INCOME TAXES

Federal Tax Reform

The TCJA was enacted on December 22, 2017. Substantially all of the provisions of the TCJA affecting the Ameren Companies, other than certain transition depreciation rules, are effective for taxable years beginning after December 31, 2017. The TCJA includes significant changes to the Internal Revenue Code, including amendments that significantly change the taxation of business entities and specific provisions related to regulated public utilities. The most significant change that affects the Ameren Companies is the reduction in the federal corporate statutory income tax rate from 35% to 21%. Specific provisions related to regulated public utilities generally allow for the continued deductibility of interest expense, the elimination of accelerated depreciation tax benefits from certain regulated utility capital investments acquired after September 27, 2017, and the continuation of certain rate normalization requirements related to the flow back of excess deferred taxes. Ameren (parent) will be subject to provisions of the TCJA that limit the deductibility of interest expense.

In accordance with GAAP, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted. GAAP also requires deferred tax assets and liabilities to be measured at the tax rate that is expected to apply when temporary differences are realized or settled. Thus, in December 2017, the Ameren Companies’ deferred taxes were revalued using the new tax rate. To the extent deferred tax balances are included in rate base, the revaluation of deferred taxes was deferred as a regulatory asset or liability on the balance sheet and will be collected from or refunded to customers. For deferred tax balances not included in rate base, the revaluation of deferred taxes was recorded as income tax expense.

As a result of the complexity of the TCJA, the SEC staff issued guidance to clarify the accounting for income taxes if information is not yet available or complete. This guidance provides for up to a one year period in which to complete the required analysis and update provisional estimates. The guidance provides three scenarios associated with a company’s status of accounting for income tax reform: (1) a company has completed its accounting for certain effects of tax reform, (2) a company is able to make a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to make a reasonable estimate and therefore continues to apply income tax accounting that is based on the tax laws in effect immediately prior to the enactment of the TCJA.

As of December 31, 2017, the Ameren Companies have made reasonable estimates for the measurement and accounting of certain effects of the TCJA, which have been reflected in their financial statements. We have recorded provisional estimates primarily related to depreciation transition rules and 2017 property, plant, and equipment, compensation, and pension-related deductions which would impact our revaluation of deferred taxes at December 31, 2017. These items may be resolved through additional analysis, which is incomplete due to the timing of the enactment of the TCJA and complexity associated with applying its provisions. Additionally, interpretations, regulations, amendments, and technical corrections of the TCJA by various regulators could also resolve provisional items. The TCJA had the following provisional effects for the year ended December 31, 2017:



	Ameren Missouri			Ameren Illinois			Other			Ameren
Increase (Decrease)
Accumulated deferred income taxes, net	$	(1,419	)	$	(871	)	$	37		$	(2,253	)
Income tax expense (benefit)^(a)	32			(5		)	127			154
Noncurrent regulatory assets	(89		)	(24		)	(1		)	(114		)
Noncurrent regulatory liabilities	1,362			842			89			2,293

For our regulated operations, reductions in accumulated deferred income tax balances due to the reduction in the federal statutory corporate income tax rate to 21% will result in amounts previously collected from utility customers for these deferred taxes being refundable to those customers, generally through reductions in future rates. The TCJA includes provisions related to the IRS normalization rules that address the time period in which certain plant-related components of the excess deferred taxes are to be reflected in customer rates. This time period for the Ameren Companies is approximately 35 to 60 years. Other components of the excess deferred taxes will be reflected in customer rates as determined by our state and federal regulators, which could be a shorter time period than that applicable to certain plant-related components. See Note 2 – Rate and Regulatory Matters for information regarding the various proceedings for the TCJA impacts with our regulators.

