Income and Other Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Components of Income (Loss) From Continuing Operations Before Income Taxes

"Income from Continuing Operations Before Income Taxes" included the following:



	2016		2015		2014
Domestic income	$	1,463	$	968	$	922
Foreign income	1,087		1,100		1,207
Total	$	2,550	$	2,068	$	2,129

Components of Deferred Tax Assets and Liabilities

Significant components of PPL's deferred income tax assets and liabilities were as follows:



	2016			2015
Deferred Tax Assets
Deferred investment tax credits	$	51		$	50
Regulatory liabilities	94			123
Accrued pension costs	250			217
Federal loss carryforwards	565			587
State loss carryforwards	326			319
Federal and state tax credit carryforwards	256			201
Foreign capital loss carryforwards	302			387
Foreign loss carryforwards	3			4
Foreign - pensions	41			171
Foreign - regulatory obligations	6			12
Foreign - other	5			8
Contributions in aid of construction	141			139
Domestic - other	188			209
Unrealized losses on qualifying derivatives	20			15
Valuation allowances (a)	(593		)	(662		)
Total deferred tax assets	1,655			1,780

Deferred Tax Liabilities
Domestic plant - net	4,325			3,875
Taxes recoverable through future rates	170			162
Regulatory assets	343			332
Reacquired debt costs	25			28
Foreign plant - net	640			777
Domestic - other	14			24
Total deferred tax liabilities	5,517			5,198
Net deferred tax liability	$	3,862		$	3,418


(a)	Includes $77 million of deferred tax assets related to state loss carryforwards and related valuation allowances previously reflected on the PPL Energy Supply Segment. The deferred tax assets and related valuation allowance remained with PPL after the spinoff.

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2016, PPL had the following loss and tax credit carryforwards, related deferred tax assets and valuation allowances recorded against the deferred tax assets.



	Gross		Deferred Tax Asset		Valuation Allowance			Expiration
Loss carryforwards
Federal net operating losses	$	1,583	$	554	$	—		2029-2035
Federal charitable contributions	28		11		—			2020-2021
State net operating losses	5,387		325		(269		)	2017-2036
State charitable contributions	12		1		—			2017-2021
Foreign net operating losses	17		3		(3		)	Indefinite
Foreign capital losses	1,783		302		(302		)	Indefinite



Credit carryforwards
Federal investment tax credit	133	—		2025-2036
Federal alternative minimum tax credit	30	—		Indefinite
Federal foreign tax credits	62	(3	)	2024-2025
Federal - other	30	(11	)	2017-2036
State - other	1	—		Indefinite

Schedule of Valuation and Qualifying Accounts of Deferred Tax Assets

The changes in deferred tax valuation allowances were as follows:



			Additions
	Balance at Beginning of Period		Charged to Income		Charged to Other Accounts			Deductions			Balance at End of Period
2016	$	662	$	17	$	2		$	88	(a)	$	593
2015	622		24		77		(b)	61		(a)	662
2014	585		57		6			26			622

(a)

The reductions of the U.K. statutory income tax rates in 2016 and 2015 resulted in $19 million and $44 million in reductions in the deferred tax assets and corresponding valuation allowances. See "Reconciliation of Income Tax Expense" below for more information on the impact of the U.K. Finance Acts 2016 and 2015. In addition, the deferred tax assets and corresponding valuation allowances were reduced in 2016 by approximately $65 million due to the effect of foreign currency exchange rates.


(b)	Valuation allowance related to the deferred tax assets previously reflected on the PPL Energy Supply Segment. The deferred tax assets and related valuation allowance remained with PPL after the spinoff.

