Income Taxes

9 Months Ended

Sep. 30, 2018

The following table details the effective tax rates for the three and nine months ended September 30, 2018 and 2017.



	Three months ended		Nine months ended
	September 30,		September 30,
	2018	2017	2018	2017
DPL	15.7%	63.0%	10.9%	39.1%

Income tax expense for the nine months ended September 30, 2018 and 2017 was calculated using the estimated annual effective income tax rates for 2018 and 2017 of 16.8% and 36.0%, respectively. Management estimates the annual effective tax rate based on its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the estimated rates could be materially different from the actual effective tax rates.

The decrease in the estimated annual effective rate compared to the same period in 2017 is primarily due to the effects of the TCJA. The primary impact of the TCJA was lowering of the statutory corporate income tax rate to 21% from 35% effective January 1, 2018. The rate was further decreased by the change in estimated flow-through depreciation. These decreases were partially offset by the repeal of the manufacturer’s production deduction.

For the nine months ended September 30, 2018, DPL’s current period effective tax rate was lower than the estimated annual effective rate primarily due to discrete tax items relating to the Beckjord Facility transaction (see Note 14 – Dispositions).

Per the terms of DP&L's 2017 ESP, DPL will not make any tax-sharing payments to AES and AES will forgo collection of the payments during the term of the DMR. As such, during the nine months ended September 30, 2018, DPL converted $30.2 million of accrued tax sharing liabilities with AES to additional equity investment in DPL.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Entity Information [Line Items]

Income Taxes

The following table details the effective tax rates for the three and nine months ended September 30, 2018 and 2017.



	Three months ended		Nine months ended
	September 30,		September 30,
	2018	2017	2018	2017
DP&L	16.8%	(4.5)%	16.2%	18.1%

Income tax expense for the nine months ended September 30, 2018 and 2017 was calculated using the estimated annual effective income tax rates for 2018 and 2017 of 17.1% and 19.0%, respectively. Management estimates the annual effective tax rate based on its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the estimated rates could be materially different from the actual effective tax rates.

For the nine months ended September 30, 2018, DP&L’s current period effective tax rate was lower than the estimated annual effective rate primarily due to discrete tax items relating to the Beckjord Facility transaction (see Note 14 – Dispositions).