Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

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


	2022		2021
Deferred Tax Assets
Deferred investment tax credits	$	29	$	30
Regulatory liabilities	88		94
Income taxes due to customers	448		422
Accrued pension and postretirement costs	86		75


State loss carryforwards	230		483

Federal and state tax credit carryforwards	68		15
Internal Revenue Code Section 197 intangibles (a)	85		—



Leases	15		67
Contributions in aid of construction	114		120
Other	72		84

Valuation allowances	(213)		(462)
Total deferred tax assets	1,022		928

Deferred Tax Liabilities
Plant - net	3,609		3,812

Regulatory assets	337		180

Prepayments	46		—

Other	30		75
Total deferred tax liabilities	4,022		4,067
Net deferred tax liability	$	3,000	$	3,139

(a)Certain of the RIE assets acquired in 2022 are treated as intangibles for tax purposes that are amortized over a 15 year period. PPL recorded deferred tax assets on these intangibles, which will reverse as tax deductions are taken.

At December 31, 2022, 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


State net operating losses	$	5,830	$	230	$	(213)	2023-2042


	Gross	Deferred Tax Asset	Valuation Allowance	Expiration
Credit carryforwards
Federal investment tax credit		20	—	2042

Federal foreign tax credits		32	—	2027
Federal - other		3	—	2042
State recycling credit		12	—	2028
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
2022	$	462	$	10		$	—	$	259	(a)	$	213
2021	536		48		(b)	—		122		(c)	462
2020	514		26			—		4			536

(a)In 2022, PPL recorded a $36 million decrease in a valuation allowance on a 2002 state net operating loss carryforward that expired in 2022 and a $213 million decrease in the valuation allowance due to the Pennsylvania rate change. See reconciliation of income tax table below.

(b)In 2021, PPL recorded a $31 million increase in a valuation allowance on a state net operating loss carryforward in connection with the loss on extinguishment associated with a tender offer to purchase and retire PPL Capital Funding's outstanding Senior Notes.

(c)In light of the disposition of PPL's U.K. utility business, there was a decrease in the valuation allowance of approximately $113 million.

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate

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:


	2022		2021		2020
Income Tax Expense (Benefit)
Current - Federal	$	(2)	$	(1)	$	(8)
Current - State	24		36		24
Current - Foreign	—		(1)		(2)
Total Current Expense (Benefit)	22		34		14
Deferred - Federal	122		28		135
Deferred - State	68		105		94
Deferred - Foreign (a)	—		383		101
Total Deferred Expense (Benefit), excluding operating loss carryforwards	190		516		330

Amortization of investment tax credit	(3)		(3)		(3)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	2		12		6
Deferred - State	(10)		(56)		(33)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	(8)		(44)		(27)
Total income tax expense (benefit)	$	201	$	503	$	314

Total income tax expense (benefit) - Federal	$	119	$	36	$	130
Total income tax expense (benefit) - State	82		85		85
Total income tax expense (benefit) - Foreign	—		382		99
Total income tax expense (benefit)	$	201	$	503	$	314

(a)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 2021.

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.

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


	2022		2021		2020
Discontinued operations	$	(42)	$	759	$	188

Reclassification from AOCI due to sale of UK utility business	—		660		—


Other comprehensive income	11		150		(19)

Total	$	(31)	$	1,569	$	169


	2022		2021		2020
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	192	$	109	$	200

State income taxes, net of federal income tax benefit	68		23		48
Valuation allowance adjustments (a)	9		48		24




Federal and state income tax return adjustments	(1)		(3)		(9)
Impact of the U.K. Finance Acts on deferred tax balances (b)	—		383		101
Depreciation and other items not normalized	(8)		(5)		(5)
Amortization of excess deferred federal and state income taxes	(54)		(54)		(43)




Non-deductible officer's salary	5		6		7

Other	(10)		(4)		(9)
Total increase (decrease)	9		394		114
Total income tax expense (benefit)	$	201	$	503	$	314
Effective income tax rate	22.0%		96.5%		32.9%

(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.

In 2022, 2021, and 2020, PPL recorded deferred income tax expense of $5 million, $15 million and $24 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.

(b)In 2020, the U.K. Finance Act 2020 cancelled the 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 corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million.

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 2021.

PPL Electric Utilities Corp [Member]


	2022		2021		2020
Taxes, other than income
State gross receipts (a)	$	175	$	113	$	100


Domestic - other (a)	157		94		80
Total	$	332	$	207	$	180

(a)Increase primarily due to the acquisition of RIE.