Components of Income Tax Expense (Benefit) From Continuing Operations

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income from Continuing Operations Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows:



	2016			2015			2014
Income Tax Expense (Benefit)
Current - Federal	$	(14	)	$	(26	)	$	18
Current - State	21			25			26
Current - Foreign	80			89			152
Total Current Expense	87			88			196
Deferred - Federal	385			699			299
Deferred - State	89			68			120
Deferred - Foreign	86			41			96
Total Deferred Expense, excluding operating loss carryforwards	560			808			515

Amortization of investment tax credit	(3		)	(4		)	(5		)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal (a)	25			(396		)	8
Deferred - State	(21		)	(31		)	(22		)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	4			(427		)	(14		)
Total income taxes from continuing operations	$	648		$	465		$	692

Total income tax expense - Federal	$	393		$	273		$	320
Total income tax expense - State	89			62			124
Total income tax expense - Foreign	166			130			248
Total income taxes from continuing operations	$	648		$	465		$	692


(a)	Increase in Federal loss carryforwards for 2015 primarily relates to the extension of bonus depreciation and the impact of bonus depreciation related to provision to return adjustments.

In the table above, the following income tax expense (benefits) are excluded from income taxes from continuing operations:



	2016			2015			2014
Discontinued operations - PPL Energy Supply Segment	$	—		$	(30	)	$	198
Stock-based compensation recorded to Additional Paid-in Capital	—			—			(4		)
Stock-based compensation recorded to Earnings Reinvested	(7		)	—			—
Other comprehensive income	(6		)	(2		)	(190		)
Valuation allowance on state deferred taxes recorded to other comprehensive income	1			(4		)	—
Total	$	(12	)	$	(36	)	$	4

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2016			2015			2014
Reconciliation of Income Tax Expense
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 35%	$	893		$	724		$	745
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	46			31			28
Valuation allowance adjustments (a)	16			24			55
Impact of lower U.K. income tax rates (b)	(177		)	(176		)	(180		)
U.S. income tax on foreign earnings - net of foreign tax credit (c)	(42		)	8			63
Federal and state tax reserves adjustments (d)	—			(22		)	(1		)
Impact of the U.K. Finance Acts on deferred tax balances (b)	(49		)	(91		)	(1		)
Depreciation not normalized	(10		)	(5		)	(7		)
Interest benefit on U.K. financing entities	(17		)	(20		)	(5		)
Stock-based compensation (e)	(10		)	—			—
Other	(2		)	(8		)	(5		)
Total increase (decrease)	(245		)	(259		)	(53		)
Total income taxes from continuing operations	$	648		$	465		$	692
Effective income tax rate	25.4		%	22.5		%	32.5		%


(a)	During 2016, PPL recorded deferred tax expense for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.

During 2015, PPL recorded $24 million of deferred income tax expense related to deferred tax valuation allowances. PPL recorded state deferred income tax expense of $12 million primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized and $12 million of federal deferred income tax expense primarily related to federal tax credit carryforwards that are expected to expire as a result of lower future taxable earnings due to the extension of bonus depreciation.

As a result of the PPL Energy Supply spinoff announcement, PPL recorded $50 million of deferred income tax expense during 2014, to adjust the valuation allowance on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the future earnings of PPL Energy Supply. See Note 8 for additional information on the spinoff.


(b)	The U.K. Finance Act 2016, enacted in September 2016, reduces the U.K. statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit during 2016.

The U.K. Finance Act 2015, enacted in November 2015, reduced the U.K. statutory income tax rate from 20% to 19% effective April 1, 2017 and from 19% to 18% effective April 1, 2020. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit during 2015, related to both rate decreases.


(c)	During 2016, PPL recorded lower income taxes primarily attributable to foreign tax credit carryforwards, arising from a decision to amend prior year tax returns to claim foreign tax credits rather than deduct foreign taxes. This decision was prompted by changes to the Company's most recent business plan.

During 2015, PPL recorded lower income taxes primarily attributable to a decrease in taxable dividends.

During 2014, PPL recorded $47 million of income tax expense primarily attributable to taxable dividends.


(d)	During 2015, PPL recorded a $12 million tax benefit related to the settlement of the IRS audit for the tax years 1998-2011.


(e)	During 2016, PPL recorded lower income tax expense related to the application of new stock-based compensation accounting guidance. See Note 1 for additional information.

Details of Taxes Other Than Income



	2016		2015		2014
Taxes, other than income
State gross receipts (a)	$	100	$	89	$	102
Foreign property	135		148		157
Domestic Other	66		62		58
Total	$	301	$	299	$	317


(a)	The decrease in 2015 was primarily due to the settlement of a 2011 gross receipts tax audit resulting in the reversal of $17 million of previously recognized reserves.

