Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes

The Registrants reported the following effective tax rates:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
CenterPoint Energy (1)	13	%	15	%	12	%	27	%
Houston Electric (2)	19	%	21	%	19	%	22	%
CERC - Continuing operations (3)	—	%	33	%	14	%	19	%
CERC - Discontinued operations (4)	n/a		24	%	n/a		24	%

(1)

CenterPoint Energy’s lower effective tax rate for the three and six months ended June 30, 2019 compared to the same periods for 2018 was primarily due to the following: an increase in the amount of amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions; the impact of state tax law changes that resulted in the remeasurement of state deferred taxes; and the release of a valuation allowance on certain state net operating losses that are now expected to be utilized prior to expiration due to a current period law change.


(2)	Houston Electric’s lower effective tax rate for the three and six months ended June 30, 2019 compared to the same periods for 2018 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability as decreed by regulators.

(3)

CERC’s lower effective tax rate on income from continuing operations for the three and six months ended June 30, 2019 compared to the same periods for 2018 was primarily due to the following: an increase in the amount of amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions; the impact of state tax law changes that resulted in the remeasurement of state deferred taxes; and the release of a valuation allowance on certain state net operating losses that are now expected to be utilized prior to expiration due to a current period law change. The state law changes and valuation allowance release resulted in a lower than expected effective tax rate for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018.


(4)	CERC’s effective tax rate on income from discontinued operations for the three and six months ended June 30, 2018 was a result of the 21% federal income tax rate plus allocable state income taxes. There are no comparable periods in 2019 since the Internal Spin was completed in the third quarter of 2018.

The Registrants reported a net uncertain tax liability inclusive of interest and penalties of less than $1 million for the three months ended June 30, 2019, which reflects a release of approximately $1 million following the anticipated completion of Vectren’s 2016 IRS audit. No significant changes to the uncertain tax liability are expected over the next twelve months. For legacy CenterPoint Energy, tax years through 2016 have been audited and settled with the IRS; however, during 2018, CenterPoint Energy filed an amended 2014 tax return to claim additional tax credits that is currently under review by the IRS. For the 2017 – 2019 tax years, CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process.