Income tax Income tax (Notes)

6 Months Ended

Jun. 30, 2020

INCOME TAXES

Income tax expense for interim periods is based on the estimated annual effective tax rate, which includes tax credits, regulatory flow-through adjustments, and other items, applied to the Company’s year-to-date, pre-tax income. The significant differences between the U.S. Federal statutory tax rate and PGE’s effective tax rate are reflected in the following table:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%	21.0	%
Federal tax credits^*	(14.4)		(15.1)		(12.0)		(13.3)

State and local taxes, net of federal tax benefit	10.9		6.5		8.5		6.5
Flow-through depreciation and cost basis differences	(2.6)		0.4		0.3		1.4
Amortization of excess deferred income tax	(2.5)		(2.7)		(2.1)		(3.2)
Other	(1.0)		0.6		0.4		0.1
Effective tax rate	11.4	%	10.7	%	16.1	%	12.5	%

* Federal tax credits consist of production tax credits (PTCs) earned from Company-owned wind-powered generating facilities. PTCs are earned based on a per-kilowatt hour rate and, as a result, the annual amount of PTCs earned will vary based on weather conditions and availability of the facilities. PTCs are earned for 10 years from the in-service dates of the corresponding facilities. PGE’s wind-powered generating facilities are eligible to earn PTCs until various dates through 2024.

Carryforwards

Federal tax credit carryforwards as of June 30, 2020 and December 31, 2019 were $64 million. These credits consist of PTCs, which will expire at various dates through 2040. PGE believes that it is more likely than not that its deferred income tax assets as of June 30, 2020 will be realized; accordingly, no valuation allowance has been recorded. As of June 30, 2020, and December 31, 2019, PGE had no material unrecognized tax benefits.