Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

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

Income taxes for 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

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 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

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 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

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 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

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 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

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 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

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 2020, 2019, and 2018 for Entergy Corporation and Subsidiaries consist of the following:

	2020	2019	2018
	(In Thousands)
Current:
Federal	$5,807	($14,416)	$36,848
State	57,939	6,535	7,274
Total	63,746	(7,881)	44,122
Deferred and non-current - net	(190,635)	(155,956)	(1,074,416)
Investment tax credit adjustments - net	5,383	(5,988)	(6,532)
Income taxes	($121,506)	($169,825)	($1,036,826)

Income taxes for 2020, 2019, and 2018 for Entergy’s Registrant Subsidiaries consist of the following:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($44,627)	$62,728	($14,580)	$293	($5,603)	$372,206
State	(2,563)	4,457	(1,316)	(303)	2,658	55,551
Total	(47,190)	67,185	(15,896)	(10)	(2,945)	427,757
Deferred and non-current - net	96,195	(444,647)	43,640	(18,153)	6,619	(405,928)
Investment tax credit adjustments - net	(1,228)	(4,862)	(554)	13,956	(632)	(1,286)
Income taxes	$47,777	($382,324)	$27,190	($4,207)	$3,042	$20,543

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Current:
Federal	($14,549)	($20,173)	($8,939)	($5,822)	$16,035	$16,256
State	(714)	(735)	5,823	1,856	663	(2,831)
Total	(15,263)	(20,908)	(3,116)	(3,966)	16,698	13,425
Deferred and non-current - net	(30,278)	147,453	34,579	4,248	(69,963)	422
Investment tax credit adjustments - net	(1,228)	(4,922)	(597)	(96)	(631)	1,502
Income taxes	($46,769)	$121,623	$30,866	$186	($53,896)	$15,349

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)

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 2020, 2019, and 2018 are:

	2020		2019		2018
	(In Thousands)
Net income attributable to Entergy Corporation	$1,388,334		$1,241,226		$848,661
Preferred dividend requirements of subsidiaries	18,319		17,018		13,894
Consolidated net income	1,406,653		1,258,244		862,555
Income taxes	(121,506)		(169,825)		(1,036,826)
Income (loss) before income taxes	$1,285,147		$1,088,419		($174,271)
Computed at statutory rate (21%)	$269,881		$228,568		($36,597)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	60,087		61,791		21,398
Regulatory differences - utility plant items	(53,229)		(45,336)		(37,507)
Equity component of AFUDC	(25,080)		(30,444)		(27,216)
Amortization of investment tax credits	(8,386)		(8,093)		(8,304)
Flow-through / permanent differences	11,099		(2,059)		439
Amortization of excess ADIT (a)	(59,629)		(205,614)		(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 (e)	(301,041)		—		(8,404)
Entergy Wholesale Commodities nuclear decommissioning trust restructuring (d)	—		—		(106,833)
Entergy Wholesale Commodities restructuring (d)	(9,223)		(173,725)		—
Stock compensation (f)	(25,591)		—		—
Charitable contribution (d)	—		(19,101)		—
Net operating loss recognition	—		(41,427)		—
Provision for uncertain tax positions	15,208		7,332		24,569
Valuation allowance	—		59,345		2,211
Other - net	4,398		(1,062)		2,657
Total income taxes as reported	($121,506)		($169,825)		($1,036,826)
Effective Income Tax Rate	(9.5	%)	(15.6)	%	595.0	%

(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 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 resolution of the audit.

(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities nuclear decommissioning trust restructuring in 2018, the Entergy Wholesale Commodities restructurings in 2017 and 2019, the ownership of Palisades restructuring in 2020, and the charitable contribution in 2019.

