Income Taxes

12 Months Ended

Dec. 31, 2019

On December 22, 2017, tax reform legislation was signed into law which, among other things, reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, NEE, including FPL, revalued its deferred income taxes as of December 31, 2017. At December 31, 2017, the revaluation reduced NEE’s net deferred income tax liabilities by approximately $6.5 billion, of which $4.5 billion related to net deferred income tax liabilities at FPL and the remaining $2 billion related to net deferred income tax liabilities at NEER. The $2 billion reduction in NEER’s deferred income tax liabilities increased NEER’s 2017 net income. The $4.5 billion reduction in FPL’s deferred income tax liabilities was recorded as a regulatory liability. The U.S. Department of Treasury has also released proposed regulations related to the business interest expense limitations and foreign tax credits associated with tax reform. These proposed regulations are not final and are subject to change in the regulatory review process.

The components of income taxes are as follows:



	NEE							FPL
	Years Ended December 31,							Years Ended December 31,
	2019		2018		2017			2019			2018		2017
	(millions)
Federal:
Current	$	167	$	30	$	100		$	348		$	251	$	168
Deferred	115		1,153		(1,047		)	(29		)	134		776
Total federal	282		1,183		(947		)	319			385		944
State:
Current	23		63		88			49			91		29
Deferred	143		330		199			73			63		133
Total state	166		393		287			122			154		162
Total income tax expense (benefit)	$	448	$	1,576	$	(660	)	$	441		$	539	$	1,106

A reconciliation between the effective income tax rates and the applicable statutory rate is as follows:



	NEE						FPL
	Years Ended December 31,						Years Ended December 31,
	2019		2018		2017		2019		2018		2017
Statutory federal income tax rate	21.0	%	21.0	%	35.0	%	21.0	%	21.0	%	35.0	%
Increases (reductions) resulting from:
State income taxes - net of federal income tax benefit	3.4		4.2		2.9		3.5		4.5		3.5
Taxes attributable to noncontrolling interests	2.1		2.5		—		—		—		—
Tax reform rate change	—		—		(41.3	)	—		—		(0.5	)
PTCs and ITCs - NEER	(7.2	)	(3.0	)	(8.4	)	—		—		—
Amortization of deferred regulatory credit^(a)	(6.2	)	(1.8	)	—		(8.1	)	(5.0	)	(0.1	)
Convertible ITCs - NEER	—		—		0.6		—		—		—
Other - net	(1.4	)	(1.5	)	(3.0	)	(0.5	)	(0.6	)	(0.9	)
Effective income tax rate	11.7	%	21.4	%	(14.2	)%	15.9	%	19.9	%	37.0	%

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(a)

2019 reflects an adjustment of approximately $83 million recorded by FPL to reduce income tax expense for the cumulative amortization of excess deferred income taxes from January 1, 2018 as a result of a FPSC order in connection with its review of impacts associated with tax reform. One of the provisions of the order requires FPL to amortize approximately $870 million of its excess deferred income taxes over a period not to exceed ten years.

The income tax effects of temporary differences giving rise to consolidated deferred income tax liabilities and assets are as follows:



	NEE						FPL
	December 31,						December 31,
	2019			2018			2019		2018
	(millions)
Deferred tax liabilities:
Property-related	$	10,133		$	9,315		$	6,394	$	6,113
Pension	417			374			374		357
Investments in partnerships and joint ventures	2,019			1,925			—		—
Other	1,618			1,505			685		791
Total deferred tax liabilities	14,187			13,119			7,453		7,261
Deferred tax assets and valuation allowance:
Decommissioning reserves	317			313			286		278
Net operating loss carryforwards	380			350			2		3
Tax credit carryforwards	3,406			3,259			—		—
ARO and accrued asset removal costs	368			310			273		237
Regulatory liabilities	1,335			1,277			1,219		1,283
Other	515			751			258		295
Valuation allowance^(a)	(285		)	(273		)	—		—
Net deferred tax assets	6,036			5,987			2,038		2,096
Net deferred income taxes	$	8,151		$	7,132		$	5,415	$	5,165

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(a)	Reflects a valuation allowance related to the solar projects in Spain that completely offsets the related deferred taxes, as well as deferred state tax credits and state operating loss carryforwards.

Deferred tax assets and liabilities are included on the consolidated balance sheets as follows:



	NEE						FPL
	December 31,						December 31,
	2019			2018			2019			2018
				(millions)
Noncurrent other assets	$	210		$	235		$	—		$	—
Deferred income taxes - noncurrent liabilities	(8,361		)	(7,367		)	(5,415		)	(5,165		)
Net deferred income taxes	$	(8,151	)	$	(7,132	)	$	(5,415	)	$	(5,165	)

The components of NEE's deferred tax assets relating to net operating loss carryforwards and tax credit carryforwards at December 31, 2019 are as follows:



	Amount			Expiration Dates
	(millions)
Net operating loss carryforwards:
State	$	304		2020-2039
Foreign	76		^(a)	2020-2039
Net operating loss carryforwards	$	380
Tax credit carryforwards:
Federal	$	3,060		2029-2039
State	344		^(b)	2020-2044
Foreign	2			2034-2039
Tax credit carryforwards	$	3,406

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(a)	Includes $58 million of net operating loss carryforwards with an indefinite expiration period.

(b)

Includes $188 million of ITC carryforwards with an indefinite expiration period.