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Income and Other Taxes (Tables)

12 Months Ended

Dec. 31, 2020

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)

Components of Income (Loss) Before Income Taxes

"Income Before Income Taxes" included the following:


	2020		2019		2018
Domestic income	$	902	$	964	$	1,127
Foreign income	1,069		1,191		1,158
Total	$	1,971	$	2,155	$	2,285

Components of Deferred Tax Assets and Liabilities

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


	2020		2019
Deferred Tax Assets
Deferred investment tax credits	$	30	$	31
Regulatory liabilities	68		75
Income taxes due to customers	444		462
Accrued pension and postretirement costs	106		211
Federal loss carryforwards	234		324

State loss carryforwards	448		432

Federal and state tax credit carryforwards	401		402
Foreign capital loss carryforwards	370		320



Foreign - other	6		8
Contributions in aid of construction	115		112
Domestic - other	136		99

Valuation allowances	(906)		(834)
Total deferred tax assets	1,452		1,642

Deferred Tax Liabilities
Domestic plant - net	3,700		3,546

Regulatory assets	195		262

Foreign plant - net	911		765
Foreign - pensions	127		72
Domestic - other	70		61
Total deferred tax liabilities	5,003		4,706
Net deferred tax liability	$	3,551	$	3,064

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2020, 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 and other carryforwards
Federal net operating losses	$	1,111	$	234	$	—	2035-2037

State net operating losses	6,032		448		(419)		2021-2040


Foreign capital losses (a)	1,945		370		(370)		Indefinite
Federal - Other	13		2		—		Indefinite
State - Other	2		—		—		Indefinite


Credit carryforwards
Federal investment tax credit	134	—	2025-2040

Federal foreign tax credits (b)	218	(113)	2024-2027
Federal - other	32	(4)	2021-2040
State Recycling Credit	16	—	2028
State - other	1	—	Indefinite

(a)In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction from 19% to 17%. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million.

(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
2020	$	834	$	69	(a)	$	7	$	4		$	906
2019	808		31			—		5			834
2018	838		26			—		56		(b)	808

(a)The cancellation of the reduction of the U.K. statutory income tax rate in 2020 resulted in a $38 million increase in deferred tax assets and corresponding valuation allowances. See "Reconciliation of Income Tax Expense" below for additional information on the impact of the U.K. Finance Act 2020. In addition, deferred tax assets and corresponding valuation allowances were increased in 2020 by approximately $11 million due to the effect of foreign currency exchange rates.

(b)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.

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:


	2020		2019		2018
Income Tax Expense (Benefit)
Current - Federal	$	(9)	$	(10)	$	(19)
Current - State	24		19		17
Current - Foreign	85		91		104
Total Current Expense (Benefit)	100		100		102
Deferred - Federal	123		139		203
Deferred - State	94		76		100
Deferred - Foreign (a)	215		123		107
Total Deferred Expense (Benefit), excluding operating loss carryforwards	432		338		410

Amortization of investment tax credit	(3)		(3)		(3)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	6		7		(20)
Deferred - State	(33)		(33)		(31)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	(27)		(26)		(51)
Total income tax expense (benefit)	$	502	$	409	$	458

Total income tax expense (benefit) - Federal	$	117	$	133	$	161
Total income tax expense (benefit) - State	85		62		86
Total income tax expense (benefit) - Foreign	300		214		211
Total income tax expense (benefit)	$	502	$	409	$	458

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


	2020		2019		2018





Other comprehensive income	$	(19)	$	(93)	$	(6)

Total	$	(19)	$	(93)	$	(6)

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2020		2019		2018
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	414	$	453	$	480
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	48		45		40
Valuation allowance adjustments (a)	26		22		21
Impact of lower U.K. income tax rates	(26)		(25)		(25)
U.S. income tax on foreign earnings - net of foreign tax credit	11		2		3


Federal and state income tax return adjustments	(9)		1		—
Impact of the U.K. Finance Acts on deferred tax balances (b)	101		(14)		(13)
Depreciation and other items not normalized	(5)		(10)		(11)
Amortization of excess deferred federal and state income taxes	(43)		(40)		(37)

Interest benefit on U.K. financing activities	(12)		(12)		(17)


Deferred tax impact of Kentucky tax reform (c)	—		—		9
Kentucky recycling credit, net of federal income tax expense (d)	—		(18)		—
Other	(3)		5		8
Total increase (decrease)	88		(44)		(22)
Total income tax expense (benefit)	$	502	$	409	$	458
Effective income tax rate	25.5%		19.0%		20.0%

(a)In 2020, 2019 and 2018, PPL recorded deferred income tax expense of $24 million, $25 million and $24 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.

(b)In 2018 and 2019, PPL reduced its net deferred tax liabilities as a result of the U.K. Finance Act 2016 that was enacted in September 2016 and reduced the U.K. statutory income tax rate effective April, 2020 to 17%. In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction to 17%. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million.

(c)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.

(d)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.

