Income Taxes

On December 22, 2017, tax reform legislation was signed into law which, among other things, reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, NEE, including FPL, performed an analysis to preliminarily revalue its deferred income taxes and included an estimate of changes in the balances in NEE's and FPL's December 31, 2017 financial statements. At December 31, 2017, the revaluation reduced NEE’s net deferred income tax liabilities by approximately $6.5 billion, of which $4.5 billion related to net deferred income tax liabilities at FPL and the remaining $2 billion related to net deferred income tax liabilities at NEER. The $2 billion reduction in NEER’s deferred income tax liabilities increased NEER’s 2017 net income. The $4.5 billion reduction in FPL’s deferred income tax liabilities was recorded as a regulatory liability. While NEE and FPL believe that the provisional tax reform adjustments are reasonable estimates of the effects on its existing deferred taxes, additional analysis and detailed reviews are still being performed to finalize the accounting for the remeasurement of deferred tax assets and liabilities as a result of the enactment of tax reform.

The components of income taxes are as follows:



	NEE								FPL
	Years Ended December 31,								Years Ended December 31,
	2017			2016		2015			2017		2016		2015
	(millions)
Federal:
Current	$	100		$	72	$	10		$	168	$	72	$	423
Deferred	(1,040		)	1,075		1,194			776		830		399
Total federal	(940		)	1,147		1,204			944		902		822
State:
Current	88			76		31			29		57		58
Deferred	199			160		(7		)	133		92		77
Total state	287			236		24			162		149		135
Total income tax expense (benefit)	$	(653	)	$	1,383	$	1,228		$	1,106	$	1,051	$	957

A reconciliation between the effective income tax rates and the applicable statutory rate is as follows:



	NEE						FPL
	Years Ended December 31,						Years Ended December 31,
	2017		2016		2015		2017		2016		2015
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
Increases (reductions) resulting from:
State income taxes - net of federal income tax benefit	2.9		3.5		0.4		3.5		3.5		3.4
Tax reform rate change	(41.2	)	—		—		(0.5	)	—		—
PTCs and ITCs - NEER	(8.4	)	(3.9	)	(4.1	)	—		—		—
Convertible ITCs - NEER	0.6		(1.7	)	(0.8	)	—		—		—
Adjustments associated with Canadian assets	—		(0.7	)	—		—		—		—
Other - net	(2.9	)	(0.7	)	0.3		(1.0	)	(0.7	)	(1.7	)
Effective income tax rate	(14.0	)%	31.5	%	30.8	%	37.0	%	37.8	%	36.7	%

The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:



	NEE						FPL
	December 31,						December 31,
	2017			2016			2017		2016
	(millions)
Deferred tax liabilities:
Property-related	$	9,030		$	13,094		$	6,045	$	8,882
Pension	364			454			342		502
Nuclear decommissioning trusts	226			253			—		—
Net unrealized gains on derivatives	263			581			—		—
Investments in partnerships and joint ventures	442			603			—		—
Other	871			1,272			584		796
Total deferred tax liabilities	11,196			16,257			6,971		10,180
Deferred tax assets and valuation allowance:
Decommissioning reserves	306			454			271		401
Postretirement benefits	74			145			57		93
Net operating loss carryforwards	482			427			3		3
Tax credit carryforwards	3,126			3,059			—		—
ARO and accrued asset removal costs	210			777			146		699
Regulatory liabilities^(a)	1,267			84			1,273		84
Other	646			940			216		359
Valuation allowance^(b)	(252		)	(269		)	—		—
Net deferred tax assets	5,859			5,617			1,966		1,639
Net deferred income taxes	$	5,337		$	10,640		$	5,005	$	8,541

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(a)	2017 reflects the tax gross up of regulatory liabilities associated with tax reform.


(b)	Reflects a valuation allowance related to the solar projects in Spain, deferred state tax credits and state operating loss carryforwards.

Deferred tax assets and liabilities are included on the consolidated balance sheets as follows:



	NEE						FPL
	December 31,						December 31,
	2017			2016			2017			2016
				(millions)
Noncurrent other assets	$	417		$	461		$	—		$	—
Deferred income taxes - noncurrent liabilities	(5,754		)	(11,101		)	(5,005		)	(8,541		)
Net deferred income taxes	$	(5,337	)	$	(10,640	)	$	(5,005	)	$	(8,541	)

The components of NEE's deferred tax assets relating to net operating loss carryforwards and tax credit carryforwards at December 31, 2017 are as follows:



	Amount			Expiration Dates
	(millions)
Net operating loss carryforwards:
Federal	$	158		2026-2037
State	232			2018-2037
Foreign	92		^(a)	2018-2036
Net operating loss carryforwards	$	482
Tax credit carryforwards:
Federal	$	2,779		2026-2037
State	347		^(b)	2018-2044
Tax credit carryforwards	$	3,126

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(a)	Includes $64 million of net operating loss carryforwards with an indefinite expiration period.


(b)	Includes $188 million of ITC carryforwards with an indefinite expiration period.