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Income and Other Taxes (Tables)

12 Months Ended

Dec. 31, 2019

The Balance Sheets at December 31, 2017 reflected the increase to the Registrants' net regulatory liabilities as a result of the TCJA as follows:



	PPL		PPL Electric		LKE		LG&E		KU
Net Increase in Regulatory Liabilities	$	2,185	$	1,019	$	1,166	$	532	$	634

The tax rate reduction impacts on non-regulated deferred tax assets and liabilities were recorded as an adjustment to the Registrants' deferred tax provisions, and were reflected in "Income Taxes" on the Statement of Income for the year ended December 31, 2017 as follows:



	PPL		PPL Electric			LKE		LG&E		KU
Income tax expense (benefit)	$	220	$	(13	)	$	112	$	—	$	—

The final amounts reported in PPL's 2017 federal income tax return, provisional amounts for the year ended December 31, 2017, the related measurement period adjustments, and the resulting tax impact for the year ended December 31, 2018 were as follows:



	Taxable Income (Loss) (a)
	Adjustments per 2017 Tax Return			Adjustments per 2017 Tax Provision			2018 Adjustments
PPL
Deemed Dividend	$	397		$	462		$	(65	)
Bonus Depreciation (b)	(67		)	—			(67		)
Consolidated Federal Net Operating Loss due to the TCJA (c)	(330		)	(462		)	132
Total	$	—		$	—		$	—

PPL Electric
Bonus Depreciation (b)	$	(39	)	$	—		$	(39	)
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c)	(68		)	(105		)	37
Total	$	(107	)	$	(105	)	$	(2	)

LKE
Bonus Depreciation (b)	$	(28	)	$	—		$	(28	)
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c)	(32		)	(45		)	13
Total	$	(60	)	$	(45	)	$	(15	)

LG&E
Bonus Depreciation (b)	$	(17	)	$	—		$	(17	)
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c)	17			—			17
Total	$	—		$	—		$	—

KU
Bonus Depreciation (b)	$	(11	)	$	—		$	(11	)
Consolidated Federal Net Operating Loss reallocated due to the TCJA (c)	11			—			11
Total	$	—		$	—		$	—


(a)	The above table reflects, for each item, the amount subject to change as a result of the TCJA and does not reflect the total amount of each item included in the return and the provision.


(b)	The TCJA increased the bonus depreciation percentage from 50% to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2018. Increases in tax depreciation reduce the Registrants' taxes payable and increase net deferred tax liabilities with no impact to “Income Taxes” on the Statements of Income.


(c)	An increase in the consolidated federal net operating loss reduces net deferred tax liabilities with the opposite effect if there is a decrease in the consolidated federal net operating loss. These increases or decreases have no impact to “Income Taxes” on the Statements of Income.



	Income Tax Expense (Benefit)
	Adjustments per 2017 Tax Return			Adjustments per 2017 Tax Provision			2018 Adjustments
PPL
Deemed Dividend	$	139		$	161		$	(22	)
Foreign Tax Credits	(157		)	(205		)	48
Valuation of Foreign Tax Credit Carryforward	110			145			(35		)
Reduction in U.S. federal income tax rate	229			220			9
Total	$	321		$	321		$	—

PPL Electric
Reduction in U.S. federal income tax rate	$	(13	)	$	(13	)	$	—

LKE
Reduction in U.S. federal income tax rate	$	110		$	112		$	(2	)

The changes enacted by the TCJA were recorded as an adjustment to the Registrants' deferred tax provisions, and were reflected in "Income Taxes" on the Statement of Income for the year ended December 31, 2017 as follows:



	PPL		PPL Electric			LKE		LG&E		KU
Income tax expense (benefit)	$	321	$	(13	)	$	112	$	—	$	—

Components of Income (Loss) Before Income Taxes

"Income Before Income Taxes" included the following:



	2019		2018		2017
Domestic income	$	964	$	1,127	$	874
Foreign income	1,191		1,158		1,038
Total	$	2,155	$	2,285	$	1,912