Summary of Income Tax Examinations

With few exceptions, at December 31, 2016, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows.



	PPL	PPL Electric	LKE	LG&E	KU
U.S. (federal)	2012 and prior	2012 and prior	2012 and prior	2012 and prior	2012 and prior
Pennsylvania (state)	2011 and prior	2011 and prior
Kentucky (state)	2011 and prior		2011 and prior	2011 and prior	2011 and prior
U.K. (foreign)	2013 and prior

PPL Electric Utilities Corp [Member]

Income Taxes [Line Items]

Components of Deferred Tax Assets and Liabilities

Significant components of PPL Electric's deferred income tax assets and liabilities were as follows:



	2016		2015
Deferred Tax Assets
Accrued pension costs	$	107	$	92
Contributions in aid of construction	112		111
Regulatory liabilities	34		56
State loss carryforwards	22		27
Federal loss carryforwards	147		146
Other	81		87
Total deferred tax assets	503		519

Deferred Tax Liabilities
Electric utility plant - net	2,001		1,803
Taxes recoverable through future rates	141		135
Reacquired debt costs	15		18
Regulatory assets	240		213
Other	5		13
Total deferred tax liabilities	2,402		2,182
Net deferred tax liability	$	1,899	$	1,663

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2016, PPL Electric had the following loss carryforwards and related deferred tax assets:



	Gross		Deferred Tax Asset		Expiration
Loss carryforwards
Federal net operating losses	$	411	$	144	2031-2035
Federal charitable contributions	5		2		2020-2021
State net operating losses (a)	327		21		2030-2032
State charitable contributions	11		1		2017-2021


(a)	An immaterial amount of valuation allowances has been recorded against the deferred tax asset for state contributions.

Components of Income Tax Expense (Benefit) From Continuing Operations

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows.



	2016			2015			2014
Income Tax Expense (Benefit)
Current - Federal	$	(29	)	$	(80	)	$	60
Current - State	19			23			15
Total Current Expense (Benefit)	(10		)	(57		)	75
Deferred - Federal	193			287			70
Deferred - State	29			12			16
Total Deferred Expense, excluding operating loss carryforwards	222			299			86



	2016		2015			2014
Amortization of investment tax credit	—		—			(1		)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	—		(75		)	—
Deferred - State	—		(3		)	—
Total Tax Expense (Benefit) of Operating Loss Carryforwards	—		(78		)	—
Total income tax expense	$	212	$	164		$	160

Total income tax expense - Federal	$	164	$	132		$	129
Total income tax expense - State	48		32			31
Total income tax expense	$	212	$	164		$	160

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2016			2015			2014
Reconciliation of Income Taxes
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%	$	193		$	146		$	148
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	36			25			22
Depreciation not normalized	(8		)	(4		)	(6		)
Stock-based compensation (a)	(6		)	—			—
Other	(3		)	(3		)	(4		)
Total increase (decrease)	19			18			12
Total income tax expense	$	212		$	164		$	160
Effective income tax rate	38.4		%	39.4		%	37.8		%


(a)	During 2016, PPL recorded lower income tax expense related to the application of new stock-based compensation accounting guidance. See Note 1 for additional information.

Details of Taxes Other Than Income



	2016		2015		2014
Taxes, other than income
State gross receipts (a)	$	100	$	89	$	102
Property and other	5		5		5
Total	$	105	$	94	$	107


(a)	The decrease in 2015 was primarily due to the settlement of a 2011 gross receipts tax audit resulting in the reversal of $17 million of previously recognized reserves.

LG And E And KU Energy LLC [Member]

Income Taxes [Line Items]

Components of Deferred Tax Assets and Liabilities

Significant components of LKE's deferred income tax assets and liabilities were as follows:



	2016			2015
Deferred Tax Assets
Federal loss carryforwards	$	248		$	280
State loss carryforwards	35			35
Tax credit carryforwards	186			181
Contributions in aid of construction	29			29
Regulatory liabilities	60			66
Accrued pension costs	58			53
Income taxes due to customers	15			17
Deferred investment tax credits	51			50
Derivative liability	12			18
Other	49			55
Valuation allowances	(11		)	(12		)
Total deferred tax assets	732			772

Deferred Tax Liabilities
Plant - net	2,352			2,105
Regulatory assets	102			119
Other	13			11
Total deferred tax liabilities	2,467			2,235
Net deferred tax liability	$	1,735		$	1,463

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2016, LKE had the following loss and tax credit carryforwards, related deferred tax assets, and valuation allowances recorded against the deferred tax assets.



