Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

Reconciliations of income tax expense (benefit) for the periods ended September 30 are as follows.

(PPL)
	Three Months				Nine Months
	2021		2020		2021		2020
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 21%	$	55	$	59	$	70	$	155
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	17		15		12		39
Valuation allowance adjustments (a)	5		7		39		19
Impact of the U.K. Finance Acts on deferred tax balances (b)	—		104		383		101
Amortization of excess deferred federal and state income taxes	(18)		(11)		(38)		(34)
Federal and state income tax return adjustments	(4)		(9)		(4)		(9)
Other	(4)		—		(7)		(5)
Total increase (decrease)	(4)		106		385		111
Total income tax expense (benefit)	$	51	$	165	$	455	$	266

(a)    In 2021, PPL recorded a $31 million state deferred tax benefit on a net operating loss and an offsetting valuation allowance in connection with the loss on extinguishment associated with a tender offer to purchase and retire PPL Capital Funding's outstanding Senior Notes. See Note 8 for additional information on the tender offer.

(b)The U.K. Finance Act 2020, formally enacted on July 22, 2020, cancelled the U.K. corporation tax rate reduction to 17%, thereby maintaining the corporation tax rate at 19% for financial years 2020 and 2021. The primary impact of the cancellation of the corporate tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $102 million in the third quarter of 2020.

The U.K. Finance Act 2021, formally enacted on June 10, 2021, increased the U.K. corporation tax rate from 19% to 25%, effective April 1, 2023. The primary impact of the corporation tax rate increase was an increase in deferred tax liabilities of the U.K. utility business, which was sold on June 14, 2021, and a corresponding deferred tax expense of $383 million, which was recognized in continuing operations in the second quarter of 2021.

(PPL Electric)
	Three Months				Nine Months
	2021		2020		2021		2020
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	36	$	37	$	95	$	104
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	13		14		36		39
Federal and state income tax return adjustments	—		(4)		—		(4)
Depreciation and other items not normalized	—		—		(4)		(4)
Amortization of excess deferred federal and state income taxes	(5)		(4)		(11)		(12)
Other	1		1		—		2
Total increase (decrease)	9		7		21		21
Total income tax expense (benefit)	$	45	$	44	$	116	$	125

(LG&E)
	Three Months				Nine Months
	2021		2020		2021		2020
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	21	$	18	$	53	$	50
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	4		3		10		9
Amortization of excess deferred federal and state income taxes	(7)		(3)		(13)		(8)
Federal and state income tax return adjustments	—		(2)		—		(2)
Other	(1)		—		(2)		(2)
Total increase (decrease)	(4)		(2)		(5)		(3)
Total income tax expense (benefit)	$	17	$	16	$	48	$	47

(KU)
	Three Months				Nine Months
	2021		2020		2021		2020
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	26	$	22	$	63	$	56
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	5		4		12		11
Amortization of excess deferred federal and state income taxes	(6)		(4)		(14)		(12)
Federal and state income tax return adjustments	(1)		(3)		(1)		(3)
Other	(1)		—		(3)		(2)
Total increase (decrease)	(3)		(3)		(6)		(6)
Total income tax expense (benefit)	$	23	$	19	$	57	$	50

Other

Net Operating Loss and Tax Credit Carryforwards (All Registrants)

PPL utilized federal net operating losses of $1,111 million and tax credit carryforwards of $272 million in June 2021 as a result of the completion of the sale of the U.K. utility business on June 14, 2021. The related deferred tax assets decreased by approximately $506 million, with a corresponding reduction in current income taxes.