Components of Deferred Tax Assets and Liabilities

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



	2019			2018
Deferred Tax Assets
Deferred investment tax credits	$	31		$	31
Regulatory liabilities	75			87
Income taxes due to customer	462			479
Accrued pension and postretirement costs	211			277
Federal loss carryforwards	324			325
State loss carryforwards	432			419
Federal and state tax credit carryforwards	402			392
Foreign capital loss carryforwards	320			313
Foreign - other	8			10
Contributions in aid of construction	112			139
Domestic - other	99			88
Valuation allowances	(834		)	(808		)
Total deferred tax assets	1,642			1,752

Deferred Tax Liabilities
Domestic plant - net	3,546			3,359
Regulatory assets	262			314
Foreign plant - net	765			724
Foreign - pensions	72			83
Domestic - other	61			40
Total deferred tax liabilities	4,706			4,520
Net deferred tax liability	$	3,064		$	2,768

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2019, 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	$	1,499	$	315	$	—		2032-2037
Federal charitable contributions	42		9		—			2020-2024
State net operating losses	5,879		432		(393		)	2021-2039
State charitable contributions	1		—		—			2020-2024
Foreign net operating losses	3		—		—			Indefinite
Foreign capital losses	1,880		320		(320		)	Indefinite
Federal - Other	7		1		—			Indefinite



Credit carryforwards
Federal investment tax credit	133	—		2025-2039
Federal alternative minimum tax credit (a)	8	—		Indefinite
Federal foreign tax credits (b)	218	(113	)	2024-2027
Federal - other	24	(6	)	2020-2039
State Recycling Credit	18	—		2028
State - other	1	—		Indefinite


(a)	The TCJA repealed the corporate alternative minimum tax (AMT) for tax years beginning after December 31, 2017. The existing indefinite carryforward period for AMT credits was retained.

(b)

Includes $62 million of foreign tax credits carried forward from 2016 and $156 million of additional foreign tax credits from 2017 related to the taxable deemed dividend associated with the TCJA.

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
2019	$	808	$	31		$	—	$	5		$	834
2018	838		26			—		56		(a)	808
2017	593		256		(b)	—		11			838


(a)	Decrease in the valuation allowance of approximately $35 million due to the change in the total foreign tax credits available after finalization of the deemed dividend calculation required by the TCJA in 2017. In addition, the deferred tax assets and corresponding valuation allowances were reduced in 2018 by approximately $19 million due to the effect of foreign currency exchange rates.


(b)	Increase in valuation allowance of approximately $145 million related to expected future utilization of both 2017 foreign tax credits and pre-2017 foreign tax credits carried forward. For additional information, see the "Reconciliation of Income Tax Expense" and associated notes below.

In addition, the reduction of the U.S. federal corporate income tax rate enacted by the TCJA in 2017 resulted in a $62 million increase in federal deferred tax assets and a corresponding valuation allowance related to the federal tax benefits of state net operating losses.

Components of Income Tax Expense (Benefit)

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:



	2019			2018			2017
Income Tax Expense (Benefit)
Current - Federal	$	(10	)	$	(19	)	$	6
Current - State	19			17			25
Current - Foreign	91			104			45
Total Current Expense (Benefit)	100			102			76
Deferred - Federal (a)	139			203			532
Deferred - State	76			100			88
Deferred - Foreign	123			107			133
Total Deferred Expense (Benefit), excluding operating loss carryforwards	338			410			753

Amortization of investment tax credit	(3		)	(3		)	(3		)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	7			(20		)	(16		)
Deferred - State	(33		)	(31		)	(26		)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	(26		)	(51		)	(42		)
Total income tax expense (benefit)	$	409		$	458		$	784

Total income tax expense (benefit) - Federal	$	133		$	161		$	519
Total income tax expense (benefit) - State	62			86			87
Total income tax expense (benefit) - Foreign	214			211			178
Total income tax expense (benefit)	$	409		$	458		$	784


(a)	Due to the enactment of the TCJA, PPL recorded the following in 2017:


•	$220 million of deferred income tax expense related to the impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on deferred tax assets and liabilities;


•	$162 million of deferred tax expense related to the utilization of current year losses resulting from the taxable deemed dividend; partially offset by,

$60 million of deferred tax benefits related to the $205 million of 2017 foreign tax credits partially offset by $145 million of valuation allowances.

