)			(7)			(2)			(1)			(1)			(1)
Tax true up	(64)			(9)			(8)			(3)			(5)			(7)			(1)			—
Other items, net	27			9			(2)			—			(1)			—			(1)			1
Income tax expense from continuing operations	$	519		$	311		$	253		$	157		$	155		$	40		$	134		$	43
Effective tax rate	12.7		%	18.1		%	16.0		%	16.3		%	18.3		%	14.3		%	23.5		%	17.6		%

	Year Ended December 31, 2018
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Income tax expense, computed at the statutory rate of 21%	$	645		$	288		$	263		$	174		$	137		$	46		$	109		$	35
State income tax, net of federal income tax effect	30			14			13			(17)			28			2			20			4
Amortization of excess deferred income tax	(61)			—			(55)			(1)			(54)			(3)			(2)			—
AFUDC equity income	(42)			(15)			(22)			(12)			(10)			(2)			(2)			—
AFUDC equity depreciation	31			18			9			5			4			1			4			—
Renewable energy PTCs	(129)			—			—			—			—			—			—			—
Other tax credits	(28)			(7)			(13)			(5)			(8)			(1)			(1)			(3)
Tax Act(a)	20			1			25			19			—			2			—			—
Other items, net	(18)			4			(2)			(3)			4			(2)			—			1
Income tax expense from continuing operations	$	448		$	303		$	218		$	160		$	101		$	43		$	128		$	37
Effective tax rate	14.6		%	22.1		%	17.4		%	19.3		%	15.4		%	19.6		%	24.6		%	22.3		%

(a)     For the year ended December 31, 2018, the Company revised the December 31, 2017, estimates of the income tax effects of the Tax Act, in accordance with SAB 118. Amounts primarily include but are not limited to items that are excluded for ratemaking purposes related certain wholesale fixed-rate contracts, remeasurement of nonregulated net deferred tax liabilities, Federal NOLs, and valuation allowance on foreign tax credits.

Valuation allowances have been established for certain state NOL carryforwards and state income tax credits that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in State income tax, net of federal income tax effect, in the above tables.

Valuation allowances have been established for foreign tax credits that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in Tax Act in the above tables.

DEFERRED TAXES

Net Deferred Income Tax Liability Components

	December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Deferred credits and other liabilities	$	286	$	85	$	87	$	67	$	18	$	21	$	7	$	38
Lease obligations	515		96		208		120		87		5		16		5
Pension, post-retirement and other employee benefits	236		(30)		68		24		38		16		26		(5)
Progress Energy merger purchase accounting adjustments(a)	441		—		—		—		—		—		—		—
Tax credits and NOL carryforwards	3,909		285		508		179		282		16		183		29
Regulatory liabilities and deferred credits	—		11		—		—		—		18		—		—
Investments and other assets	—		—		—		—		—		7				—
Other	93		8		14		9		4		7		1		8
Valuation allowance	(586)		—		—		—		—		—		—		—
Total deferred income tax assets	4,894		455		885		399		429		90		233		75
Investments and other assets	(2,267)		(1,127)		(669)		(507)		(164)		—		(14)		(48)
Accelerated depreciation rates	(10,729)		(3,170)		(3,868)		(1,778)		(2,124)		(1,071)		(1,433)		(844)
Regulatory assets and deferred debits, net	(1,142)		—		(744)		(412)		(332)		—		(14)		(4)
Total deferred income tax liabilities	(14,138)		(4,297)		(5,281)		(2,697)		(2,620)		(1,071)		(1,461)		(896)
Net deferred income tax liabilities	$	(9,244)	$	(3,842)	$	(4,396)	$	(2,298)	$	(2,191)	$	(981)	$	(1,228)	$	(821)

(a)    Primarily related to lease obligations and debt fair value adjustments.

The following table presents the expiration of tax credits and NOL carryforwards.

	December 31, 2020
(in millions)	Amount		Expiration Year
General Business Credits	$	2,033	2024	—	2040
Federal NOL carryforwards(a) (f)	154		2024	—	Indefinite
Capital loss carryforward(e)	85		2024
State carryforwards and credits(b) (f)	340		2021	—	Indefinite
Foreign NOL carryforwards(c)	12		2027	—	2037
Foreign Tax Credits(d)	1,272		2024	—	2027
Charitable contribution carryforwards	13		2025
Total tax credits and NOL carryforwards	$	3,909

(a)    A valuation allowance of $4 million has been recorded on the Federal NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.

(b)    A valuation allowance of $97 million has been recorded on the state NOL and attribute carryforwards, as presented in the Net Deferred Income Tax Liability Components table.

