Income Taxes

3 Months Ended

Mar. 31, 2018

The following table details the effective tax rates for the three months ended March 31, 2018 and 2017.



	Three months ended
	March 31,
	2018	2017
DPL	17.6%	37.9%

Income tax expense for the three months ended March 31, 2018 and 2017 was calculated using the estimated annual effective income tax rates for 2018 and 2017 of 19.2% and 37.6%, respectively. Management estimates the annual effective tax rate based on its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the estimated rates could be materially different from the actual effective tax rates.

The decrease in the estimated annual effective rate compared to the same period in 2017 is primarily due to the effects of the TCJA. The primary impact of the TCJA was lowering of the statutory corporate income tax rate to 21% from 35% effective January 1, 2018. The rate was further decreased by the change in estimated flow-through depreciation. These decreases were partially offset by the repeal of the manufacturer’s production deduction

For the three months ended March 31, 2018, DPL’s current period effective tax rate was lower than the estimated annual effective rate primarily due to discrete tax items relating to the Beckjord Facility and Peaker Assets transactions (see Note 14 – Dispositions).

Per the terms of DP&L's 2017 ESP, DPL will not make any tax-sharing payments to AES and AES will forgo collection of the payments during the term of the DMR. As such, during the first quarter of 2018 we converted $45.1 million of accrued tax sharing liabilities with AES to additional equity investment in DPL.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Entity Information [Line Items]

Income Taxes

The following table details the effective tax rates for the three months ended March 31, 2018 and 2017.



	Three months ended
	March 31,
	2018	2017
DP&L	18.7%	32.0%

Income tax expense for the three months ended March 31, 2018 and 2017 was calculated using the estimated annual effective income tax rates for 2018 and 2017 of 19.8% and 33.8%, respectively. Management estimates the annual effective tax rate based on its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the estimated rates could be materially different from the actual effective tax rates.

For the three months ended March 31, 2018, DP&L’s current period effective tax rate was lower than the estimated annual effective rate primarily due to discrete tax items relating to the Beckjord Facility transaction (see Note 14 – Dispositions).