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



	2019			2018			2017
Other comprehensive income	$	(93	)	$	(6	)	$	(34	)
Valuation allowance on state deferred taxes recorded to other comprehensive income	—			—			(1		)
Total	$	(93	)	$	(6	)	$	(35	)

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2019			2018			2017
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate (a)	$	453		$	480		$	669
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	45			40			46
Valuation allowance adjustments (b)	22			21			36
Impact of lower U.K. income tax rates (c)	(25		)	(25		)	(176		)
U.S. income tax on foreign earnings - net of foreign tax credit (a)(d)	2			3			47
Foreign income return adjustments	—			—			(8		)
Impact of the U.K. Finance Act on deferred tax balances (e)	(14		)	(13		)	(16		)
Depreciation and other items not normalized	(10		)	(11		)	(10		)
Amortization of excess deferred federal and state income taxes (f)	(40		)	(37		)	—
Interest benefit on U.K. financing entities	(12		)	(17		)	(16		)
Deferred tax impact of U.S. tax reform (g)	—			—			220
Deferred tax impact of Kentucky tax reform (h)	—			9			—
Kentucky recycling credit, net of federal income tax expense (i)	(18		)	—			—
Other	6			8			(8		)
Total increase (decrease)	(44		)	(22		)	115
Total income tax expense (benefit)	$	409		$	458		$	784
Effective income tax rate	19.0		%	20.0		%	41.0		%


(a)	The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.


(b)	In 2017, PPL recorded an increase in valuation allowances of $23 million primarily related to foreign tax credits recorded in 2016. The future utilization of these credits is expected to be lower as a result of the TCJA.

In 2019, 2018 and 2017, PPL recorded deferred income tax expense of $25 million, $24 million and $16 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.


(c)	The reduction in the U.S. federal corporate income tax rate from 35% to 21% significantly reduced the difference between the U.K. and U.S. income tax rates in 2019 and 2018 compared with 2017.


(d)	In 2017, PPL recorded a federal income tax benefit of $35 million primarily attributable to U.K. pension contributions.

In 2017, PPL recorded deferred income tax expense of $83 million primarily related to enactment of the TCJA. The enacted tax law included a conversion from a worldwide tax system to a territorial tax system, effective January 1, 2018. In the transition to the territorial regime, a one-time transition tax was imposed on PPL’s unrepatriated accumulated foreign earnings in 2017. These earnings were treated as a taxable deemed dividend to PPL of approximately $462 million, including $205 million of foreign tax credits. As the PPL consolidated U.S. group had a taxable loss for 2017, inclusive of the taxable deemed dividend, these credits were recorded as a deferred tax asset. However, it is expected that under the TCJA, only $83 million of the $205 million of foreign tax credits will be realized in the carry forward period. Accordingly, a valuation allowance on the current year foreign tax credits in the amount of $122 million has been recorded to reflect the reduction in the future utilization of the credits. The foreign tax credits associated with the deemed repatriation result in a gross carryforward and corresponding deferred tax asset of $205 million offset by a valuation allowance of $122 million.


(e)	The U.K. Finance Act 2016, enacted in September 2016, reduced the U.K. statutory income tax rate effective April 1, 2020 to 17%. As a result, PPL reduced its net deferred tax liabilities each year as it revalued its balances at the 17% tax rate.

(f)

In 2019 and 2018, PPL recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.


(g)	In 2017, PPL recorded deferred income tax expense related to the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.

In 2018, PPL 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.

(h)

In 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.

(i)

In 2018, PPL filed its consolidated federal income tax return, which included updates to the TCJA provisional amounts recorded in 2017. The adjustments to the various provisional amounts that are considered complete as of the filed tax return resulted in an immaterial impact to income tax expense and are discussed in the TCJA section below.