(c)    A valuation allowance of $12 million has been recorded on the foreign NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.

(d)    A valuation allowance of $388 million has been recorded on the foreign tax credits, as presented in the Net Deferred Income Tax Liability Components table.

(e)    A valuation allowance of $85 million has been recorded on the Federal capital loss carryforward, as presented in the Net Deferred Income Tax Liability Components table.

(f)    Indefinite carryforward for Federal NOLs, and NOLs for states that have adopted the Tax Act's NOL provisions, generated in tax years beginning after December 31, 2017.

	December 31, 2019
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Deferred credits and other liabilities	$	125	$	24	$	25	$	49	$	—	$	14	$	5	$	22
Lease obligations	462		72		193		92		102		5		17		6
Pension, post-retirement and other employee benefits	303		(5)		88		38		44		17		27		(3)
Progress Energy merger purchase accounting adjustments(a)	389		—		—		—		—		—		—		—
Tax credits and NOL carryforwards	3,925		262		486		176		253		16		176		19
Regulatory liabilities and deferred credits	—		—		—		—		—		36		52		42
Investments and other assets	—		—		—		—		—		10		—		2
Other	97		5		8		3		2		8		1		6
Valuation allowance	(587)		—		—		—		—		—		—		—
Total deferred income tax assets	4,714		358		800		358		401		106		278		94
Investments and other assets	(1,664)		(981)		(577)		(390)		(190)		—		(12)		—
Accelerated depreciation rates	(10,813)		(3,254)		(3,798)		(1,918)		(1,913)		(1,028)		(1,416)		(802)
Regulatory assets and deferred debits, net	(1,115)		(44)		(887)		(438)		(477)		—		—		—
Total deferred income tax liabilities	(13,592)		(4,279)		(5,262)		(2,746)		(2,580)		(1,028)		(1,428)		(802)
Net deferred income tax liabilities	$	(8,878)	$	(3,921)	$	(4,462)	$	(2,388)	$	(2,179)	$	(922)	$	(1,150)	$	(708)

(a)    Primarily related to finance lease obligations and debt fair value adjustments.

UNRECOGNIZED TAX BENEFITS

The following tables present changes to unrecognized tax benefits.

	Year Ended December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Unrecognized tax benefits – January 1	$	126	$	8	$	9	$	6	$	3	$	1	$	1	$	4
Gross decreases – tax positions in prior periods	(2)		—		—		—		—		—		—		—
Gross increases – current period tax positions	4		2		1		—		—		—		—		—
Reduction due to lapse of statute of limitations	(3)		—		—		—		—		—		—		(3)
Total changes	(1)		2		1		—		—		—		—		(3)
Unrecognized tax benefits – December 31	$	125	$	10	$	10	$	6	$	3	$	1	$	1	$	1

	Year Ended December 31, 2019
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Unrecognized tax benefits – January 1	$	24	$	6	$	9	$	6	$	3	$	1	$	1	$	4
Unrecognized tax benefits increases	105		2		1		1		—		—		—		—
Gross decreases – tax positions in prior periods	(3)		—		(1)		(1)		—		—		—		—
Total changes	102		2		—		—		—		—		—		—
Unrecognized tax benefits – December 31	$	126	$	8	$	9	$	6	$	3	$	1	$	1	$	4

	Year Ended December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Unrecognized tax benefits – January 1	$	25	$	5	$	5	$	5	$	5	$	1	$	1	$	3
Unrecognized tax benefits increases (decreases)
Gross decreases – tax positions in prior periods	(2)		(1)		—		—		(4)		—		—		—
Gross increases – tax positions in prior periods	7		2		4		1		2		—		—		1
Decreases due to settlements	(6)		—		—		—		—		—		—		—
Total changes	(1)		1		4		1		(2)		—		—		1
Unrecognized tax benefits – December 31	$	24	$	6	$	9	$	6	$	3	$	1	$	1	$	4

The following table includes additional information regarding the Duke Energy Registrants' unrecognized tax benefits at December 31, 2020. Duke Energy Registrants do not anticipate a material increase or decrease in unrecognized tax benefits within the next 12 months.

	December 31, 2020
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Amount that if recognized, would affect the effective tax rate or regulatory liability(a)	$	122	$	10	$	10	$	6	$	3	$	1	$	1	$	1

(a)    The Duke Energy Registrants are unable to estimate the specific amounts that would affect the ETR versus the regulatory liability.

Duke Energy and its subsidiaries are no longer subject to U.S. federal examination for years before 2016. With few exceptions, Duke Energy and its subsidiaries are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 2016.