Illinois Income Tax Rate

In July 2017, Illinois enacted a law that increased the state’s corporate income tax rate from 7.75% to 9.5% as of July 1, 2017. The law made the increase in the state’s corporate income tax rate permanent. That rate was previously scheduled to go to 7.3% in 2025. In July 2017, Ameren recorded an expense of $14 million at Ameren (parent) due to the revaluation of accumulated deferred taxes and the estimated state apportionment of such taxes. Beyond this expense, Ameren does not expect this tax increase to have a material impact on its consolidated net income prospectively. The tax increase is not expected to materially impact the earnings of the Ameren Illinois Electric Distribution, the Ameren Transmission, or the Ameren Illinois Transmission segments, since these businesses operate under formula ratemaking frameworks. The tax increase unfavorably affected the 2017 net income of the Ameren Illinois Natural Gas segment by less than $1 million. In addition, in the third quarter of 2017, Ameren’s and Ameren Illinois’ accumulated deferred tax balances were revalued using the state’s new corporate income tax rate, which resulted in a net increase to the liability balances of $97 million and $79 million, respectively. These increased liabilities were offset by a regulatory asset, as well as income tax expense, as discussed above.

The following table presents the principal reasons for the difference between the effective income tax rate and the federal statutory corporate income tax rate for the years ended December 31, 2017, 2016, and 2015:



	Ameren Missouri		Ameren Illinois		Ameren
2017
Federal statutory corporate income tax rate:	35	%	35	%	35	%
Increases (decreases) from:
Depreciation differences	1		(1	)	—
Amortization of deferred investment tax credit	(1	)	—		(1	)
State tax	4		6		6
TCJA	6		(1	)	14
Tax credits	(1	)	—		—
Other permanent items	—		(1	)	(2	)
Effective income tax rate	44	%	38	%	52	%
2016
Federal statutory corporate income tax rate:	35	%	35	%	35	%
Increases (decreases) from:
Depreciation differences	1		—		—
Amortization of deferred investment tax credit	(1	)	—		—
State tax	3		5		4
Stock-based compensation^(a)	—		—		(2	)
Valuation allowance	—		—		1
Other permanent items	—		(2	)	(1	)
Effective income tax rate	38	%	38	%	37	%
2015
Federal statutory corporate income tax rate:	35	%	35	%	35	%
Increases (decreases) from:
Depreciation differences	—		(2	)	(1	)
Amortization of deferred investment tax credit	(1	)	—		(1	)
State tax	3		5		5
Other permanent items	—		(1	)	—
Effective income tax rate	37	%	37	%	38	%


(a)	Reflects the adoption of authoritative accounting guidance related to share-based compensation, which resulted in the recognition of a $21 million income tax benefit in 2016.

The following table presents the components of income tax expense for the years ended December 31, 2017, 2016, and 2015:



	Ameren Missouri			Ameren Illinois			Other			Ameren
2017
Current taxes:
Federal	$	149		$	(34	)	$	(110	)	$	5
State	23			29			(20		)	32
Deferred taxes:
Federal	76			185			250			511
State	11			(13		)	36			34
Amortization of deferred investment tax credits	(5		)	(1		)	—			(6		)
Total income tax expense	$	254		$	166		$	156		$	576
2016
Current taxes:
Federal	$	31		$	(8	)	$	(24	)	$	(1	)
State	6			12			(21		)	(3		)
Deferred taxes:
Federal	161			117			21			299
State	23			37			32			92
Amortization of deferred investment tax credits	(5		)	—			—			(5		)
Total income tax expense	$	216		$	158		$	8		$	382
2015
Current taxes:
Federal	$	110		$	(83	)	$	(29	)	$	(2	)
State	17			(11		)	(10		)	(4		)
Deferred taxes:
Federal	71			193			35			299
State	16			29			31			76
Amortization of deferred investment tax credits	(5		)	(1		)	—			(6		)
Total income tax expense	$	209		$	127		$	27		$	363

The following table presents the accumulated deferred income tax assets and liabilities recorded as a result of temporary differences at December 31, 2017 and 2016:



