Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

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with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate AMT and stipulates a refund of 50% of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax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, 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.

	Year Ended December 31, 2017
				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	$	(247	)	$	221		$	(436	)	$	(95	)	$	(188	)	$	(37	)	$	128	$	(90	)
State	4			20			(5		)	2			(11		)	2			21		(3		)
Foreign	3			—			—			—			—			—			—		—
Total current income taxes	(240		)	241			(441		)	(93		)	(199		)	(35		)	149		(93		)
Deferred income taxes
Federal	1,344			381			664			378			194			99			138		147
State	102			35			44			10			51			(4		)	14		8
Total deferred income taxes(a)(b)	1,446			416			708			388			245			95			152		155
ITC amortization	(10		)	(5		)	(3		)	(3		)	—			(1		)	—		—
Income tax expense from continuing operations	1,196			652			264			292			46			59			301		62
Tax benefit from discontinued operations	(6		)	—			—			—			—			—			—		—
Total income tax expense included in Consolidated Statements of Operations	$	1,190		$	652		$	264		$	292		$	46		$	59		$	301	$	62

(a) Includes utilization of NOL carryforwards and tax credit carryforwards of $428 million at Duke Energy, $74 million at Progress Energy, $36 million at Duke Energy Florida, $17 million at Duke Energy Ohio, $42 million at Duke Energy Indiana and $79 million at Piedmont. In addition, total deferred income taxes includes benefits of NOL carryforwards and tax credit carryforwards of $10 million at Duke Energy Carolinas and $1 million at Duke Energy Progress.

(b) As a result of the Tax Act, Duke Energy's deferred tax assets and liabilities were revalued as of December 31, 2017. 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)	2019		2018		2017
Domestic(a)	$	4,053	$	3,018	$	4,207
Foreign	44		55		59
Income from continuing operations before income taxes	$	4,097	$	3,073	$	4,266

(a) Includes a $16 million expense in 2017 related to the Tax Act impact on equity earnings included within Equity in earnings of unconsolidated affiliates on the Consolidated Statement of Operations.

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, 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.

	Year Ended December 31, 2017
				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 35%	$	1,493		$	653		$	536		$	353		$	265		$	88		$	229		$	70
State income tax, net of federal income tax effect	69			36			25			8			26			(1		)	23			3
AFUDC equity income	(81		)	(37		)	(32		)	(17		)	(16		)	(4		)	(8		)	—
Renewable energy PTCs	(132		)	—			—			—			—			—			—			—
Tax Act(a)	(112		)	15			(246		)	(40		)	(226		)	(23		)	55			(12		)
Tax true up	(52		)	(24		)	(19		)	(13		)	(7		)	(5		)	(6		)	—
Other items, net	11			9			—			1			4			4			8			1
Income tax expense from continuing operations	$	1,196		$	652		$	264		$	292		$	46		$	59		$	301		$	62
Effective tax rate	28.0		%	34.9		%	17.2		%	29.0		%	6.1		%	23.4		%	46.0		%	30.8		%

(a) Amounts primarily include but are not limited to items that are excluded for ratemaking purposes related to abandoned or impaired assets, 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, 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.

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

	December 31, 2019
(in millions)	Amount		Expiration Year
General Business Credits	$	1,821	2024	—	2039
AMT credits	286		Refundable by 2021
Federal NOL carryforwards(a) (f)	169		2024	—	Indefinite
Capital loss carryforward(e)	87		2024
State carryforwards and credits(b) (f)	303		2020	—	Indefinite
Foreign NOL carryforwards(c)	12		2027	—	2037
Foreign Tax Credits(d)	1,237		2024	—	2027
Charitable contribution carryforwards	10		2020	—	2024
Total tax credits and NOL carryforwards	$	3,925

(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 credit 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 $387 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 $87 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, 2018
				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	$	164		$	64		$	35		$	53		$	—		$	17		$	6		$	17
Finance lease obligations	60			26			—			—			—			—			2			—
Pension, post-retirement and other employee benefits	347			24			110			47			58			16			24			(1		)
Progress Energy merger purchase accounting adjustments(a)	483			—			—			—			—			—			—			—
Tax credits and NOL carryforwards	4,580			257			693			215			363			42			237			110
Regulatory liabilities and deferred credits	—			—			—			—			—			56			—			48
Investments and other assets	—			—			—			—			—			18			—			16
Other	25			6			5			5			—			1			(1		)	—
Valuation allowance	(484		)	—			—			—			—			—			—			—
Total deferred income tax assets	5,175			377			843			320			421			150			268			190
Investments and other assets	(1,317		)	(795		)	(430		)	(272		)	(163		)	—			(5		)	—
Accelerated depreciation rates	(10,124		)	(3,207		)	(3,369		)	(1,735		)	(1,670		)	(967		)	(1,081		)	(733		)
Regulatory assets and deferred debits, net	(1,540		)	(64		)	(985		)	(432		)	(574		)	—			(191		)	—
Other	—			—			—			—			—			—			—			(8		)
Total deferred income tax liabilities	(12,981		)	(4,066		)	(4,784		)	(2,439		)	(2,407		)	(967		)	(1,277		)	(741		)
Net deferred income tax liabilities	$	(7,806	)	$	(3,689	)	$	(3,941	)	$	(2,119	)	$	(1,986	)	$	(817	)	$	(1,009	)	$	(551	)

(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, 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 benefit 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

	Year Ended December 31, 2017
				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	$	17		$	1	$	2	$	2	$	4	$	4		$	—	$	—
Unrecognized tax benefits increases (decreases)
Gross increases – tax positions in prior periods	12			4		3		3		1		1			1		3
Gross decreases – tax positions in prior periods	(4		)	—		—		—		—		(4		)	—		—
Total changes	8			4		3		3		1		(3		)	1		3
Unrecognized tax benefits – December 31	$	25		$	5	$	5	$	5	$	5	$	1		$	1	$	3

The following table includes additional information regarding the Duke Energy Registrants' unrecognized tax benefits at December 31, 2019. It is reasonably possible that Duke Energy will reflect a $3 million decrease in unrecognized tax benefits within the next 12 months.

	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
Amount that if recognized, would affect the effective tax rate or regulatory liability(a)	$	122	$	8	$	9	$	6	$	3	$	1	$	1	$	4

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

OTHER TAX MATTERS

The following tables include interest recognized in the Consolidated Statements of Operations and the Consolidated Balance Sheets.

	Year Ended December 31, 2019
					Duke
	Duke		Progress		Energy
(in millions)	Energy		Energy		Progress		Piedmont
Net interest income recognized related to income taxes	$	16	$	1	$	1	$	—
Interest receivable related to income taxes	1		—		—		—
Interest payable related to income taxes	1		—		—		1

	Year Ended December 31, 2018
					Duke
	Duke		Progress		Energy
(in millions)	Energy		Energy		Progress
Net interest income recognized related to income taxes	$	2	$	—	$	—
Interest payable related to income taxes	3		1		1

	Year Ended December 31, 2017
			Duke				Duke		Duke
	Duke		Energy		Progress		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida
Net interest income recognized related to income taxes	$	—	$	—	$	1	$	—	$	1
Net interest expense recognized related to income taxes	—		2		—		—		—
Interest payable related to income taxes	5		25		1		1		—

 

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.