Details of Taxes Other Than Income


	2020		2019		2018
Taxes, other than income
State gross receipts	$	100	$	107	$	103

Foreign property	127		127		134
Domestic - other	80		79		75
Total	$	307	$	313	$	312

Summary of Income Tax Examinations

With few exceptions, at December 31, 2020, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows.

PPL

PPL Electric

LKE

LG&E

U.S. (federal)

2016 and prior

Pennsylvania (state)

2016 and prior

Kentucky (state)

2014 and prior

U.K. (foreign)

2016 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:


	2020		2019
Deferred Tax Assets
Accrued pension and postretirement costs	$	25	$	81
Contributions in aid of construction	91		88
Regulatory liabilities	24		31
Income taxes due to customers	162		170
State loss carryforwards	—		6

Federal loss carryforwards	52		78

Other	29		23
Total deferred tax assets	383		477

Deferred Tax Liabilities
Electric utility plant - net	1,826		1,761


Regulatory assets	86		139
Other	30		24
Total deferred tax liabilities	1,942		1,924
Net deferred tax liability	$	1,559	$	1,447

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2020, PPL Electric had the following loss and tax credit carryforwards and related deferred tax assets:


	Gross		Deferred Tax Asset		Expiration
Loss carryforwards
Federal net operating losses	$	248	$	52	2035-2037


Credit carryforwards
Federal - other	5	2031-2040

Components of Income Tax Expense (Benefit)


	2020		2019		2018
Income Tax Expense (Benefit)
Current - Federal	$	61	$	44	$	2
Current - State	23		15		9
Total Current Expense (Benefit)	84		59		11
Deferred - Federal	45		51		96
Deferred - State	38		39		37
Total Deferred Expense (Benefit), excluding operating loss carryforwards	83		90		133


Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	—		—		(8)

Total Tax Expense (Benefit) of Operating Loss Carryforwards	—		—		(8)
Total income tax expense (benefit)	$	167	$	149	$	136

Total income tax expense (benefit) - Federal	$	106	$	95	$	90
Total income tax expense (benefit) - State	61		54		46
Total income tax expense (benefit)	$	167	$	149	$	136

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2020		2019		2018
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	139	$	127	$	119
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	52		47		43

Federal and state income tax return adjustments	(4)		1		—
Depreciation and other items not normalized	(5)		(10)		(11)
Amortization of excess deferred federal income taxes (a)	(16)		(18)		(17)


Other	1		2		2
Total increase (decrease)	28		22		17
Total income tax expense (benefit)	$	167	$	149	$	136
Effective income tax rate	25.2%		24.6%		24.0%

(a)In 2020, 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.

Details of Taxes Other Than Income


	2020		2019		2018
Taxes, other than income
State gross receipts	$	100	$	107	$	103
Property and other	7		5		6
Total	$	107	$	112	$	109

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:


	2020		2019
Deferred Tax Assets
Federal loss carryforwards	$	107	$	140
State loss carryforwards	28		31
Federal tax credit carryforwards	159		162
Contributions in aid of construction	23		23
Regulatory liabilities	43		44
Accrued pension and postretirement costs	57		71
State tax credit carryforwards	17		19
Income taxes due to customers	282		292
Deferred investment tax credits	30		31
Lease liabilities	13		14
Valuation allowances	(4)		(6)
Other	29		28
Total deferred tax assets	784		849

Deferred Tax Liabilities
Plant - net	1,831		1,778
Regulatory assets	109		122
Lease right-of-use assets	11		12
Other	8		6
Total deferred tax liabilities	1,959		1,918
Net deferred tax liability	$	1,175	$	1,069

Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

At December 31, 2020, 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	$	511	$	107	$	—	2035 - 2037
Federal charitable contributions	1		—		—		2024
State net operating losses	710		28		—		2029 - 2038


	Gross	Deferred Tax Asset	Valuation Allowance	Expiration
Credit carryforwards
Federal investment tax credit		134	—	2025 - 2028, 2036 - 2040

Federal - other		25	(4)	2021-2040
State - recycling credit		16	—	2028
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
2020	$	6	$	—	$	2	(a)	$	4
2019	8		3		5		(a)	6
2018	8		—		—			8

(a)Tax credits expiring.

Components of Income Tax Expense (Benefit)


	2020		2019		2018
Income Tax Expense (Benefit)
Current - Federal	$	41	$	20	$	31
Current - State	1		—		4
Total Current Expense (Benefit)	42		20		35
Deferred - Federal	43		81		65
Deferred - State (a)	24		5		34
Total Deferred Expense (Benefit), excluding benefits of operating loss carryforwards	67		86		99
Amortization of investment tax credit - Federal	(3)		(3)		(3)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	—		—		(2)

Total Tax Expense (Benefit) of Operating Loss Carryforwards	—		—		(2)
Total income tax expense (benefit) (b)	$	106	$	103	$	129

Total income tax expense (benefit) - Federal	$	81	$	98	$	91
Total income tax expense (benefit) - State	25		5		38
Total income tax expense (benefit) (b)	$	106	$	103	$	129

(a)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.

