Income tax Income tax (Notes)

9 Months Ended

Sep. 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 pre-tax book loss for the quarter is the primary driver for the change in interim effective tax rate results. 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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%	21.0	%
Federal tax credits*	14.8		(14.8)		(23.6)		(13.8)

State and local taxes, net of federal tax benefit	4.2		6.5		10.4		6.5
Flow-through depreciation and cost basis differences	17.5		1.0		(7.2)		1.2
Amortization of excess deferred income tax	(0.4)		(3.9)		(2.8)		(3.5)
Other	4.3		—		(1.8)		0.2
Effective tax rate	61.4	%	9.8	%	(4.0)	%	11.6	%

* Federal tax credits primarily 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 September 30, 2020 and December 31, 2019 were $82 million and $64 million, respectively. 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 September 30, 2020 will be realized; accordingly, no valuation allowance has been recorded. As of September 30, 2020, and December 31, 2019, PGE had no material unrecognized tax benefits.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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