Income Taxes

6 Months Ended

Jun. 30, 2015

5. Income Taxes

Reconciliations of income taxes for the periods ended June 30 are:

(PPL)

				Three Months				Six Months
				2015		2014		2015		2014

Federal income tax on Income from Continuing Operations Before
	Income Taxes at statutory tax rate - 35%			$	112	$	139	$	382	$	333
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			9		3		29		16
		Valuation allowance adjustments (a)			5		46		8		46
		Impact of lower U.K. income tax rates			(36)		(31)		(98)		(76)
		U.S. income tax on foreign earnings - net of foreign tax credit (b)					10		(1)		21
		Federal and state tax reserve adjustments (c)			(12)		(1)		(12)		(1)
		Intercompany interest on U.K. financing entities			(3)		(1)		(11)		(3)
		Other			(4)		1		(9)		(3)
			Total increase (decrease)		(41)		27		(94)
Total income taxes				$	71	$	166	$	288	$	333

(a) As a result of the spinoff announcement, PPL recorded deferred income tax expense during the three and six months ended June 30, 2014 to adjust valuation allowances on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the earnings of PPL Energy Supply. See Note 8 for additional information on the spinoff.

(b) During the three and six months ended June 30, 2015, PPL recorded lower income tax expense due to a decrease in taxable dividends.

(c) During the three and six months ended June 30, 2015, PPL recorded a tax benefit to adjust the settled refund amount approved by Joint Committee of Taxation for the open audit years 1998-2011.

(PPL Electric)

				Three Months				Six Months
				2015		2014		2015		2014

Federal income tax on Income Before Income Taxes at statutory
	tax rate - 35%			$	30	$	29	$	81	$	77
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			4		4		14		12
		Federal and state tax reserve adjustments			2		(1)		2		(1)
		Depreciation not normalized			(1)		(1)		(2)		(3)
		Other			1						(1)
			Total increase (decrease)		6		2		14		7
Total income taxes				$	36	$	31	$	95	$	84

(LKE)

				Three Months				Six Months
				2015		2014		2015		2014

Federal income tax on Income from Continuing Operations Before
	Income Taxes at statutory tax rate - 35%			$	37	$	37	$	104	$	102
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			4		4		11		10
		Valuation allowance adjustment (a)			5				8
		Other			(1)				(2)		(2)
			Total increase (decrease)		8		4		17		8
Total income taxes				$	45	$	41	$	121	$	110

(a) Represents a valuation allowance against tax credits expiring in 2016 and 2017 that are more likely than not to expire before being utilized.

(LG&E)

				Three Months				Six Months
				2015		2014		2015		2014

Federal income tax on Income Before Income Taxes at statutory
	tax rate - 35%			$	20	$	20	$	50	$	48
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			2		2		5		5
		Other					(1)				(2)
			Total increase (decrease)		2		1		5		3
Total income taxes				$	22	$	21	$	55	$	51

(KU)

				Three Months				Six Months
				2015		2014		2015		2014

Federal income tax on Income Before Income Taxes at statutory
	tax rate - 35%			$	22	$	23	$	66	$	66
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			2		2		7		7
		Other					1		(2)		(1)
			Total increase (decrease)		2		3		5		6
Total income taxes				$	24	$	26	$	71	$	72

Unrecognized Tax Benefits (PPL)

Changes to unrecognized tax benefits for the periods ended June 30 were as follows.

		Three Months				Six Months
		2015		2014		2015		2014
PPL
	Beginning of period	$	20	$	22	$	20	$	22
	Additions based on tax positions of prior years				1				1
	Reductions based on tax positions of prior years				(2)				(2)
	Settlements		(15)				(15)
	End of period	$	5	$	21	$	5	$	21

Other (PPL)

In February 2015, PPL and the IRS Appeals division reached a settlement on the amount of PPL's refund from its open audits for the years 1998 – 2011. In April 2015, PPL was notified that the Joint Committee on Taxation approved PPL's settlement. In the second quarter of 2015, PPL recorded a tax benefit of $23 million, which includes an estimate of interest on the refund. Of this amount, $11 million is reflected in continuing operations. Final determination of interest on the refund is still pending from the IRS.