Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.

Entergy Arkansas [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.

Entergy Louisiana [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.

Entergy Mississippi [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.

Entergy New Orleans [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.

Entergy Texas [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.

System Energy [Member]

Income Taxes

INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following:

	2018			2017			2016
	(In Thousands)
Current:
Federal		$36,848			$29,595			$45,249
Foreign	—			—			68
State	7,274			15,478			(14,960		)
Total	44,122			45,073			30,357
Deferred and non-current - net	(1,074,416		)	505,010			(840,465		)
Investment tax credit adjustments - net	(6,532		)	(7,513		)	(7,151		)
Income taxes		($1,036,826	)		$542,570			($817,259	)

Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($23,638	)		($15,841	)		($11,275	)		($10,813	)		$16,190			($9,786	)
State	(1,617		)	(1,122		)	(1,066		)	545			3,205			(1,821		)
Total	(25,255		)	(16,963		)	(12,341		)	(10,268		)	19,395			(11,607		)
Deferred and non-current - net	(270,586		)	(32,725		)	(114,738		)	7,943			(44,817		)	(35,329		)
Investment tax credit adjustments - net	(1,226		)	(4,923		)	1,306			(111		)	(821		)	(739		)
Income taxes		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		$16,086			($84,250	)		($8,845	)		($30,635	)		$6,034			$47,674
State	9,191			1,480			(924		)	(728		)	310			5,314
Total	25,277			(82,770		)	(9,769		)	(31,363		)	6,344			52,988
Deferred and non-current - net	69,753			572,988			83,501			62,946			43,102			19,243
Investment tax credit adjustments - net	(1,226		)	(4,920		)	187			1,695			(965		)	(2,262		)
Income taxes		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi		Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Current:
Federal		($14,748	)		($124,113	)		$10,603		($91,067	)		$19,656			$29,628
State	2,805			10,757			2,257		566			1,374			(25,825		)
Total	(11,943		)	(113,356		)	12,860		(90,501		)	21,030			3,803
Deferred and non-current - net	120,942			208,157			46,984		119,345			42,982			71,051
Investment tax credit adjustments - net	(1,226		)	(5,067		)	4,010		(139		)	(915		)	(3,793		)
Income taxes		$107,773			$89,734			$63,854		$28,705			$63,097			$71,061

Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

	2018			2017			2016
	(In Thousands)
Net income (loss) attributable to Entergy Corporation		$848,661			$411,612			($583,618	)
Preferred dividend requirements of subsidiaries	13,894			13,741			19,115
Consolidated net income (loss)	862,555			425,353			(564,503		)
Income taxes	(1,036,826		)	542,570			(817,259		)
Income (loss) before income taxes		($174,271	)		$967,923			($1,381,762	)
Computed at statutory rate (21% for 2018) (35% for 2017 and 2016)		($36,597	)		$338,773			($483,617	)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	21,398			44,179			40,581
Regulatory differences - utility plant items	(37,507		)	39,825			33,581
Equity component of AFUDC	(27,216		)	(33,282		)	(23,647		)
Amortization of investment tax credits	(8,304		)	(10,204		)	(10,889		)
Flow-through / permanent differences	439			8,727			(19,307		)
Tax legislation enactment (a)	—			560,410			—
Amortization of excess ADIT (a)	(577,082		)	—			—
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	(40,494		)	—			—
Utility restructuring (b)	(169,918		)	—			—
Settlement on treatment of regulatory obligations (c)	(52,320		)	—			—
State income tax audit conclusion	(23,425		)	—			—
IRS audit adjustment	(8,404		)	—			—
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	(106,833		)	—			—
Entergy Wholesale Commodities restructuring (d)	—			(373,277		)	(237,760		)
Act 55 financing settlement (e)	—			—			(63,477		)
FitzPatrick disposition	—			(44,344		)	—
Provision for uncertain tax positions (e)	24,569			8,756			(67,119		)
Valuation allowance	2,211			—			11,411
Other - net	2,657			3,007			2,984
Total income taxes as reported		($1,036,826	)		$542,570			($817,259	)
Effective Income Tax Rate	595.0		%	56.1		%	59.1		%

(a) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(b) See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of the Utility restructuring.

(c) See “Income Tax Audits- 2012-2013 IRS Audit” below for discussion of the settlement.

(d) See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in 2016 and 2017.