(e)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(f)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

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 2020, 2019, and 2018 are:

2020	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$245,232		$1,082,352		$140,583		$49,338		$215,073		$99,131
Income taxes	47,777		(382,324)		27,190		(4,207)		3,042		20,543
Pretax income	$293,009		$700,028		$167,773		$45,131		$218,115		$119,674
Computed at statutory rate (21%)	$61,532		$147,006		$35,232		$9,478		$45,804		$25,132
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	16,256		38,182		6,917		2,606		1,460		5,524
Regulatory differences - utility plant items	(8,034)		(23,819)		(7,441)		(3,442)		(7,673)		(2,821)
Equity component of AFUDC	(3,154)		(8,012)		(1,412)		(1,331)		(9,255)		(1,916)
Amortization of investment tax credits	(1,201)		(4,811)		(540)		(61)		(617)		(1,155)
Flow-through / permanent differences	(2,219)		1,404		(102)		498		766		(421)
Amortization of excess ADIT (b)	(6,011)		(26,293)		18		(4,564)		(22,780)		—
Stock compensation (e)	(4,952)		(9,004)		(2,763)		(1,526)		(2,842)		(1,300)
IRS audit adjustment (d)	(6,351)		(471,702)		(3,768)		(6,819)		(2,091)		(2,925)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	1,200		300		800		800		—		300
Other - net	711		1,220		249		154		270		125
Total income taxes as reported	$47,777		($382,324)		$27,190		($4,207)		$3,042		$20,543
Effective Income Tax Rate	16.3	%	(54.6)	%	16.2	%	(9.3)	%	1.4	%	17.2	%

2019	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Thousands)
Net income	$262,964		$691,537		$119,925		$52,629		$159,397		$99,120
Income taxes	(46,769)		121,623		30,866		186		(53,896)		15,349
Pretax income	$216,195		$813,160		$150,791		$52,815		$105,501		$114,469
Computed at statutory rate (21%)	$45,401		$170,764		$31,666		$11,091		$22,155		$24,039
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect	15,954		42,854		5,563		3,443		360		5,134
Regulatory differences - utility plant items	(10,627)		(19,421)		(5,556)		(1,532)		(1,987)		(6,213)
Equity component of AFUDC	(3,255)		(15,545)		(1,755)		(2,088)		(5,973)		(1,829)
Amortization of investment tax credits	(1,201)		(4,871)		(160)		(88)		(617)		(1,155)
Flow-through / permanent differences	696		439		160		(741)		560		(500)
Amortization of excess ADIT (b)	(90,921)		(28,531)		203		(11,724)		(69,091)		(5,550)
Non-taxable dividend income	—		(26,795)		—		—		—		—
Provision for uncertain tax positions	(3,517)		1,519		500		1,672		430		1,300
Other - net	701		1,210		245		153		267		123
Total income taxes as reported	($46,769)		$121,623		$30,866		$186		($53,896)		$15,349
Effective Income Tax Rate	(21.6	%)	15.0	%	20.5	%	0.4	%	(51.1	%)	13.4	%

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 (a)	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	%)

(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 accumulated deferred income taxes (ADIT) in 2018, 2019, and 2020 and the tax legislation enactment in 2017.

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

(d)See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in 2020.

(e)See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions

Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2020 and 2019 are as follows:

	2020	2019
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($4,795,422)	($4,111,761)
Regulatory assets	(429,996)	(389,573)
Nuclear decommissioning trusts/receivables	(1,188,235)	(1,015,542)
Pension, net funding	(327,445)	(348,260)
Combined unitary state taxes	(7,723)	(11,519)
Unbilled/deferred revenues	(9,152)	(10,218)
Deferred fuel	(7,667)	(8,360)
Other	(549,355)	(445,378)
Total	(7,314,995)	(6,340,611)
Deferred tax assets:
Nuclear decommissioning liabilities	968,464	929,251
Regulatory liabilities	791,927	806,777
Pension and other post-employment benefits	278,486	297,272
Sale and leaseback	102,477	102,420
Compensation	89,279	87,355
Accumulated deferred investment tax credit	57,379	56,013
Provision for allowances and contingencies	71,598	126,886
Power purchase agreements	352,019	231,502
Net operating loss carryforwards	1,580,109	1,133,197
Capital losses and miscellaneous tax credits	21,291	22,597
Valuation allowance	(328,581)	(303,307)
Other	230,291	289,557
Total	4,214,739	3,779,520
Non-current accrued taxes (including unrecognized tax benefits)	(1,185,227)	(1,775,638)
Accumulated deferred income taxes and taxes accrued	($4,285,483)	($4,336,729)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

