Income Taxes

The components of CenterPoint Houston’s income tax expense were as follows:



	Year Ended December 31,
	2015		2014			2013
	(in millions)
Current income tax expense:
Federal	$	106	$	136		$	201
State	21		19			20
Total current expense	127		155			221
Deferred income tax expense (benefit):
Federal	18		(24		)	(75		)
Total deferred expense (benefit)	18		(24		)	(75		)
Total income tax expense	$	145	$	131		$	146

A reconciliation of income tax expense using the federal statutory income tax rate to the actual income tax expense and resulting effective income tax rate is as follows:



	Year Ended December 31,
	2015			2014			2013
	(in millions)
Income before income taxes	$	406		$	383		$	415
Federal statutory income tax rate	35.0		%	35.0		%	35.0		%
Expected federal income tax expense	142			134			145
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	14			12			13
Decrease in settled and uncertain tax positions	—			—			(5		)
Other, net	(11		)	(15		)	(7		)
Total	3			(3		)	1
Total income tax expense	$	145		$	131		$	146
Effective tax rate	35.7		%	34.2		%	35.2		%

In 2014, CenterPoint Houston recognized a $6 million reversal of previously accrued taxes as a result of final positions taken in the 2013 income tax returns. CenterPoint Houston recognized a tax benefit of $5 million from favorable audit settlements for the year ended December 31, 2013.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:



	December 31,
	2015		2014
	(in millions)
Deferred tax assets:
Benefits and compensation	$	69	$	92
Loss and credit carryforwards	6		—
Asset retirement obligations	13		12
Other	7		7
Total deferred tax assets	95		111

Deferred tax liabilities:
Property, plant, and equipment	1,447		1,284
Regulatory assets/liabilities, net	680		826
Total deferred tax liabilities	2,127		2,110
Net deferred tax liabilities	$	2,032	$	1,999

Effective December 31, 2015, all deferred taxes for 2014 and 2015 are classified as noncurrent. See Note 2.

CenterPoint Houston is included in the consolidated income tax returns of CenterPoint Energy. CenterPoint Houston calculates its income tax provision on a separate return basis under a tax sharing agreement with CenterPoint Energy.

Uncertain Income Tax Positions. CenterPoint Houston reported no uncertain tax liability as of December 31, 2015 and expects no significant change to the uncertain tax liability over the next twelve months ending December 31, 2016.

Tax Audits and Settlements. CenterPoint Energy’s tax years through 2013 have been audited and settled with the Internal Revenue Service (IRS). For 2014 and 2015, CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process. CenterPoint Energy has considered the effects of these examinations in its accrual for settled issues and liability for uncertain income tax positions (if any) as of December 31, 2015.