INCOME TAXES

Income tax expense consists of the following (in millions):



	Years Ended December 31,
	2015		2014		2013
Current:
Federal	$	4	$	20	$	10
State and local	1		2		—
	5		22		10
Deferred:
Federal	26		26		4
State and local	14		13		7
	40		39		11
Income tax expense	$	45	$	61	$	21

The significant differences between the U.S. federal statutory rate and PGE’s effective tax rate for financial reporting purposes are as follows:



	Years Ended December 31,
	2015		2014		2013
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Federal tax credits	(19.0	)	(11.4	)	(21.8	)
State and local taxes, net of federal tax benefit	4.2		3.9		3.4
Flow through depreciation and cost basis differences	—		(2.3	)	2.8
Other	0.5		0.8		(2.6	)
Effective tax rate	20.7	%	26.0	%	16.8	%

Deferred income tax assets and liabilities consist of the following (in millions):



	As of December 31,
	2015			2014
Deferred income tax assets:
Employee benefits	$	170		$	161
Price risk management	112			88
Regulatory liabilities	42			48
Tax credits	46			13
Other	—			1
Total deferred income tax assets	370			311
Deferred income tax liabilities:
Depreciation and amortization	781			693
Regulatory assets	220			210
Other	1			—
Total deferred income tax liabilities	1,002			903
Deferred income tax liability, net	$	(632	)	$	(592	)
Classification of net deferred income taxes:
Current deferred income tax asset ⁽¹⁾⁽²⁾	$	—		$	33
Noncurrent deferred income tax liability	(632		)	(625		)
	$	(632	)	$	(592	)

(1) Included in Other current assets in the consolidated balance sheets.

(2) Current deferred income tax asset was not retrospectively restated for the adoption of ASU 2015-17, Balance Sheet Classification of Deferred Taxes. For additional information, see Note 2, Summary of Significant Accounting Policies.

As of December 31, 2015, PGE has federal and state tax credit carryforwards of $42 million and $4 million, respectively, which will expire at various dates from 2023 through 2035.

PGE believes that it is more likely than not that its deferred income tax assets as of December 31, 2015 and 2014 will be realized; accordingly, no valuation allowance has been recorded. As of December 31, 2015 and 2014, PGE had no unrecognized tax benefits.

PGE and its subsidiaries file a consolidated federal income tax return. The Company also files state income tax returns in certain jurisdictions, including Oregon, California, Montana, and certain local jurisdictions. The Internal Revenue Service (IRS) has completed its examination of all tax years through 2010 and all issues were resolved related to those years. The Company does not believe that any open tax years for federal or state income taxes could result in any adjustments that would be significant to the consolidated financial statements.

The Protecting Americans from Tax Hikes Act of 2015 (PATH) was signed into law on December 18, 2015. Among other items, the PATH extended provisions for bonus depreciation and production tax credits through 2019, inclusive of certain phase-down schedules. In the event PGE qualifies for future production tax credits related to the construction of new wind generation facilities or deems the application of bonus depreciation favorable, the Company will consider utilizing some of the PATH’s extended provisions. As of December 31, 2015, no provision materially impacts the Company’s current consolidated financial position.