Carryover Description	Carryover Amount	Year(s) of expiration
Federal net operating losses before 1/1/2018	$6.1 billion	2023-2037
Federal net operating losses - 1/1/2018 forward	$14.6 billion	N/A
State net operating losses	$19.7 billion	2021-2040
Federal and state charitable contributions	$449 million	2021-2025
Miscellaneous federal and state credits	$77.5 million	2021-2040

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. Entergy evaluates the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax assets to the realizable amount.

Because it is more likely than not that the benefits from certain state net operating loss and other deferred tax assets will not be utilized, valuation allowances totaling $329 million as of December 31, 2020 and $303 million as of December 31, 2019 have been provided on the deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize certain separate company tax return attributes, 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, 2020 and 2019 are as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($1,117,948)	($2,481,976)	($623,796)	($83,457)	($620,669)	($407,125)
Regulatory assets	(188,284)	(95,135)	(22,381)	(20,276)	(47,684)	(56,496)
Nuclear decommissioning trusts/receivables	(156,123)	(148,040)	—	—	—	(131,985)
Pension, net funding	(93,486)	(95,854)	(24,922)	(11,564)	(19,481)	(20,330)
Deferred fuel	—	(4,210)	(1,706)	(1,393)	—	(314)
Other	(54,753)	(76,735)	(27,565)	(26,334)	(141)	(12,521)
Total	(1,610,594)	(2,901,950)	(700,370)	(143,024)	(687,975)	(628,771)
Deferred tax assets:
Regulatory liabilities	273,774	218,278	56,022	31,248	47,991	163,534
Nuclear decommissioning liabilities	123,319	7,767	—	(419)	121	29,916
Pension and other post-employment benefits	(24,747)	72,724	(6,763)	(13,997)	(17,132)	(1,344)
Sale and leaseback	—	—	—	—	—	102,477
Accumulated deferred investment tax credit	7,971	31,155	2,261	4,197	2,088	9,706
Provision for allowances and contingencies	22,179	7,071	16,799	24,529	(4,094)	—
Power purchase agreements	9,662	3,381	1,140	(5,324)	(30,932)	—
Unbilled/deferred revenues	4,242	(23,382)	2,989	877	5,909	—
Compensation	2,264	3,240	1,670	761	1,308	48
Net operating loss carryforwards	119,555	363,806	54,262	26,564	53,052	—
Capital losses and miscellaneous tax credits	—	9,309	—	12,317	—	7,014
Other	16,036	6,958	3,507	8,128	2,232	2
Total	554,255	700,307	131,887	88,881	60,543	311,353
Non-current accrued taxes (including unrecognized tax benefits)	(229,784)	63,121	(78,191)	(284,571)	(11,990)	(42,417)
Accumulated deferred income taxes and taxes accrued	($1,286,123)	($2,138,522)	($646,674)	($338,714)	($639,422)	($359,835)