	Gross		Deferred Tax Asset		Valuation Allowance		Expiration
Loss carryforwards
Federal net operating losses	$	709	$	248	$	—	2029-2035
Federal contribution carryforwards	11		4		—		2020-2021
State net operating losses	907		35		—		2028-2036



Credit carryforwards
Federal investment tax credit	133	—		2025-2036
Federal alternative minimum tax credit	27	—		Indefinite
Federal - other	26	(11	)	2017-2036
State - other	1	—		Indefinite

Schedule of Valuation and Qualifying Accounts of Deferred Tax Assets

Changes in deferred tax valuation allowances were:



	Balance at Beginning of Period		Additions			Deductions			Balance at End of Period
2016	$	12	$	—		$	1	(a)	$	11
2015	—		12		(b)	—			12
2014	4		—			4		(c)	—


(a)	Federal tax credit expiring in 2016.


(b)	Federal tax credits expiring in 2016 through 2020 that are more likely than not to expire before being utilized.


(c)	Primarily related to the expiration of state capital loss carryforwards.

Components of Income Tax Expense (Benefit) From Continuing Operations



	2016			2015			2014
Income Tax Expense (Benefit)
Current - Federal	$	(36	)	$	2		$	(247	)
Current - State	1			1			8
Total Current Expense (Benefit)	(35		)	3			(239		)
Deferred - Federal	248			405			437
Deferred - State	38			32			23
Total Deferred Expense, excluding benefits of operating loss carryforwards	286			437			460
Amortization of investment tax credit - Federal	(3		)	(3		)	(4		)
Tax benefit of operating loss carryforwards
Deferred - Federal	10			(198		)	(8		)
Deferred - State	(1		)	—			—
Total Tax Expense (Benefit) of Operating Loss Carryforwards	9			(198		)	(8		)
Total income tax expense from continuing operations (a)	$	257		$	239		$	209

Total income tax expense - Federal	$	219		$	206		$	178
Total income tax expense - State	38			33			31
Total income tax expense from continuing operations (a)	$	257		$	239		$	209


(a)	Excludes current and deferred federal and state tax expense (benefit) recorded to Discontinued Operations of less than $1 million in 2016, 2015 and 2014. Also, excludes deferred federal and state tax expense (benefit) recorded to OCI of $(16) million in 2016, less than $(1) million in 2015 and $(36) million in 2014.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2016			2015			2014
Reconciliation of Income Taxes
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%	$	240		$	211		$	194
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	25			22			20
Amortization of investment tax credit	(3		)	(3		)	(4		)
Valuation allowance adjustment (a)	—			12			—
Stock-based compensation (b)	(3		)	—			—
Other	(2		)	(3		)	(1		)
Total increase	17			28			15
Total income tax expense	$	257		$	239		$	209
Effective income tax rate	37.5		%	39.6		%	37.8		%


(a)	Represents a valuation allowance against tax credits expiring through 2020 that are more likely than not to expire before being utilized.


(b)	During 2016, LKE recorded lower income tax expense related to the application of new stock-based compensation accounting guidance. See Note 1 for additional information.

