Summary of Operating Loss Carryforwards and Tax Credit Carryforwards

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


	2023		2022
Deferred Tax Assets
Deferred investment tax credits	$	28	$	29
Regulatory liabilities	123		88
Income taxes due to customers	436		448
Accrued pension and postretirement costs	101		86


State loss carryforwards	253		230

Federal and state tax credit carryforwards	67		68
Internal Revenue Code Section 197 intangibles (a)	78		85




Contributions in aid of construction	149		114
Other	139		87

Valuation allowances	(245)		(213)
Total deferred tax assets	1,129		1,022

Deferred Tax Liabilities
Plant - net	3,749		3,609

Regulatory assets	376		337

Prepayments	47		46
Goodwill	22		7
Other	30		23
Total deferred tax liabilities	4,224		4,022
Net deferred tax liability	$	3,095	$	3,000

(a)Certain of the RIE assets acquired in 2022 are treated as intangibles for tax purposes and 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, 2023, 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	$	5,475	$	253	$	(243)	2024-2043
State charitable contributions	10		1		(1)		2024-2028


	Gross	Deferred Tax Asset	Valuation Allowance	Expiration
Credit carryforwards
Federal investment tax credit		51	—	2045


Federal - other		5	—	2043
State recycling credit		10	—	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
2023	$	213	$	54	(a)	$	—	$	22	(b)	$	245
2022	462		10			—		259		(c)	213
2021	536		48		(d)	—		122		(e)	462

(a)PPL has a Pennsylvania net operating loss fully offset by a valuation allowance. In 2023, PPL adjusted the net operating loss and related valuation allowance to be recorded at the current estimate of the applicable rate at which each portion of the net operating loss that will expire and be written off as the rate is reduced annually by one half a percentage point until the rate reaches to 4.99% in 2031.

(b)In 2023, PPL recorded a $22 million decrease in a valuation allowance on a 2003 state net operating loss carryforward that expired in 2023.

(c)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.

(d)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.

(e)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:


	2023		2022		2021
Income Tax Expense (Benefit)
Current - Federal (a)	$	(175)	$	(2)	$	(1)
Current - State	37		24		36
Current - Foreign	—		—		(1)
Total Current Expense (Benefit)	(138)		22		34
Deferred - Federal (a)	286		122		28
Deferred - State	48		68		105
Deferred - Foreign (b)	—		—		383
Total Deferred Expense (Benefit), excluding operating loss carryforwards	334		190		516

Amortization of investment tax credit	(3)		(3)		(3)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	3		2		12
Deferred - State	(12)		(10)		(56)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	(9)		(8)		(44)
Total income tax expense (benefit)	$	184	$	201	$	503

Total income tax expense (benefit) - Federal	$	111	$	119	$	36
Total income tax expense (benefit) - State	73		82		85
Total income tax expense (benefit) - Foreign	—		—		382
Total income tax expense (benefit)	$	184	$	201	$	503

(a)During 2023, PPL purchased approximately $300 million of renewable tax credits, as allowed by the IRA. PPL recorded a current tax benefit and a deferred tax expense for the utilization of approximately $250 million of the credits in 2023 and prior years, per the three-year carry-back rule. See "Other - Purchase of Renewable Tax Credits" below for additional information.

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


	2023		2022		2021
Discontinued operations	$	—	$	(42)	$	759

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


Other comprehensive income	(14)		11		150
Valuation allowance recorded to other comprehensive income	(1)		—		—
Total	$	(15)	$	(31)	$	1,569


	2023		2022		2021
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	194	$	192	$	109

State income taxes, net of federal income tax benefit	58		68		23
Valuation allowance adjustments (a)	12		9		48
Income tax credits (b)	(22)		(3)		(2)




Impact of the U.K. Finance Acts on deferred tax balances (c)	—		—		383
Depreciation and other items not normalized	(10)		(8)		(5)
Amortization of excess deferred federal and state income taxes	(48)		(54)		(54)




Non-deductible officer's salary	1		5		6

Other	(1)		(8)		(5)
Total increase (decrease)	(10)		9		394
Total income tax expense (benefit)	$	184	$	201	$	503
Effective income tax rate	19.9%		22.0%		96.5%

(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 2023, 2022, and 2021, PPL recorded deferred income tax expense of $11 million, $5 million and $15 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.

(b)In addition to credits internally generated, in 2023, PPL purchased approximately $300 million of renewable tax credits, as allowed by the IRA. PPL recorded a current tax benefit and a deferred tax expense for the utilization of approximately $250 million of the credits in 2023 and prior years, per the three-year carry-back rule.

(c)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]


	2023		2022		2021
Taxes, other than income
State gross receipts (a)	$	195	$	175	$	113


Property and other (a)	197		157		94
Total	$	392	$	332	$	207

(a)Increase in 2022 is primarily due to the acquisition of RIE on May 25, 2022. The increase in 2023 is primarily due to the results for 2023 including a full year of RIE operations compared to 2022, which includes only operations beginning on the acquisition date.