(e) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for 2016.

Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2018, 2017, and 2016 are:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$252,707			$675,614			$126,078			$53,152			$162,235			$94,109
Income taxes	(297,067		)	(54,611		)	(125,773		)	(2,436		)	(26,243		)	(47,675		)
Pretax income		($44,360	)		$621,003			$305			$50,716			$135,992			$46,434
Computed at statutory rate (21%)		($9,316	)		$130,411			$64			$10,650			$28,558			$9,751
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	(794		)	26,031			(1,747		)	2,322			2,576			2,812
Regulatory differences - utility plant items	(14,916		)	(12,604		)	(4,103		)	(1,502		)	(1,872		)	(2,510		)
Equity component of AFUDC	(3,477		)	(16,784		)	(1,829		)	(1,248		)	(2,042		)	(1,837		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(109		)	(808		)	(1,155		)
Flow-through / permanent differences	570			3,203			1,893			(4,222		)	1,038			2,815
Revisions of the 2017 tax legislation enactment regulatory liability accrual, including the effect of the Entergy Texas 2018 base rate proceeding	933			(2,810		)	(556		)	884			(43,799		)	(3,565		)
Amortization of excess ADIT (b)	(271,570		)	(104,313		)	(120,831		)	(9,878		)	(11,519		)	(58,971		)
Settlement on treatment of regulatory obligations (c)	—			(52,320		)	—			—			—			—
IRS audit adjustment	1,290			1,097			1,018			(96		)	524			(12		)
Non-taxable dividend income	—			(26,795		)	—			—			—			—
Provision for uncertain tax positions	724			3,949			240			613			839			4,876
Other - net	690			1,195			238			150			262			121
Total income taxes as reported		($297,067	)		($54,611	)		($125,773	)		($2,436	)		($26,243	)		($47,675	)
Effective Income Tax Rate	669.7		%	(8.8		)%	(41,237.0		)%	(4.8		)%	(19.3		)%	(102.7		)%

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$139,844			$316,347			$110,032			$44,553			$76,173			$78,596
Income taxes	93,804			485,298			73,919			33,278			48,481			69,969
Pretax income		$233,648			$801,645			$183,951			$77,831			$124,654			$148,565
Computed at statutory rate (35%)		$81,777			$280,576			$64,383			$27,241			$43,629			$51,998
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,586			31,927			6,202			2,842			527			5,635
Regulatory differences - utility plant items	7,220			12,168			1,356			619			5,581			12,880
Equity component of AFUDC	(6,458		)	(18,020		)	(3,383		)	(847		)	(2,353		)	(2,221		)
Amortization of investment tax credits	(1,201		)	(4,871		)	(160		)	(124		)	(951		)	(2,896		)
Flow-through / permanent differences	3,098			3,774			1,567			(3,352		)	1,428			(276		)
Tax legislation enactment (b)	(3,090		)	217,258			3,492			6,153			2,981			(69		)
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions	200			5,700			228			600			(2,617		)	4,800
Other - net	672			1,444			234			146			256			118
Total income taxes as reported		$93,804			$485,298			$73,919			$33,278			$48,481			$69,969
Effective Income Tax Rate	40.1		%	60.5		%	40.2		%	42.8		%	38.9		%	47.1		%

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Net income		$167,212			$622,047			$109,184			$48,849			$107,538			$96,744
Income taxes	107,773			89,734			63,854			28,705			63,097			71,061
Pretax income		$274,985			$711,781			$173,038			$77,554			$170,635			$167,805
Computed at statutory rate (35%)		$96,245			$249,123			$60,563			$27,144			$59,722			$58,732
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	11,652			29,014			5,592			3,543			449			7,001
Regulatory differences - utility plant items	10,971			8,094			(1,154		)	2,329			4,140			9,201
Equity component of AFUDC	(5,985		)	(9,774		)	(2,030		)	(412		)	(2,666		)	(2,780		)
Amortization of investment tax credits	(1,201		)	(5,019		)	(160		)	(132		)	(900		)	(3,476		)
Flow-through / permanent differences	(3,848		)	(980		)	764			(3,609		)	634			(883		)
Act 55 financing settlement (d)	—			(61,620		)	—			—			(454		)	—
Non-taxable dividend income	—			(44,658		)	—			—			—			—
Provision for uncertain tax positions (d)	(717		)	(75,871		)	50			(300		)	1,926			3,151
Other - net	656			1,425			229			142			246			115
Total income taxes as reported		$107,773			$89,734			$63,854			$28,705			$63,097			$71,061
Effective Income Tax Rate	39.2		%	12.6		%	36.9		%	37.0		%	37.0		%	42.3		%

(a) See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.