Details of Taxes Other Than Income



	2019		2018		2017
Taxes, other than income
State gross receipts	$	107	$	103	$	102
State capital stock	—		—		(6		)
Foreign property	127		134		127
Domestic Other	79		75		69
Total	$	313	$	312	$	292

Summary of Income Tax Examinations

With few exceptions, at December 31, 2019, 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)	2015 and prior	2015 and prior	2015 and prior	2015 and prior	2015 and prior
Pennsylvania (state) (a)	2015 and prior	2015 and prior
Kentucky (state)	2014 and prior		2014 and prior	2014 and prior	2014 and prior
U.K. (foreign)	2015 and prior


(a)	Tax year 2013 is still subject to examination.

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:



	2019		2018
Deferred Tax Assets
Accrued pension and postretirement costs	$	81	$	110
Contributions in aid of construction	88		118
Regulatory liabilities	31		35
Income taxes due to customers	170		181
State loss carryforwards	6		14
Federal loss carryforwards	78		79
Other	23		25
Total deferred tax assets	477		562



	2019		2018

Deferred Tax Liabilities
Electric utility plant - net	1,761		1,681
Regulatory assets	139		176
Other	24		25
Total deferred tax liabilities	1,924		1,882
Net deferred tax liability	$	1,447	$	1,320

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2019, PPL Electric had the following loss carryforwards and related deferred tax assets:



	Gross		Deferred Tax Asset		Expiration
Loss carryforwards
Federal net operating losses	$	363	$	76	2032-2037
Federal charitable contributions	9		2		2020-2024
State net operating losses	81		6		2031-2032

Components of Income Tax Expense (Benefit)



	2019		2018			2017
Income Tax Expense (Benefit)
Current - Federal	$	44	$	2		$	(65	)
Current - State	15		9			20
Total Current Expense (Benefit)	59		11			(45		)
Deferred - Federal (a)	51		96			234
Deferred - State	39		37			29
Total Deferred Expense (Benefit), excluding operating loss carryforwards	90		133			263

Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	—		(8		)	(5		)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	—		(8		)	(5		)
Total income tax expense (benefit)	$	149	$	136		$	213

Total income tax expense (benefit) - Federal	$	95	$	90		$	164
Total income tax expense (benefit) - State	54		46			49
Total income tax expense (benefit)	$	149	$	136		$	213

(a)

Due to the enactment of the TCJA in 2017, PPL Electric recorded a $13 million deferred tax benefit related to the impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on deferred tax assets and liabilities.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2019			2018			2017
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate (a)	$	127		$	119		$	201
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	47			43			36
Depreciation and other items not normalized	(10		)	(11		)	(8		)
Amortization of excess deferred federal income taxes (b)	(18		)	(17		)	—
Deferred tax impact of U.S. tax reform (c)	—			—			(13		)
Other	3			2			(3		)
Total increase (decrease)	22			17			12
Total income tax expense (benefit)	$	149		$	136		$	213
Effective income tax rate	24.6		%	24.0		%	37.0		%


(a)	The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.

(b)

In 2019 and 2018, PPL Electric recorded lower income tax expense for the amortization of excess deferred taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.

(c)

In 2017, PPL Electric recorded a deferred tax benefit related to the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.

Details of Taxes Other Than Income



	2019		2018		2017
Taxes, other than income
State gross receipts	$	107	$	103	$	102
Property and other	5		6		5
Total	$	112	$	109	$	107

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:



	2019			2018
Deferred Tax Assets
Federal loss carryforwards	$	140		$	142
State loss carryforwards	31			33
Federal tax credit carryforwards	162			169
Contributions in aid of construction	23			21
Regulatory liabilities	44			52
Accrued pension and postretirement costs	71			92
State tax credit carryforwards	19			1
Income taxes due to customers	292			299
Deferred investment tax credits	31			32
Lease liabilities	14			—
Valuation allowances	(6		)	(8		)
Other	28			28
Total deferred tax assets	849			861

Deferred Tax Liabilities
Plant - net	1,778			1,671
Regulatory assets	122			138
Lease right-of-use assets	12			—
Other	6			8
Total deferred tax liabilities	1,918			1,817
Net deferred tax liability	$	1,069		$	956