(b)Excludes deferred federal and state tax expense (benefit) recorded to OCI of $2 million in 2020, $(1) million in 2019 and $5 million in 2018.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2020		2019		2018
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	117	$	120	$	121
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	22		23		22
Amortization of investment tax credit	(3)		(3)		(3)
Amortization of excess deferred federal and state income taxes	(28)		(23)		(20)


Deferred tax impact of state tax reform (a)	—		—		9
Kentucky Recycling Credit, net of federal income tax expense (b)	—		(18)		—

Other	(2)		4		—
Total increase (decrease)	(11)		(17)		8
Total income tax expense (benefit)	$	106	$	103	$	129
Effective income tax rate	19.1%		18.0%		22.5%

(a)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.

(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.

Details of Taxes Other Than Income


	2020		2019		2018
Taxes, other than income
Property and other	$	77	$	74	$	70
Total	$	77	$	74	$	70

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:


	2020		2019
Deferred Tax Assets

Contributions in aid of construction	$	15	$	15
Regulatory liabilities	20		19
Accrued pension and postretirement costs	—		6
Deferred investment tax credits	8		8
Income taxes due to customers	132		136
State tax credit carryforwards	12		14
Lease liabilities	5		5
Valuation allowances	(12)		(14)
Other	11		10
Total deferred tax assets	191		199

Deferred Tax Liabilities
Plant - net	833		811
Regulatory assets	66		77
Lease right-of-use assets	4		4
Other	4		4
Total deferred tax liabilities	907		896
Net deferred tax liability	$	716	$	697

Components of Income Tax Expense (Benefit)


	2020		2019		2018
Income Tax Expense (Benefit)
Current - Federal	$	53	$	4	$	—
Current - State	7		4		4
Total Current Expense (Benefit)	60		8		4
Deferred - Federal	(4)		46		51
Deferred - State	7		10		10
Total Deferred Expense (Benefit)	3		56		61
Amortization of investment tax credit - Federal	(1)		(1)		(1)




Total income tax expense (benefit)	$	62	$	63	$	64

Total income tax expense (benefit) - Federal	$	48	$	49	$	50
Total income tax expense (benefit) - State	14		14		14
Total income tax expense (benefit)	$	62	$	63	$	64

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2020		2019		2018
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	64	$	62	$	62
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	12		12		11
Amortization of excess deferred federal and state income taxes	(11)		(10)		(8)
Kentucky recycling credit, net of federal income tax expense (a)	—		(14)		—
Valuation allowance adjustments (a)	—		14		—
Other	(3)		(1)		(1)
Total increase (decrease)	(2)		1		2
Total income tax expense (benefit)	$	62	$	63	$	64
Effective income tax rate	20.3%		21.4%		21.5%

(a)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


	2020		2019		2018
Taxes, other than income
Property and other	$	40	$	39	$	36
Total	$	40	$	39	$	36

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:


	2020		2019
Deferred Tax Assets

Contributions in aid of construction	$	8	$	8
Regulatory liabilities	23		25

Deferred investment tax credits	22		23
Income taxes due to customers	150		156
State tax credit carryforwards	5		5
Lease liabilities	8		8
Valuation allowances	(4)		(4)
Other	4		3
Total deferred tax assets	216		224

Deferred Tax Liabilities
Plant - net	992		959
Regulatory assets	43		45
Accrued pension and postretirement costs	8		2
Lease right-of-use assets	7		7
Other	1		3
Total deferred tax liabilities	1,051		1,016
Net deferred tax liability	$	835	$	792

Components of Income Tax Expense (Benefit)


	2020		2019		2018
Income Tax Expense (Benefit)
Current - Federal	$	40	$	35	$	22
Current - State	3		5		6
Total Current Expense (Benefit)	43		40		28
Deferred - Federal	11		28		40
Deferred - State	11		13		10
Total Deferred Expense (Benefit)	22		41		50
Amortization of investment tax credit - Federal	(2)		(2)		(2)



Total income tax expense (benefit)	$	63	$	79	$	76

Total income tax expense (benefit) - Federal	$	49	$	61	$	60
Total income tax expense (benefit) - State	14		18		16
Total income tax expense (benefit)	$	63	$	79	$	76

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2020		2019		2018
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	72	$	78	$	76
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	14		15		13
Amortization of investment tax credit	(2)		(2)		(2)
Amortization of excess deferred federal and state income taxes	(17)		(13)		(12)
Kentucky recycling credit, net of federal income tax expense (a)	—		(4)		—
Valuation allowance adjustments (a)	—		4		—
Other	(4)		1		1
Total increase (decrease)	(9)		1		—
Total income tax expense (benefit)	$	63	$	79	$	76
Effective income tax rate	18.4%		21.2%		21.0%

(a)In 2019, KU recorded a deferred income tax benefit associated with a project 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


	2020		2019		2018
Taxes, other than income
Property and other	$	37	$	35	$	34
Total	$	37	$	35	$	34