(b) See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and the tax legislation enactment in 2017.

(c) See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.

(d) See “Income Tax Audits- 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2018 and 2017 are as follows:

	2018			2017
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($3,835,211	)		($3,963,798	)
Regulatory assets	(370,484		)	—
Nuclear decommissioning trusts/receivables	(1,128,140		)	(1,657,808		)
Pension, net funding	(307,626		)	(350,743		)
Combined unitary state taxes	(9,440		)	(24,645		)
Power purchase agreements	(73,335		)	(19,621		)
Deferred fuel	(29,953		)	—
Other	(248,997		)	(249,327		)
Total	(6,003,186		)	(6,265,942		)
Deferred tax assets:
Nuclear decommissioning liabilities	1,070,583			964,945
Regulatory liabilities	895,756			841,370
Pension and other post-employment benefits	305,736			343,817
Sale and leaseback	121,473			122,397
Compensation	86,461			75,217
Accumulated deferred investment tax credit	57,643			59,285
Provision for allowances and contingencies	135,631			126,391
Unbilled/deferred revenues	43,762			—
Net operating loss carryforwards	628,165			467,255
Capital losses and miscellaneous tax credits	20,549			16,738
Valuation allowance	(243,726		)	(137,283		)
Other	125,522			54,058
Total	3,247,555			2,934,190
Non-current accrued taxes (including unrecognized tax benefits)	(1,296,928		)	(956,547		)
Accumulated deferred income taxes and taxes accrued		($4,052,559	)		($4,288,299	)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$11.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$6.4 billion	N/A
State net operating losses	$20.4 billion	2019-2038
Miscellaneous federal and state credits	$115.6 million	2019-2037

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as of December 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($966,791	)		($1,893,831	)		($579,319	)		($135,143	)		($544,282	)		($403,809	)
Regulatory assets	(169,482		)	(74,917		)	(1,732		)	(20,009		)	(57,777		)	(46,627		)
Nuclear decommissioning trusts/receivables	(77,664		)	(71,470		)	—			—			—			(86,882		)
Pension, net funding	(91,962		)	(92,693		)	(24,398		)	(11,885		)	(20,331		)	(18,898		)
Deferred fuel	(5,801		)	(6,974		)	(11,819		)	(1,701		)	(2,835		)	(312		)
Other	(41,025		)	(34,700		)	(13,443		)	(7,640		)	(6,085		)	(4,544		)
Total	(1,352,725		)	(2,174,585		)	(630,711		)	(176,378		)	(631,310		)	(561,072		)
Deferred tax assets:
Regulatory liabilities	247,964			339,126			72,570			40,181			86,032			110,370
Nuclear decommissioning liabilities	99,479			48,738			—			—			—			46,643
Pension and other post-employment benefits	(19,068		)	80,102			(5,405		)	(11,371		)	(14,215		)	(632		)
Sale and leaseback	—			18,999			—			—						102,481
Accumulated deferred investment tax credit	8,599			33,928			2,541			579			2,347			9,649
Provision for allowances and contingencies	9,877			81,108			13,412			23,962			5,579			—
Power purchase agreements	(17,223		)	19,385			1,140			12,155			(18		)	—
Unbilled/deferred revenues	7,471			(17,345		)	5,527			636			7,016			—
Compensation	1,708			1,959			1,265			512			995			(260		)
Net operating loss carryforwards	6,338			20,118			4,896			480			261			—
Other	7,977			23,412			1,610			12,181			2,127			4
Total	353,122			649,530			97,556			79,315			90,124			268,255
Non-current accrued taxes (including unrecognized tax benefits)	(85,942		)	(701,666		)	(18,714		)	(226,532		)	(11,349		)	(512,479		)
Accumulated deferred income taxes and taxes accrued		($1,085,545	)		($2,226,721	)		($551,869	)		($323,595	)		($552,535	)		($805,296	)