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Deferred tax liabilities:
Plant basis differences - net	($979,033)	($1,987,025)	($565,202)	($133,073)	($551,365)	($380,594)
Regulatory assets	(170,949)	(79,117)	(10,528)	(16,867)	(59,745)	(52,662)
Nuclear decommissioning trusts/receivables	(120,306)	(113,830)	—	—	—	(100,621)
Pension, net funding	(102,685)	(98,743)	(27,325)	(11,859)	(19,961)	(21,609)
Deferred fuel	—	(2,637)	(609)	(666)	(4,380)	(55)
Other	(82,682)	(94,139)	(27,905)	(25,909)	2,059	(7,350)
Total	(1,455,655)	(2,375,491)	(631,569)	(188,374)	(633,392)	(562,891)
Deferred tax assets:
Regulatory liabilities	250,410	283,507	53,421	33,258	65,602	121,011
Nuclear decommissioning liabilities	111,078	56,300	—	—	—	52,633
Pension and other post-employment benefits	(21,828)	74,881	(5,844)	(12,666)	(15,406)	(898)
Sale and leaseback	—	—	—	—	—	102,480
Accumulated deferred investment tax credit	8,285	32,534	2,396	556	2,217	10,025
Provision for allowances and contingencies	5,365	77,298	12,963	24,022	4,024	—
Power purchase agreements	(15,087)	18,004	1,147	7,961	26	—
Unbilled/deferred revenues	5,897	(28,081)	4,715	1,428	5,544	—
Compensation	2,550	3,670	1,625	496	1,282	75
Net operating loss carryforwards	112,658	65,178	21,492	5,056	—	—
Capital losses and miscellaneous tax credits	—	—	45	—	—	7,857
Other	12,541	35,401	999	9,027	2,004	3
Total	471,869	618,692	92,959	69,138	65,293	293,186
Non-current accrued taxes (including unrecognized tax benefits)	(199,340)	(707,714)	(56,222)	(235,300)	(17,314)	(544,235)
Accumulated deferred income taxes and taxes accrued	($1,183,126)	($2,464,513)	($594,832)	($354,536)	($585,413)	($813,940)

The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2020 are as follows:

	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
Federal net operating losses before 1/1/2018	$— billion	$1.7 billion	$— billion	$0.9 billion	$— billion	$— billion
Year(s) of expiration	N/A	2035-2037	N/A	2037	N/A	N/A
Federal net operating losses - 1/1/2018 forward	$4.4 billion	$1.4 billion	$1.9 billion	$0.3 billion	$2.7 billion	$— billion
Year(s) of expiration	N/A	N/A	N/A	N/A	N/A	N/A
State net operating losses	$4.5 billion	$4 billion	$2 billion	$1.3 billion	$— million	$— million
Year(s) of expiration	2023-2025	2035-2040	2038-2040	2037-2040	N/A	N/A
Misc. federal credits	$2.9 million	$9.3 million	$1.2 million	$14.8 million	$2.6 million	$1.3 million
Year(s) of expiration	2038-2040	2035-2040	2038-2040	2037-2040	2029-2040	2029-2040
State credits	$— million	$— million	$— million	$—million	$2.9 million	$13.1 million
Year(s) of expiration	N/A	N/A	N/A	N/A	2026	2021-2023

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:

	2020	2019	2018
	(In Thousands)
Gross balance at January 1	$7,383,154	$7,181,482	$4,871,846
Additions based on tax positions related to the current year	669,207	731,276	2,276,614
Additions for tax positions of prior years	98,591	151,628	506,142
Reductions for tax positions of prior years	(935,735)	(681,232)	(274,600)
Settlements	(1,515,878)	—	(198,520)
Gross balance at December 31	5,699,339	7,383,154	7,181,482
Offsets to gross unrecognized tax benefits:
Carryovers and refund claims	(4,710,214)	(5,831,587)	(5,957,992)
Cash paid to taxing authorities	(10,000)	(10,000)	(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims and payments (a)	$979,125	$1,541,567	$1,213,490

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

The balances of unrecognized tax benefits include $2,208 million, $2,421 million, and $2,161 million as of December 31, 2020, 2019, and 2018, 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 $3,491 million, $4,962 million, and $5,020 million as of December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018 accrued balance for the possible payment of interest is approximately $44 million, $48 million, and $44 million, respectively. Interest (net-of-tax) of $(4) million, $4 million, and $7 million was recorded in 2020, 2019, and 2018, respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018 is as follows:

2020	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2020	$1,341,242	$2,381,653	$566,287	$716,773	$21,406	$473,331
Additions based on tax positions related to the current year	9,403	35,681	5,619	2,430	504,362	4,013
Additions for tax positions of prior years	13,400	10,508	1,156	294	799	4,606
Reductions for tax positions of prior years	(11,346)	(679,601)	(24,173)	(80,267)	(5,559)	(41,466)
Settlements	11,936	(1,107,946)	828	316	924	(418,832)
Gross balance at December 31, 2020	1,364,635	640,295	549,717	639,546	521,932	21,652
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,112,628)	(640,295)	(465,679)	(451,922)	(507,720)	(7,413)
Unrecognized tax benefits net of unused tax attributes and payments	$252,007	$—	$84,038	$187,624	$14,212	$14,239