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2019, 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	$	668	$	140	$	—	2032 - 2037
Federal charitable contributions	23		5		—		2020 - 2024
State net operating losses	797		31		—		2029 - 2038



	Gross	Deferred Tax Asset	Valuation Allowance		Expiration
Credit carryforwards
Federal investment tax credit		133	—		2025 - 2028, 2036 - 2039
Federal alternative minimum tax credit (a)		7	—		Indefinite
Federal - other		22	(6	)	2020-2039
State - recycling credit		18	—		2028
State - other		1	—		Indefinite


(a)	The TCJA repealed the corporate alternative minimum tax (AMT) for tax years beginning after December 31, 2017. The existing indefinite carryforward period for AMT credits was retained.

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
2019	$	8	$	3	$	5	(a)	$	6
2018	8		—		—			8
2017	11		4		7		(a)	8

(a)

Tax credits expiring.

Components of Income Tax Expense (Benefit)



	2019			2018			2017
Income Tax Expense (Benefit)
Current - Federal	$	20		$	31		$	74
Current - State	—			4			6
Total Current Expense (Benefit)	20			35			80
Deferred - Federal (a)	81			65			268
Deferred - State (b)	5			34			32
Total Deferred Expense (Benefit), excluding benefits of operating loss carryforwards	86			99			300
Amortization of investment tax credit - Federal	(3		)	(3		)	(3		)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	—			(2		)	(2		)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	—			(2		)	(2		)
Total income tax expense (benefit) (c)	$	103		$	129		$	375

Total income tax expense (benefit) - Federal	$	98		$	91		$	337
Total income tax expense (benefit) - State	5			38			38
Total income tax expense (benefit) (c)	$	103		$	129		$	375


(a)	Due to the enactment of the TCJA in 2017, LKE recorded $112 million of deferred income tax expense, of which $108 million related to the impact of the U.S. federal corporate income tax rate reduction from 35% to 21% on deferred tax assets and liabilities and $4 million related to valuation allowances on tax credits expiring in 2021.


(b)	In 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

(c)

Excludes deferred federal and state tax expense (benefit) recorded to OCI of $(1) million in 2019, $5 million in 2018 and $(10) million in 2017.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2019			2018			2017
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate (a)	$	120		$	121		$	242
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	23			22			26
Amortization of investment tax credit	(3		)	(3		)	(3		)
Amortization of excess deferred federal and state income taxes (b)	(23		)	(20		)	(2		)
Deferred tax impact of U.S. tax reform (c)	—			—			112
Deferred tax impact of state tax reform (d)	—			9			—
Kentucky Recycling Credit, net of federal income tax expense (e)	(18		)	—			—
Other	4			—			—
Total increase (decrease)	(17		)	8			133
Total income tax expense (benefit)	$	103		$	129		$	375
Effective income tax rate	18.0		%	22.5		%	54.3		%


(a)	The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.

(b)

In 2019 and 2018, LKE recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.


(c)	In 2017, LKE recorded deferred income tax expense primarily due to the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA.


(d)	In 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.

(e)

Details of Taxes Other Than Income



	2019		2018		2017
Taxes, other than income
Property and other	$	74	$	70	$	65
Total	$	74	$	70	$	65

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:



	2019			2018
Deferred Tax Assets
Contributions in aid of construction	$	15		$	14
Regulatory liabilities	19			24
Accrued pension and postretirement costs	6			16
Deferred investment tax credits	8			9
Income taxes due to customers	136			139
State tax credit carryforwards	14			—
Lease liabilities	5			—
Valuation allowances	(14		)	—
Other	10			15
Total deferred tax assets	199			217



	2019		2018

Deferred Tax Liabilities
Plant - net	811		751
Regulatory assets	77		88
Lease right-of-use assets	4		—
Other	4		6
Total deferred tax liabilities	896		845
Net deferred tax liability	$	697	$	628

Components of Income Tax Expense (Benefit)