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net		($1,289,827	)		($1,583,100	)		($571,682	)		($85,515	)		($526,596	)		($359,931	)
Nuclear decommissioning trusts/receivables	(181,911		)	(164,395		)	—			—			—			(119,184		)
Pension, net funding	(99,971		)	(102,138		)	(26,413		)	(13,040		)	(20,700		)	(21,871		)
Deferred fuel	(16,530		)	(1,329		)	(19,005		)	(1,894		)	—			(272		)
Other	(23,079		)	(98,307		)	(11,306		)	(23,610		)	(8,236		)	(5,955		)
Total	(1,611,318		)	(1,949,269		)	(628,406		)	(124,059		)	(555,532		)	(507,213		)
Deferred tax assets:
Regulatory liabilities	227,489			368,156			102,676			23,526			25,428			91,271
Nuclear decommissioning liabilities	132,464			58,891			—			—			—			63,180
Pension and other post-employment benefits	(16,252		)	98,596			(4,865		)	(9,618		)	(12,044		)	(516		)
Sale and leaseback	—			19,915			—			—			—			102,482
Accumulated deferred investment tax credit	8,913			35,323			2,212			488			2,516			9,832
Provision for allowances and contingencies	4,367			80,516			11,898			24,234			4,383			—
Power purchase agreements	—			(6,924		)	1,129			—			—			—
Unbilled/deferred revenues	6,195			(18,263		)	4,847			1,811			7,736			—
Compensation	2,566			4,387			1,466			723			1,224			332
Net operating loss carryforwards	16,172			44			10,255			—			1,690			—
Capital losses and miscellaneous tax credits	2,678			—			5,736			—			—			—
Other	473			21,922			1,307			388			1,133			—
Total	385,065			662,563			136,661			41,552			32,066			266,581
Non-current accrued taxes (including unrecognized tax benefits)	35,584			(763,665		)	2,939			(200,795		)	(21,176		)	(535,788		)
Accumulated deferred income taxes and taxes accrued		($1,190,669	)		($2,050,371	)		($488,806	)		($283,302	)		($544,642	)		($776,420	)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses	$4.2 billion	$4.3 billion	$1.8 billion	$1 billion	$—	$96 million
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
State net operating losses	$4.4 billion	$5.1 billion	$1.8 billion	$1.1 billion	$—	$190 million
Year(s) of expiration	2023	2035-2037	2038	2037	N/A	2038
Misc. federal credits	$—	$3.3 million	$—	$—	$1.4 million	$2.9 million
Year(s) of expiration	N/A	2035-2037	N/A	N/A	2029-2037	2029-2037
State credits	$—	$—	$—	$—	$2.9 million	$9.6 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2027	2019-2022

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:

	2018			2017			2016
	(In Thousands)
Gross balance at January 1		$4,871,846			$3,909,855			$2,611,585
Additions based on tax positions related to the current year	2,276,614			1,120,687			1,532,782
Additions for tax positions of prior years	506,142			283,683			368,404
Reductions for tax positions of prior years	(274,600		)	(442,379		)	(265,653		)
Settlements	(198,520		)	—			(337,263		)
Gross balance at December 31	7,181,482			4,871,846			3,909,855
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(5,957,992		)	(3,945,524		)	(2,922,085		)
Cash paid to taxing authorities	(10,000		)	(10,000		)	(10,000		)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)		$1,213,490			$916,322			$977,770

(a) Potential tax liability above what is payable on tax returns

The balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31, 2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $5,020 million, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million, respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and 2016 is as follows:

2018	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2018		($117,716	)		$2,518,457			$15,122			$679,544			$16,399			$445,511
Additions based on tax positions related to the current year (a)	1,430,828			30,577			493,039			2,261			1,978			18,271
Additions for tax positions of prior years	31,612			77,372			3,878			12,972			1,722			7,255
Reductions for tax positions of prior years	(21,619		)	(158,510		)	(3,253		)	(8,081		)	(2,262		)	(3,253		)
Settlements	(24,443		)	(67,725		)	(21		)	(9		)	(35		)	(297		)
Gross balance at December 31, 2018	1,298,662			2,400,171			508,765			686,687			17,802			467,487
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,173,839		)	(1,597,826		)	(478,268		)	(420,813		)	(3,199		)	(42,228		)
Unrecognized tax benefits net of unused tax attributes and payments		$124,823			$802,345			$30,497			$265,874			$14,603			$425,259