2019	Entergy Arkansas	Entergy Louisiana	Entergy Mississippi	Entergy New Orleans	Entergy Texas	System Energy
	(In Thousands)
Gross balance at January 1, 2019	$1,298,662	$2,400,171	$508,765	$686,687	$17,802	$467,487
Additions based on tax positions related to the current year (a)	84,335	28,705	68,594	40,676	2,312	5,496
Additions for tax positions of prior years	20,399	25,090	1,651	489	1,299	2,186
Reductions for tax positions of prior years	(62,154)	(72,313)	(12,723)	(11,079)	(7)	(1,838)
Gross balance at December 31, 2019	1,341,242	2,381,653	566,287	716,773	21,406	473,331
Offsets to gross unrecognized tax benefits:
Loss carryovers	(1,134,187)	(1,573,257)	(506,976)	(445,430)	(3,944)	(8,392)
Unrecognized tax benefits net of unused tax attributes and payments	$207,055	$808,396	$59,311	$271,343	$17,462	$464,939

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

(a)The primary additions for Entergy Texas in 2020 and Entergy Mississippi in 2018 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,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$259.3	$203.3	$85.4
Entergy Louisiana	$63.8	$556.3	$594.0
Entergy Mississippi	$50.7	$1.9	$1.5
Entergy New Orleans	$203.5	$242.7	$246.2
Entergy Texas	$6.1	$5.7	$5.1
System Energy	$0.5	$—	$—

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

	December 31,
	2020	2019	2018
	(In Millions)
Entergy Arkansas	$2.3	$3.1	$1.7
Entergy Louisiana	$3.4	$14.2	$17.9
Entergy Mississippi	$1.9	$1.7	$1.2
Entergy New Orleans	$3.9	$4.7	$2.7
Entergy Texas	$0.9	$1.1	$0.9
System Energy	$11.9	$14.5	$13.2

The Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense.  No penalties were recorded in 2020, 2019, and 2018. Interest (net-of-tax) was recorded as follows:

	2020	2019	2018
	(In Millions)
Entergy Arkansas	($0.8)	$1.4	$0.2
Entergy Louisiana	($10.8)	($3.7)	$3.8
Entergy Mississippi	$0.2	$0.5	$0.2
Entergy New Orleans	($0.8)	$2.0	$0.6
Entergy Texas	($0.2)	$0.2	$0.5
System Energy	($2.6)	$1.3	$4.7

Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state income tax returns.  IRS examinations are complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2015. Entergy regularly defends its positions and works with the IRS to resolve audits.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2012-2013 IRS Audit

The IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (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.

2014-2015 IRS Audit

The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction.

Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in 2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits totaling $13 million.

The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.

As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to a prior regulatory settlement.

Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income tax expense of $8 million associated with claims for mark-to-market deductions.

In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.

Other Tax Matters

Tax Cuts and Jobs Act (TCJA)

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of the TCJA, signed by President Trump on December 22, 2017. The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was 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 TCJA limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.

The IRS issued proposed regulations relating to this limitation in November 2018 and July 2020. The IRS issued certain final regulations in July 2020 and January 2021, which were published in the Federal Register in September 2020 and January 2021, respectively. The proposed regulations are generally to be effective for taxable years ending after the date Treasury adopted the regulations as final. The final regulations will be effective for Entergy beginning with the 2021 tax year. Taxpayers may apply the rules of the proposed regulations to a taxable year beginning after December 31, 2017, as long as taxpayers consistently apply the rules of the proposed regulations. The proposed and final regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible.

As a result of the limitation under TCJA, Entergy recorded limitations in 2018 and 2019 and recorded a deferred tax asset on the nondeductible portion, as it has an unlimited carryover period. Entergy recorded a valuation allowance of $24 million due to a lack of earnings from sources other than the Utility. No limitation was recorded in 2020.

