Income Taxes

3 Months Ended

Mar. 31, 2013

Income Taxes [Abstract]

Income Taxes

5.Income Taxes

Reconciliations of income taxes for the periods ended March 31 are:

(PPL)
			Three Months
			2013		2012
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%			$	197	$	281
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			3		24
	Impact of lower U.K. income tax rates			(38)		(21)
	U.S. income tax on foreign earnings - net of foreign tax credit			2		2
	Foreign tax reserve adjustments					3
	Federal income tax credits			(3)		(4)
	Amortization of investment tax credit			(3)		(2)
	Depreciation not normalized			(3)		(2)
	State deferred tax rate change (a)					(11)
	Net operating loss carryforward adjustments (b)					(6)
	Other			(4)		(5)
		Total increase (decrease)		(46)		(22)
Total income taxes			$	151	$	259

(a)       During the three months ended March 31, 2012,PPL recorded adjustments related to state deferred tax liabilities.

(b)       During the three months ended March 31, 2012, PPL recorded adjustments to deferred taxes related to net operating loss carryforwards of LKE based on income tax return adjustments.

(PPL Energy Supply)
			Three Months
			2013		2012
Federal income tax on Income (Loss) Before Income Taxes at statutory tax rate - 35%			$	(26)	$	170
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			(6)		23
	Federal income tax credits			(3)		(4)
	State deferred tax rate change (a)					(11)
	Other					(1)
		Total increase (decrease)		(9)		7
Total income taxes			$	(35)	$	177

(a)       During the three months ended March 31, 2012, PPL Energy Supply recorded adjustments related to state deferred tax liabilities.

(PPL Electric)
			Three Months
			2013		2012
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%			$	34	$	20
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			5		2
	Federal and state tax reserve adjustments			(2)		(1)
	Depreciation not normalized			(3)		(1)
	Other			(1)
		Total increase (decrease)		(1)
Total income taxes			$	33	$	20

(LKE)
			Three Months
			2013		2012
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%			$	54	$	26
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			5		2
	Net operating loss carryforward adjustments (a)					(6)
	Other			(2)		(1)
		Total increase (decrease)		3		(5)
Total income taxes			$	57	$	21

(a)During thethree months ended March 31, 2012, LKE recorded adjustments to deferred taxes related to net operating loss carryforwards based on income tax return adjustments.

(LG&E)
			Three Months
			2013		2012
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%			$	24	$	14
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			3		1
	Other			(2)
		Total increase (decrease)		1		1
Total income taxes			$	25	$	15

(KU)
			Three Months
			2013		2012
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%			$	36	$	21
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			4		2
	Other			(1)		(1)
		Total increase (decrease)		3		1
Total income taxes			$	39	$	22

Unrecognized Tax Benefits(PPL, PPL Energy Supply, PPL Electric, LKE, LG&E and KU)

Changes to unrecognized tax benefits for the periods ended March 31 were as follows:

		Three Months
		2013		2012
PPL
	Beginning of period	$	92	$	145
	Additions based on tax positions of prior years				4
	Reductions based on tax positions of prior years				(27)
	Additions based on tax positions related to the current year				1
	Lapse of applicable statutes of limitations		(2)		(2)
	End of period	$	90	$	121
PPL Energy Supply
	Beginning of period	$	30	$	28
	Additions based on tax positions of prior years				4
	Reductions based on tax positions of prior years				(1)
	End of period	$	30	$	31
PPL Electric
	Beginning of period	$	26	$	73
	Reductions based on tax positions of prior years				(26)
	Additions based on tax positions related to the current year				1
	Lapse of applicable statutes of limitations		(2)		(2)
	End of period	$	24	$	46

LKE's, LG&E's and KU's unrecognized tax benefits and changes in those unrecognized tax benefits are insignificant for the three months ended March 31, 2013 and 2012.

At March 31, 2013, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase or decrease by the following amounts.For LKE, LG&E and KU, no significant changes in unrecognized tax benefits are projected over the next 12 months.

	Increase		Decrease
PPL	$	10	$	88
PPL Energy Supply				30
PPL Electric		10		22

These potential changes could result from subsequent recognition, derecognition and/or changes in the measurement of uncertain tax positions related to the creditability of foreign taxes, the timing and utilization of foreign tax credits and the related impact on alternative minimum tax and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

At March 31, the total unrecognized tax benefits and related indirect effects that, if recognized, would decrease the effective income tax rate wereas follows. The amounts for LKE, LG&E and KU were insignificant.

	2013		2012
PPL	$	37	$	41
PPL Energy Supply		13		14
PPL Electric		3		6

Other(PPL, PPL Energy Supply and PPL Electric)

PPL changed its method of accounting for repair expenditures for tax purposes effective for its 2008 tax year for Pennsylvania operations. PPL made the same change for itsMontana operations for 2009.In 2011, the IRS issued guidance on repair expenditures related to network assets providing a safe harbor method of determining whether the repair expenditures can be currently deducted for tax purposes. On April 30, 2013, the IRS issued Revenue Procedure 2013-24 providing guidance to taxpayers to determine whether expenditures to maintain, replace or improve steam or electric generation property must be capitalized for tax purposes. PPL is evaluating the impact of this guidance. The IRS may assert, and ultimately conclude, that PPL's deduction for generation-related expenditures should be disallowed in whole or in part. PPL believes that it has established an adequate reserve for this contingency.

Tax Litigation(PPL)

In 1997, the U.K. imposed a Windfall Profits Tax (WPT) on privatized utilities, including WPD. PPL filed its tax returns for years subsequent to its 1997 and 1998 claims for refund on the basis that the U.K. WPT was creditable. In September 2010, the U.S. Tax Court (Tax Court) ruled in PPL's favor in a dispute with the IRS, concluding that the U.K. WPT is a creditable tax for U.S. tax purposes. As a result, and with finalization of other issues, PPL recorded a $42 million tax benefit in 2010. In January 2011, the IRS appealed the Tax Court's decision to the U.S. Court of Appeals for the Third Circuit (Third Circuit). In December 2011, the Third Circuit issued its opinion reversing the Tax Court's decision, holding that the U.K. WPT is not a creditable tax. As a result of the Third Circuit's adverse determination, PPL recorded a $39 million expense in the fourth quarter of 2011. In February 2012, PPL filed a petition for rehearing ofthe Third Circuit'sopinion. In March 2012, the Third Circuit denied PPL's petition. In June 2012, the U.S. Court of Appeals for the Fifth Circuit issued a contrary opinion in an identical case involving another company. In July 2012, PPL filed a petition for a writ of certiorari seeking U.S. Supreme Court review of the Third Circuit's opinion.The Supreme Court granted PPL's petition on October29, 2012, and oral argument was held on February 20, 2013. PPL expects the case to be decided before the end of the Supreme Court's current termin June 2013 and cannot predict the outcome of this matter.