2017	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2017		$2,503			$2,440,339			$12,206			$166,230			$15,946			$472,372
Additions based on tax positions related to the current year (a)	8,974			32,843			2,105			509,183			1,747			909
Additions for tax positions of prior years	3,682			235,331			1,267			13,364			3,115			1,432
Reductions for tax positions of prior years	(132,875		)	(190,056		)	(456		)	(9,233		)	(4,409		)	(29,202		)
Gross balance at December 31, 2017	(117,716		)	2,518,457			15,122			679,544			16,399			445,511
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,591,907		)	(15,122		)	(441,374		)	(638		)	(12,536		)
Unrecognized tax benefits net of unused tax attributes and payments		($117,716	)		$926,550			$—			$238,170			$15,761			$432,975

2016	Entergy Arkansas			Entergy Louisiana			Entergy Mississippi			Entergy New Orleans			Entergy Texas			System Energy
	(In Thousands)
Gross balance at January 1, 2016		$25,445			$1,690,661			$19,482			$53,897			$13,462			$478,318
Additions based on tax positions related to the current year (a)	16,868			931,720			2,662			33,912			2,002			5,318
Additions for tax positions of prior years	2,463			157,586			336			129,784			2,888			601
Reductions for tax positions of prior years	(41,957		)	(144,068		)	(10,219		)	(29,821		)	(1,849		)	(10,266		)
Settlements	(316		)	(195,560		)	(55		)	(21,542		)	(557		)	(1,599		)
Gross balance at December 31, 2016	2,503			2,440,339			12,206			166,230			15,946			472,372
Offsets to gross unrecognized tax benefits:
Loss carryovers	—			(1,783,093		)	(2,373		)	(27,320		)	(376		)	(90,028		)
Unrecognized tax benefits net of unused tax attributes and payments		$2,503			$657,246			$9,833			$138,910			$15,570			$382,344

(a) The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are related to the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additions for Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$85.4		$2.6		$3.6
Entergy Louisiana		$594.0		$575.8		$473.3
Entergy Mississippi		$1.5		$—		$—
Entergy New Orleans		$246.2		$31.7		$33.6
Entergy Texas		$5.1		$4.4		$7.0
System Energy		$—		$—		$—

Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows:

	December 31,
	2018		2017		2016
	(In Millions)
Entergy Arkansas		$1.7		$1.6		$1.4
Entergy Louisiana		$17.9		$14.1		$8.4
Entergy Mississippi		$1.2		$1.0		$0.8
Entergy New Orleans		$2.7		$2.1		$1.5
Entergy Texas		$0.9		$0.4		$1.2
System Energy		$13.2		$8.5		$3.7

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows:

	2018		2017			2016
	(In Millions)
Entergy Arkansas		$0.2		$0.2			$—
Entergy Louisiana		$3.8		$5.7			($0.9	)
Entergy Mississippi		$0.2		$0.2			$0.4
Entergy New Orleans		$0.6		$0.6			($0.3	)
Entergy Texas		$0.5		($0.8	)		$0.7
System Energy		$4.7		$4.8			$5.2

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

• Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlement agreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) for Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

• Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments in June 2018.

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.

The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation in November 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decision adopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. The regulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interest expense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect on the financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.

The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Act excludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed in service after 2017.

The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.

The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.

Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:

• repeal of the corporate alternative minimum tax (AMT),

• modification to the capital contribution rules under Internal Revenue Code section 118,

• repeal of domestic production activities deduction, and

• fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form of lower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi, $246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: Entergy Arkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million; Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million; Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.

During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy began paying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117 million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; and System Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s 2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million; Entergy Texas, $198 million; and System Energy, $76 million.

In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.

For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.

Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries was as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans, $6 million; Entergy Texas, $3 million; and System Energy, $0.

Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal and state income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability for income taxes.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy Wholesale Commodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standards provide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recovered without incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basis recognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.

Entergy Wholesale Commodities Tax Audit

A state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Upon conclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain tax positions totaling approximately $23 million, net of tax and interest paid.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioning costs which resulted in a $2.2 billion reduction in taxable income.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.

Entergy Arkansas and Entergy Mississippi Internal Restructuring

In the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy Utility Holding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 million reduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170 million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets the reduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. See Note 2 to the financial statements for further discussion of the internal restructuring.