	Ameren Missouri			Ameren Illinois			Other			Ameren
2017
Accumulated deferred income taxes, net liability (asset):
Plant related	$	2,064		$	1,264		$	146		$	3,474
Regulatory assets and liabilities, net	(317		)	(206		)	(24		)	(547		)
Deferred employee benefit costs	(53		)	(17		)	(61		)	(131		)
Revenue requirement reconciliation adjustments	—			20			—			20
Tax carryforwards	(31		)	(43		)	(287		)	(361		)
Other	(13		)	3			61			51
Total net accumulated deferred income tax liabilities (assets)	$	1,650		$	1,021		$	(165	)	$	2,506
2016
Accumulated deferred income taxes, net liability (asset):
Plant related	$	3,103		$	1,769		$	147		$	5,019
Regulatory assets and liabilities, net	75			(1		)	—			74
Deferred employee benefit costs	(76		)	(38		)	(97		)	(211		)
Revenue requirement reconciliation adjustments	—			34			—			34
Tax carryforwards	(66		)	(138		)	(472		)	(676		)
Other	(23		)	5			42			24
Total net accumulated deferred income tax liabilities (assets)	$	3,013		$	1,631		$	(380	)	$	4,264

The following table presents the components of accumulated deferred income tax assets relating to net operating loss carryforwards, tax credit carryforwards, and charitable contribution carryforwards at December 31, 2017 and 2016:



	Ameren Missouri		Ameren Illinois		Other			Ameren
2017
Net operating loss carryforwards:
Federal^(a)	$	—	$	41	$	162		$	203
State^(a)	—		—		32			32
Total net operating loss carryforwards	$	—	$	41	$	194		$	235
Tax credit carryforwards:
Federal^(b)	$	31	$	2	$	80		$	113
State^(c)	—		—		7			7
Total tax credit carryforwards	$	31	$	2	$	87		$	120
Charitable contribution carryforwards^(d)	$	—	$	—	$	11		$	11
Valuation allowance^(e)	—		—		(5		)	(5		)
Total charitable contribution carryforwards	$	—	$	—	$	6		$	6
2016
Net operating loss carryforwards:
Federal	$	33	$	137	$	324		$	494
State	4		—		41			45
Total net operating loss carryforwards	$	37	$	137	$	365		$	539
Tax credit carryforwards:
Federal	$	29	$	1	$	79		$	109
State	—		—		21			21
Total tax credit carryforwards	$	29	$	1	$	100		$	130
Charitable contribution carryforwards	$	—	$	—	$	18		$	18
Valuation allowance	—		—		(11		)	(11		)
Total charitable contribution carryforwards	$	—	$	—	$	7		$	7


(a)	Will expire between 2033 and 2036. Any net operating loss carryforward generated after January 1, 2018, will not have an expiration date as a result of the TCJA.


(b)	Will expire between 2029 and 2037.


(c)	Will expire between2019 and 2022.


(d)	Will expire between 2018 and 2021.


(e)	See Schedule II under Part IV, Item 15, in this report for information on changes in the valuation allowance.

Uncertain Tax Positions

As of December 31, 2017 and 2016, the Ameren Companies did not record any uncertain tax positions.

In 2015, final settlements for tax years 2012 and 2013 were reached with the IRS. The 2015 settlement of the 2013 tax year affected discontinued operations. See Note 1 – Summary of Significant Accounting Policies for additional information.

State income tax returns are generally subject to examination for a period of three years after filing. The state impact of any federal changes remains subject to examination by various states for up to one year after formal notification to the states. The Ameren Companies currently do not have material state income tax issues under examination, administrative appeals, or litigation.

Ameren Missouri has an uncertain tax position tracker. Under Missouri’s regulatory framework, uncertain tax positions do not reduce Ameren Missouri’s electric rate base. When an uncertain income tax position liability is resolved, the MoPSC requires, through the uncertain tax position tracker, the creation of a regulatory asset or regulatory liability to reflect the time value, using the weighted-average cost of capital included in each of the electric rate orders in effect before the tax position was resolved, of the difference between the uncertain tax position liability that was excluded from rate base and the final tax liability. The resulting regulatory asset or liability will affect earnings in the year it is created. It will then will be amortized over three years, beginning on the effective date of new rates established in the next electric regulatory rate review.