Income Taxes [Line Items]

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


	2022		2021
Deferred Tax Assets
Accrued pension and postretirement costs	$	27	$	14
Contributions in aid of construction	87		95
Regulatory liabilities	36		52
Income taxes due to customers	193		154




Other	18		21
Total deferred tax assets	361		336

Deferred Tax Liabilities
Electric utility plant - net	1,745		1,891


Regulatory assets	93		74
Prepayments	35		—
Other	2		39
Total deferred tax liabilities	1,875		2,004
Net deferred tax liability	$	1,514	$	1,668

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2022		2021		2020
Income Tax Expense (Benefit)
Current - Federal	$	63	$	40	$	61
Current - State	20		35		23
Total Current Expense (Benefit)	83		75		84
Deferred - Federal	60		59		45
Deferred - State	31		20		38
Total Deferred Expense (Benefit), excluding operating loss carryforwards	91		79		83






Total income tax expense (benefit)	$	174	$	154	$	167

Total income tax expense (benefit) - Federal	$	123	$	99	$	106
Total income tax expense (benefit) - State	51		55		61
Total income tax expense (benefit)	$	174	$	154	$	167


	2022		2021		2020
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	147	$	126	$	139
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	54		46		52

Federal and state income tax return adjustments	(1)		—		(4)
Depreciation and other items not normalized	(7)		(5)		(5)
Amortization of excess deferred federal income taxes (a)	(12)		(14)		(16)
State income tax rate change (b)	(9)		—		—

Other	2		1		1
Total increase (decrease)	27		28		28
Total income tax expense (benefit)	$	174	$	154	$	167
Effective income tax rate	24.9%		25.7%		25.2%

(a)In 2022, 2021, and 2020, 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.

(b)On July 8, 2022, the Governor of Pennsylvania signed into law Pennsylvania House Bill 1342 (H.B. 1342). Among other changes to the state tax code, the bill reduces the corporate net income tax rate from 9.99% to 8.99% beginning January 1, 2023, and further reduces the rate annually by half a percentage point until the rate reaches 4.99% in 2031. The income statement impact of the corporate net income tax reduction was a deferred tax benefit of $9 million.

Louisville Gas And Electric Co [Member]


	2022		2021		2020
Taxes, other than income
State gross receipts	$	142	$	113	$	100
Property and other	7		7		7
Total	$	149	$	120	$	107

Income Taxes [Line Items]

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


	2022		2021
Deferred Tax Assets

Contributions in aid of construction	$	17	$	15
Regulatory liabilities	18		18

Deferred investment tax credits	8		8
Income taxes due to customers	119		125
State tax credit carryforwards	9		11
Lease liabilities	4		4
Valuation allowances	(9)		(11)
Other	8		11
Total deferred tax assets	174		181

Deferred Tax Liabilities
Plant - net	869		854
Regulatory assets	69		65
Lease right-of-use assets	3		4
Other	4		9
Total deferred tax liabilities	945		932
Net deferred tax liability	$	771	$	751

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2022		2021		2020
Income Tax Expense (Benefit)
Current - Federal	$	60	$	41	$	53
Current - State	9		5		7
Total Current Expense (Benefit)	69		46		60
Deferred - Federal	(10)		1		(4)
Deferred - State	5		8		7
Total Deferred Expense (Benefit)	(5)		9		3
Amortization of investment tax credit - Federal	(1)		(1)		(1)




Total income tax expense (benefit)	$	63	$	54	$	62

Total income tax expense (benefit) - Federal	$	49	$	41	$	48
Total income tax expense (benefit) - State	14		13		14
Total income tax expense (benefit)	$	63	$	54	$	62


	2022		2021		2020
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	70	$	64	$	64
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	13		12		12
Amortization of excess deferred federal and state income taxes	(18)		(20)		(11)


Other	(2)		(2)		(3)
Total increase (decrease)	(7)		(10)		(2)
Total income tax expense (benefit)	$	63	$	54	$	62
Effective income tax rate	18.8%		17.8%		20.3%

Kentucky Utilities Co [Member]


	2022		2021		2020
Taxes, other than income
Property and other	$	48	$	46	$	40
Total	$	48	$	46	$	40

Income Taxes [Line Items]

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


	2022		2021
Deferred Tax Assets

Contributions in aid of construction	$	9	$	9
Regulatory liabilities	23		23

Deferred investment tax credits	21		22
Income taxes due to customers	136		143
State tax credit carryforwards	4		4
Lease liabilities	5		7
Valuation allowances	(3)		(3)
Other	4		4
Total deferred tax assets	199		209

Deferred Tax Liabilities
Plant - net	1,028		1,012
Regulatory assets	56		41
Pension and postretirement costs	6		13
Lease right-of-use assets	5		6
Other	—		2
Total deferred tax liabilities	1,095		1,074
Net deferred tax liability	$	896	$	865

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2022		2021		2020
Income Tax Expense (Benefit)
Current - Federal	$	63	$	58	$	40
Current - State	11		8		3
Total Current Expense (Benefit)	74		66		43
Deferred - Federal	(3)		(4)		11
Deferred - State	7		7		11
Total Deferred Expense (Benefit)	4		3		22
Amortization of investment tax credit - Federal	(2)		(2)		(2)



Total income tax expense (benefit)	$	76	$	67	$	63

Total income tax expense (benefit) - Federal	$	58	$	52	$	49
Total income tax expense (benefit) - State	18		15		14
Total income tax expense (benefit)	$	76	$	67	$	63


	2022		2021		2020
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	84	$	76	$	72
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	16		14		14
Amortization of investment tax credit	(2)		(2)		(2)
Amortization of excess deferred federal and state income taxes	(21)		(20)		(17)


Other	(1)		(1)		(4)
Total decrease	(8)		(9)		(9)
Total income tax expense (benefit)	$	76	$	67	$	63
Effective income tax rate	19.1%		18.4%		18.4%