Income Taxes [Line Items]

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


	2023		2022
Deferred Tax Assets
Accrued pension and postretirement costs	$	30	$	27
Contributions in aid of construction	105		87
Regulatory liabilities	43		36
Income taxes due to customers	191		193




Other	27		18
Total deferred tax assets	396		361

Deferred Tax Liabilities
Electric utility plant - net	1,810		1,745


Regulatory assets	119		93
Prepayments	36		35
Other	4		2
Total deferred tax liabilities	1,969		1,875
Net deferred tax liability	$	1,573	$	1,514

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2023		2022		2021
Income Tax Expense (Benefit)
Current - Federal	$	91	$	63	$	40
Current - State	31		20		35
Total Current Expense (Benefit)	122		83		75
Deferred - Federal	28		60		59
Deferred - State	18		31		20
Total Deferred Expense (Benefit), excluding operating loss carryforwards	46		91		79






Total income tax expense (benefit)	$	168	$	174	$	154

Total income tax expense (benefit) - Federal	$	119	$	123	$	99
Total income tax expense (benefit) - State	49		51		55
Total income tax expense (benefit)	$	168	$	174	$	154


	2023		2022		2021
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	144	$	147	$	126
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	49		54		46


Depreciation and other items not normalized	(9)		(7)		(5)
Amortization of excess deferred federal income taxes (a)	(11)		(12)		(14)
State income tax rate change (b)	—		(9)		—

Other	(5)		1		1
Total increase (decrease)	24		27		28
Total income tax expense (benefit)	$	168	$	174	$	154
Effective income tax rate	24.5%		24.9%		25.7%

(a)In 2023, 2022, and 2021, 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)2022 includes a deferred tax benefit of $9 million due to the corporate net income tax rate reduction. See "Other - Pennsylvania State Tax Reform" below for additional information.

Louisville Gas And Electric Co [Member]


	2023		2022		2021
Taxes, other than income
State gross receipts	$	136	$	142	$	113
Property and other	7		7		7
Total	$	143	$	149	$	120

Income Taxes [Line Items]

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


	2023		2022
Deferred Tax Assets

Contributions in aid of construction	$	18	$	17
Regulatory liabilities	19		18
Accrued pension and postretirement costs	3		—
Deferred investment tax credits	8		8
Income taxes due to customers	115		119
State tax credit carryforwards	8		9
Lease liabilities	4		4
Valuation allowances	(8)		(9)
Other	8		8
Total deferred tax assets	175		174

Deferred Tax Liabilities
Plant - net	877		869
Regulatory assets	67		69
Lease right-of-use assets	3		3
Other	4		4
Total deferred tax liabilities	951		945
Net deferred tax liability	$	776	$	771

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2023		2022		2021
Income Tax Expense (Benefit)
Current - Federal	$	70	$	60	$	41
Current - State	13		9		5
Total Current Expense (Benefit)	83		69		46
Deferred - Federal	(15)		(10)		1
Deferred - State	2		5		8
Total Deferred Expense (Benefit)	(13)		(5)		9
Amortization of investment tax credit - Federal	(1)		(1)		(1)




Total income tax expense (benefit)	$	69	$	63	$	54

Total income tax expense (benefit) - Federal	$	54	$	49	$	41
Total income tax expense (benefit) - State	15		14		13
Total income tax expense (benefit)	$	69	$	63	$	54


	2023		2022		2021
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	70	$	70	$	64
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	13		13		12
Amortization of excess deferred federal and state income taxes	(13)		(18)		(20)


Other	(1)		(2)		(2)
Total increase (decrease)	(1)		(7)		(10)
Total income tax expense (benefit)	$	69	$	63	$	54
Effective income tax rate	20.6%		18.8%		17.8%

Kentucky Utilities Co [Member]


	2023		2022		2021
Taxes, other than income
Property and other	$	48	$	48	$	46
Total	$	48	$	48	$	46

Income Taxes [Line Items]

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


	2023		2022
Deferred Tax Assets

Contributions in aid of construction	$	10	$	9
Regulatory liabilities	23		23

Deferred investment tax credits	21		21
Income taxes due to customers	131		136
State tax credit carryforwards	4		4
Lease liabilities	5		5
Valuation allowances	(2)		(3)
Other	5		4
Total deferred tax assets	197		199

Deferred Tax Liabilities
Plant - net	1,045		1,028
Regulatory assets	50		56
Pension and postretirement costs	7		6
Lease right-of-use assets	5		5
Other	2		—
Total deferred tax liabilities	1,109		1,095
Net deferred tax liability	$	912	$	896

Reconciliation of Income Tax Expense Derived From Statutory Tax Rate


	2023		2022		2021
Income Tax Expense (Benefit)
Current - Federal	$	73	$	63	$	58
Current - State	13		11		8
Total Current Expense (Benefit)	86		74		66
Deferred - Federal	(11)		(3)		(4)
Deferred - State	4		7		7
Total Deferred Expense (Benefit)	(7)		4		3
Amortization of investment tax credit - Federal	(2)		(2)		(2)



Total income tax expense (benefit)	$	77	$	76	$	67

Total income tax expense (benefit) - Federal	$	60	$	58	$	52
Total income tax expense (benefit) - State	17		18		15
Total income tax expense (benefit)	$	77	$	76	$	67


	2023		2022		2021
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%	$	82	$	84	$	76
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	15		16		14
Amortization of investment tax credit	(2)		(2)		(2)
Amortization of excess deferred federal and state income taxes	(17)		(21)		(20)


Other	(1)		(1)		(1)
Total decrease	(5)		(8)		(9)
Total income tax expense (benefit)	$	77	$	76	$	67
Effective income tax rate	19.8%		19.1%		18.4%