	2019			2018			2017
Income Tax Expense (Benefit)
Current - Federal	$	4		$	—		$	—
Current - State	4			4			5
Total Current Expense (Benefit)	8			4			5
Deferred - Federal	46			51			112
Deferred - State	10			10			14
Total Deferred Expense (Benefit), excluding benefits of operating loss carryforwards	56			61			126
Amortization of investment tax credit - Federal	(1		)	(1		)	(1		)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	—			—			1
Total Tax Expense (Benefit) of Operating Loss Carryforwards	—			—			1
Total income tax expense (benefit)	$	63		$	64		$	131

Total income tax expense (benefit) - Federal	$	49		$	50		$	112
Total income tax expense (benefit) - State	14			14			19
Total income tax expense (benefit)	$	63		$	64		$	131

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2019			2018			2017
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate (a)	$	62		$	62		$	120
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	12			11			14
Amortization of excess deferred federal and state income taxes (b)	(10		)	(8		)	(1		)
Kentucky recycling credit, net of federal income tax expense (c)	(14		)	—			—
Valuation allowance adjustments (c)	14			—			—
Other	(1		)	(1		)	(2		)
Total increase (decrease)	1			2			11
Total income tax expense (benefit)	$	63		$	64		$	131
Effective income tax rate	21.4		%	21.5		%	38.1		%


(a)	The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.

(b)

In 2019 and 2018, LG&E recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.

(c)

In 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. This amount has been reserved due to insufficient Kentucky taxable income projected at LG&E.

Details of Taxes Other Than Income



	2019		2018		2017
Taxes, other than income
Property and other	$	39	$	36	$	33
Total	$	39	$	36	$	33

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:



	2019			2018
Deferred Tax Assets
Contributions in aid of construction	$	8		$	7
Regulatory liabilities	25			28
Accrued pension and postretirement costs	—			7
Deferred investment tax credits	23			23
Income taxes due to customers	156			160
State tax credit carryforwards	5			—
Lease liabilities	8			—
Valuation allowances	(4		)	—
Other	3			3
Total deferred tax assets	224			228

Deferred Tax Liabilities
Plant - net	959			911
Regulatory assets	45			50
Accrued pension and postretirement costs	2			—
Lease right-of-use assets	7			—
Other	3			2
Total deferred tax liabilities	1,016			963
Net deferred tax liability	$	792		$	735

Components of Income Tax Expense (Benefit)



	2019			2018			2017
Income Tax Expense (Benefit)
Current - Federal	$	35		$	22		$	—
Current - State	5			6			7
Total Current Expense (Benefit)	40			28			7
Deferred - Federal	28			40			138
Deferred - State	13			10			16
Total Deferred Expense (Benefit)	41			50			154
Amortization of investment tax credit - Federal	(2		)	(2		)	(2		)
Total income tax expense (benefit)	$	79		$	76		$	159

Total income tax expense (benefit) - Federal	$	61		$	60		$	136
Total income tax expense (benefit) - State	18			16			23
Total income tax expense (benefit)	$	79		$	76		$	159

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate



	2019			2018			2017
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate (a)	$	78		$	76		$	146
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	15			13			15
Amortization of investment tax credit	(2		)	(2		)	(2		)
Amortization of excess deferred federal and state income taxes (b)	(13		)	(12		)	(1		)
Kentucky recycling credit, net of federal income tax expense (c)	(4		)	—			—
Valuation allowance adjustments (c)	4			—			—
Other	1			1			1
Total increase (decrease)	1			—			13
Total income tax expense (benefit)	$	79		$	76		$	159
Effective income tax rate	21.2		%	21.0		%	38.0		%


(a)	The U.S. federal corporate tax rate was reduced from 35% to 21%, as enacted by the TCJA, effective January 1, 2018.


(b)	In 2019 and 2018, KU recorded lower income tax expense for the amortization of excess deferred income taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.

(c)

In 2019, KU 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. This amount has been reserved due to insufficient Kentucky taxable income projected at KU.

Details of Taxes Other Than Income



	2019		2018		2017
Taxes, other than income
Property and other	$	35	$	34	$	32
Total	$	35	$	34	$	32