Income Taxes

2 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

EFFECTIVE TAX RATES

Our effective tax rates are included in the following table.

	Two Months Ended December 31,
	2016		2015
Effective tax rate	37.4	%	41.0	%

The decrease in our effective tax rate is primarily due to a decrease in compensation exceeding the deductible limitation under IRS regulations, a reduction in income tax expense related to the portion of the rate decrement implemented to refund excess deferred income taxes to customers in Tennessee and a decrease in the North Carolina corporate income tax rate.

We and our wholly owned subsidiaries will be included in the Duke Energy consolidated income tax returns for the period October 4, 2016 through December 31, 2016. Piedmont and each of our subsidiaries have entered into a tax sharing agreement with Duke Energy and subsidiaries. The tax sharing agreement provides allocation of consolidated tax liabilities and benefits based on amounts participants would incur as separate C-Corporations. Income taxes recorded for the period November 1, 2016 through December 31, 2016 are based on amounts we and our subsidiaries would incur as separate C-Corporations. "Taxes accrued" on the Condensed Consolidated Balance Sheets includes $37.5 million and $31.5 million payable to Duke Energy for federal income taxes due under the tax sharing agreement as of December 31, 2016 and October 31, 2016, respectively. In accordance with IRS regulations, we and our subsidiaries are jointly and severally liable for the federal tax liability.