XML 38 R15.htm IDEA: XBRL DOCUMENT v3.19.2
Income Taxes
 6 Months Ended
Jun. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
6. Income Taxes

Reconciliations of income taxes for the periods ended June 30 are as follows.
(PPL)
 
Three Months
 
Six Months
 
2019
 
2018
 
2019
 
2018
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%
$
110

 
$
138

 
$
235

 
$
257

Increase (decrease) due to:
 

 
 

 
 

 
 

State income taxes, net of federal income tax benefit
8

 
10

 
21

 
25

Valuation allowance adjustments (b)
7

 
5

 
14

 
12

Impact of lower U.K. income tax rates
(6
)
 
(6
)
 
(14
)
 
(13
)
Amortization of excess deferred federal and state income taxes
(10
)
 
(9
)
 
(21
)
 
(19
)
Deferred tax impact of state tax reform (a)
—

 
9

 
—

 
9

Interest benefit on U.K. financing entities
(3
)
 
(4
)
 
(6
)
 
(9
)
Kentucky recycling credit, net of federal income tax expense (b)
(20
)
 
—

 
(20
)
 
—

Other
(2
)
 
(1
)
 
1

 
(3
)
Total increase (decrease)
(26
)
 
4

 
(25
)
 
2

Total income taxes
$
84

 
$
142

 
$
210

 
$
259



(a)
During the second quarter of 2018, LKE recorded deferred income tax expense, primarily associated with LKE's non-regulated entities, due to the Kentucky corporate income tax rate reduction from 6% to 5%, as enacted by HB 487, effective January 1, 2018.
(b)
During the second quarter of 2019, LKE recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky, with the benefit recognized during the period in which the assets are placed into service. A valuation allowance of $3 million has been recognized related to this credit due to insufficient Kentucky taxable income projected at LKE.
(PPL Electric)
 
 
 
 
 
 
 
 
Three Months
 
Six Months
 
2019
 
2018
 
2019
 
2018
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%
$
26

 
$
22

 
$
61

 
$
63

Increase (decrease) due to:
 

 
 

 
 

 
 

State income taxes, net of federal income tax benefit
10

 
8

 
23

 
24

Amortization of excess deferred income taxes
(4
)
 
(3
)
 
(8
)
 
(8
)
Other
—

 
—

 
(2
)
 
(3
)
Total increase (decrease)
6

 
5

 
13

 
13

Total income taxes
$
32

 
$
27

 
$
74

 
$
76


(LKE)
 
 
 
 
 
 
 
 
Three Months
 
Six Months
 
2019
 
2018
 
2019
 
2018
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%
$
23

 
$
25

 
$
56

 
$
63

Increase (decrease) due to:
 

 
 

 
 

 
 

State income taxes, net of federal income tax benefit
4

 
3

 
10

 
11

Deferred tax impact of state tax reform (a)
—

 
9

 
—

 
9

Valuation allowance adjustments (b)
3

 
—

 
3

 
—

Amortization of excess deferred federal and state income taxes
(6
)
 
(6
)
 
(12
)
 
(11
)
Kentucky recycling credit, net of federal income tax expense (b)
(20
)
 
—

 
(20
)
 
—

Other
(1
)
 
—

 
(2
)
 
(2
)
Total increase (decrease)
(20
)
 
6

 
(21
)
 
7

Total income taxes
$
3

 
$
31

 
$
35

 
$
70



(a)
During the second quarter of 2018, LKE recorded deferred income tax expense, primarily associated with LKE's non-regulated entities, due to the Kentucky corporate income tax rate reduction from 6% to 5%, as enacted by HB 487, effective January 1, 2018.
(b)
During the second quarter of 2019, LKE recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky, with the benefit recognized during the period in which the assets are placed into service. A portion of this amount has been reserved due to insufficient Kentucky taxable income projected at LKE.
(LG&E)
 
 
 
 
 
 
 
 
Three Months
 
Six Months
 
2019
 
2018
 
2019
 
2018
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%
$
12

 
$
13

 
$
29

 
$
33

Increase (decrease) due to:
 

 
 

 
 

 
 

State income taxes, net of federal income tax benefit
2

 
2

 
5

 
6

Valuation allowance adjustments (a)
15

 
—

 
15

 
—

Amortization of excess deferred federal and state income taxes
(2
)
 
(3
)
 
(5
)
 
(5
)
Kentucky recycling credit, net of federal income tax expense (a)
(15
)
 
—

 
(15
)
 
—

Other
—

 
—

 
—

 
(1
)
Total increase (decrease)
—

 
(1
)
 
—

 
—

Total income taxes
$
12

 
$
12

 
$
29

 
$
33



(a)
During the second quarter of 2019, LG&E recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky, with the benefit recognized during the period in which the assets are placed into service. This amount has been reserved due to insufficient Kentucky taxable income projected at LG&E.
(KU)
 
 
 
 
 
 
 
 
Three Months
 
Six Months
 
2019
 
2018
 
2019
 
2018
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%
$
16

 
$
16

 
$
37

 
$
39

Increase (decrease) due to:
 

 
 

 
 

 
 

State income taxes, net of federal income tax benefit
3

 
2

 
7

 
7

Valuation allowance adjustments (a)
5

 
—

 
5

 
—

Amortization of excess deferred federal and state income taxes
(4
)
 
(3
)
 
(7
)
 
(6
)
Kentucky recycling credit, net of federal income tax expense (a)
(5
)
 
—

 
(5
)
 
—

Other
(1
)
 
(1
)
 
(1
)
 
(2
)
Total increase (decrease)
(2
)
 
(2
)
 
(1
)
 
(1
)
Total income taxes
$
14

 
$
14

 
$
36

 
$
38



(a)
During the second quarter of 2019, KU recorded a deferred income tax benefit associated with a project placed into service that prepares a generation waste material for reuse and, as a result, qualifies for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky, with the benefit recognized during the period in which the assets are placed into service. This amount has been reserved due to insufficient Kentucky taxable income projected at KU.

Other

U.S. Tax Reform (All Registrants)

The IRS issued proposed regulations for certain provisions of the TCJA in 2018, including interest deductibility and Global Intangible Low-Taxed Income (GILTI). In June 2019, the IRS issued both final and new proposed regulations relating to GILTI. PPL has determined that neither these final nor proposed regulations materially change PPL's current interpretation of the statutory impact of these rules on the company. Proposed regulations relating to the limitation on the deductibility of interest expense were issued in November 2018 and such regulations provide detailed rules implementing the broader statutory provisions. These proposed regulations should not apply to the Registrants until the year in which the regulations are issued in final form, which is expected to be in the fourth quarter of 2019. It is uncertain what form the final regulations will take and, therefore, the Registrants cannot predict what impact the final regulations will have on the tax deductibility of interest expense. However, if the proposed regulations were issued as final in their current form, the Registrants could have a limitation on a portion of their interest expense deduction for tax purposes and such limitation could be significant. PPL expressed its views on these proposed regulations in a comment letter addressed to the IRS on February 26, 2019.