The TCJA limited 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. A temporary provision of the CARES Act (discussed below) removes this limitation and allows corporate taxpayers to fully offset taxable income with NOLs carried to tax years

beginning before 2021. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The TCJA does not allow a carryback period but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. However, with the enactment of the CARES Act, a temporary provision allows for a five-year carryback of 2018-2020 NOLs. 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 TCJA 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 IRS issued proposed regulations relating to this limitation in December 2019 and final regulations in December 2020. The significant provisions of the TCJA and associated proposed and final regulations require inclusion of performance-based compensation and an expanded definition of “covered employees” in the annual computation of the section 162 limitation. The TCJA amendments and associated proposed regulations resulted in an increase in disallowed compensation expense, but this limitation does not have a material effect on Entergy or the Registrant Subsidiaries.

With respect to the federal corporate income tax rate change from 35% to 21% in 2017, 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 2019 and 2020 in the form of lower rates. Entergy’s December 31, 2020 and December 31, 2019 balance sheets reflect a regulatory liability of $1.6 billion and $1.7 billion, respectively, 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 2019 and 2020. 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, 2020 and December 31, 2019 balance sheets reflect net regulatory liabilities for income taxes as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$467	$487
Entergy Louisiana	$479	$531
Entergy Mississippi	$224	$237
Entergy New Orleans	$59	$59
Entergy Texas	$205	$253
System Energy	$152	$143

Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The TCJA 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, 2020 and December 31, 2019, includes protected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$490	$490
Entergy Louisiana	$721	$797
Entergy Mississippi	$248	$261
Entergy New Orleans	$61	$62
Entergy Texas	$215	$228
System Energy	$173	$186

During the second quarter of 2018, the Registrant Subsidiaries 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, 2020 and December 31, 2019, includes unprotected excess ADIT as follows:

	2020	2019
	(In Millions)
Entergy Arkansas	$11	$9
Entergy Louisiana	$223	$242
Entergy New Orleans	$3	$9
Entergy Texas	$54	$83
System Energy	$16	$—

The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows for 2020 and 2019:

	2020	2019
	(In Millions)
Entergy	$74	$273
Entergy Arkansas	$8	$126
Entergy Louisiana	$31	$39
Entergy New Orleans	$6	$14
Entergy Texas	$29	$87
System Energy	$—	$7

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.

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 TCJA, 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 TCJA 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 TCJA; 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.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv) accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately $64 million of 2020 payroll tax payments, which will be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.

Entergy Wholesale Commodities Restructuring

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.

In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174 million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax expense of $18 million in connection with the accounting method on power contracts associated with the Palisades nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured. The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 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 $156 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.

Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to tax expense of $19 million.

In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required Entergy to recognize Palisades’ 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

$9.2 million. The accrual of the nuclear decommissioning liability 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.

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 their nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Energy Louisiana.

In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the proposed adjustments included in the RAR.

As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the outcome of this uncertain tax position.

As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position.

The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.

Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.

The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed further in Note 2, has been resolved with the IRS in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million.

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. Additionally, in 2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale agreements which resulted in a $2.5 billion deductible temporary difference.

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.

Arkansas Corporate Income Tax Rate Reduction

In April 2019 the State of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% in 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas computed a final regulatory liability for income taxes of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas. During the first quarter of 2021, Entergy Arkansas refunded $7.5 million to Arkansas retail customers which represents the retail portion of the $21 million referenced above offset by the effect of adjustments to the regulatory liability for TCJA excess accumulated deferred income taxes. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.

Consolidated Income Tax Return of Entergy Corporation

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  As a result of these four Utility operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to recognize a $41 million deferred tax asset associated with a previously unrecognized Arkansas net operating loss carryover.

Additionally, in September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax return of Entergy Corporation.  These changes will not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock issuance.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for discussion of the Vermont Yankee transaction.

Stock Compensation

In accordance with stock compensation accounting rules, Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.