Details of Taxes Other Than Income



	2016		2015		2014
Taxes, other than income
Property and other	$	62	$	57	$	52
Total	$	62	$	57	$	52

Louisville Gas And Electric Co [Member]

Income Taxes [Line Items]

Components of Deferred Tax Assets and Liabilities

Significant components of LG&E's deferred income tax assets and liabilities were as follows:



	2016		2015
Deferred Tax Assets
Federal loss carryforwards	$	80	$	76
Contributions in aid of constructions	18		18
Regulatory liabilities	34		38
Deferred investment tax credits	14		13
Income taxes due to customers	17		17
Derivative liability	12		18
Other	17		15
Total deferred tax assets	192		195

Deferred Tax Liabilities
Plant - net	1,058		914
Regulatory assets	65		75
Accrued pension costs	35		28
Other	8		7
Total deferred tax liabilities	1,166		1,024
Net deferred tax liability	$	974	$	829

Components of Income Tax Expense (Benefit) From Continuing Operations



	2016			2015			2014
Income Tax Expense (Benefit)
Current - Federal	$	(22	)	$	(15	)	$	(25	)
Current - State	1			3			10
Total Current Benefit	(21		)	(12		)	(15		)
Deferred - Federal	134			190			114
Deferred - State	18			13			6
Total Deferred Expense, excluding benefits of operating loss carryforwards	152			203			120
Amortization of investment tax credit - Federal	(1		)	(1		)	(2		)
Tax benefit of operating loss carryforwards
Deferred - Federal	(4		)	(76		)	—
Total Tax Benefit of Operating Loss Carryforwards	(4		)	(76		)	—
Total income tax expense	$	126		$	114		$	103

Total income tax expense - Federal	$	107		$	98		$	87
Total income tax expense - State	19			16			16
Total income tax expense	$	126		$	114		$	103

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2016			2015			2014
Reconciliation of Income Taxes
Federal income tax on Income Before Income Taxes at
statutory tax rate - 35%	$	115		$	105		$	95
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	12			11			10
Amortization of investment tax credit	(1		)	(1		)	(2		)
Other	—			(1		)	—
Total increase	11			9			8
Total income tax expense	$	126		$	114		$	103
Effective income tax rate	38.3		%	38.1		%	37.9		%

Details of Taxes Other Than Income



	2016		2015		2014
Taxes, other than income
Property and other	$	32	$	28	$	25
Total	$	32	$	28	$	25

Kentucky Utilities Co [Member]

Income Taxes [Line Items]

Components of Deferred Tax Assets and Liabilities

Significant components of KU's deferred income tax assets and liabilities were as follows:



	2016		2015
Deferred Tax Assets
Federal loss carryforwards	$	79	$	97
Contributions in aid of construction	11		11
Regulatory liabilities	26		28
Deferred investment tax credits	37		36
Other	11		7
Total deferred tax assets	164		179

Deferred Tax Liabilities
Plant - net	1,280		1,175
Regulatory assets	37		44
Accrued pension costs	12		4
Other	5		2
Total deferred tax liabilities	1,334		1,225
Net deferred tax liability	$	1,170	$	1,046

Components of Income Tax Expense (Benefit) From Continuing Operations



	2016			2015			2014
Income Tax Expense (Benefit)
Current - Federal	$	31		$	(21	)	$	(95	)
Current - State	5			1			6
Total Current Expense (Benefit)	36			(20		)	(89		)
Deferred - Federal	131			240			212
Deferred - State	19			19			14
Total Deferred Expense, excluding benefits of operating loss carryforwards	150			259			226
Amortization of investment tax credit - Federal	(2		)	(2		)	(2		)
Tax benefit of operating loss carryforwards
Deferred - Federal	(21		)	(97		)	—
Total Tax Benefit of Operating Loss Carryforwards	(21		)	(97		)	—
Total income tax expense (a)	$	163		$	140		$	135

Total income tax expense - Federal	$	139		$	120		$	115
Total income tax expense - State	24			20			20
Total income tax expense (a)	$	163		$	140		$	135


(a)	Excludes deferred federal and state tax expense (benefit) recorded to OCI of less than $(1) million in 2016, 2015 and 2014.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2016			2015			2014
Reconciliation of Income Taxes
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%	$	150		$	131		$	124
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	16			13			13
Amortization of investment tax credit	(2		)	(2		)	(2		)
Other	(1		)	(2		)	—
Total increase	13			9			11
Total income tax expense	$	163		$	140		$	135
Effective income tax rate	38.1		%	37.4		%	38.0		%

Details of Taxes Other Than Income



	2016		2015		2014
Taxes, other than income
Property and other	$	30	$	29	$	27
Total	$	30	$	29	$	27