Income Taxes

12 Months Ended

Dec. 31, 2013

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
PSEG	2013			2012			2011
	Millions
Net Income	$	1,243		$	1,275		$	1,503
Income (Loss) from Discontinued Operations, net of tax	—			—			96
Income from Continuing Operations	$	1,243		$	1,275		$	1,407
Income Taxes:
Operating Income:
Current Expense:
Federal	$	487		$	(204	)	$	258
State	42			(2		)	32
Total Current	529			(206		)	290
Deferred Expense:
Federal	147			758			501
State	118			125			191
Total Deferred	265			883			692
Investment Tax Credit	18			59			(5		)
Total Income Taxes	$	812		$	736		$	977
Pre-Tax Income	$	2,055		$	2,011		$	2,384
Tax Computed at Statutory Rate @ 35%	$	719		$	704		$	834
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	108			115			146
Uncertain Tax Positions	10			4			19
Manufacturing Deduction	(9		)	—			(15		)
Nuclear Decommissioning Trust	12			10			14
Plant-Related Items	(14		)	(5		)	(6		)
Tax Credits	(9		)	(10		)	(5		)
Audit Settlement	—			(71		)	—
Other	(5		)	(11		)	(10		)
Sub-Total	93			32			143
Total Income Tax Provision	$	812		$	736		$	977
Effective Income Tax Rate	39.5		%	36.6		%	41.0		%

The following is an analysis of deferred income taxes for PSEG:




	As of December 31,
PSEG	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	24	$	49
Noncurrent
OPEB	$	280	$	200
Related to Uncertain Tax Position	201		75
Accumulated Other Comprehensive Income (Loss)	3		40
Other	124		262
Total Noncurrent Assets	$	608	$	577
Total Assets	$	632	$	626
Liabilities:
Current (net)	$	—	$	72
Noncurrent:
Plant-Related Items	$	4,865	$	4,685
Nuclear Decommissioning	282		209
New Jersey Corporate Business Tax	534		343
Securitization	279		371
Leasing Activities	639		656
Pension Costs	288		180
AROs	241		297
Taxes Recoverable Through Future Rate (net)	181		165
Other	293		$	118
Total Noncurrent Liabilities	$	7,602	$	7,024
Total Liabilities	$	7,602	$	7,096
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	24	$	49
Net Current Deferred Income Tax Liability	$	—	$	72
Net Noncurrent Deferred Income Tax Liabilities	$	6,994	$	6,447
Investment Tax Credit (ITC)	113		95
Net Total Noncurrent Deferred Income Taxes and ITC	$	7,107	$	6,542

The deferred tax effect of certain assets and liabilities are presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

A reconciliation of reported income tax expense for Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
Power	2013			2012			2011
	Millions
Net Income	$	644		$	666		$	1,109
Income (Loss) from Discontinued Operations, net of tax	—			—			96
Income from Continuing Operations	$	644		$	666		$	1,013
Income Taxes:
Operating Income:
Current Expense:
Federal	$	262		$	30		$	400
State	40			51			39
Total Current	302			81			439
Deferred Expense:
Federal	69			279			156
State	35			37			95
Total Deferred	104			316			251
Investment Tax Credit	13			36			—
Total Income Taxes	$	419		$	433		$	690
Pre-Tax Income	$	1,063		$	1,099		$	1,703
Tax Computed at Statutory Rate @ 35%	$	372		$	385		$	596
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	51			55			90
Manufacturing Deduction	(10		)	—			(15		)
Nuclear Decommissioning Trust	12			10			14
Tax Credits	(2		)	(7		)	(1		)
Uncertain Tax Positions	3			(6		)	11
Audit Settlement	—			(1		)	—
Other	(7		)	(3		)	(5		)
Sub-Total	47			48			94
Total Income Tax Provision	$	419		$	433		$	690
Effective Income Tax Rate	39.4		%	39.4		%	40.5		%

The following is an analysis of deferred income taxes for Power:




	As of December 31,
Power	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current	$	30	$	—
Noncurrent:
Pension Costs	$	—	$	38
Accumulated Other Comprehensive Income (Loss)	—		40
Contractual Liabilities & Environmental Costs	35		35
Related to Uncertain Tax Positions	32		27
Other	91		61
Total Noncurrent Assets	$	158	$	201
Total Assets	$	188	$	201
Liabilities:
Current (net)	$	—	$	16
Noncurrent:
Plant-Related Items	$	1,416	$	1,291
New Jersey Corporate Business Tax	81		32
Nuclear Decommissioning	282		209
Pension Costs	77		—
AROs	241		297
Accumulated Other Comprehensive Income (Loss)	2		—
Other	36		—
Total Noncurrent Liabilities	2,135		$	1,829
Total Liabilities	$	2,135	$	1,845
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	30	$	—
Net Current Deferred Income Tax Liabilities	$	—	$	16
Net Noncurrent Deferred Income Tax Liabilities	$	1,977	$	1,628
Investment Tax Credit (ITC)	54		41
Net Total Noncurrent Deferred Income Taxes and ITC	$	2,031	$	1,669

A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
PSE&G	2013			2012			2011
	Millions
Net Income	$	612		$	528		$	521
Income Taxes:
Operating Income:
Current Expense:
Federal	$	183		$	(217	)	$	(225	)
State	—			9			(6		)
Total Current	183			(208		)	(231		)
Deferred Expense:
Federal	101			409			483
State	92			83			92
Total Deferred	193			492			575
Investment Tax Credit	5			23			(4		)
Total Income Taxes	$	381		$	307		$	340
Pre-Tax Income	$	993		$	835		$	861
Tax Computed at Statutory Rate @ 35%	$	348		$	292		$	301
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	59			52			56
Uncertain Tax Positions	—			7			(1		)
Plant-Related Items	(14		)	(4		)	(6		)
Tax Credits	(6		)	(3		)	(4		)
Audit Settlement	—			(31		)	—
Other	(6		)	(6		)	(6		)
Sub-Total	33			15			39
Total Income Tax Provision	$	381		$	307		$	340
Effective Income Tax Rate	38.4		%	36.8		%	39.5		%

The following is an analysis of deferred income taxes for PSE&G:




	As of December 31,
PSE&G	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	16	$	49
Noncurrent:
OPEB	$	182	$	189
Other	—		93
Total Noncurrent Assets	$	182	$	282
Total Assets	$	198	$	331
Liabilities:
Current (net)	$	30	$	60
Noncurrent:
Plant-Related Items	$	3,439	$	3,374
New Jersey Corporate Business Tax	340		253
Securitization	279		371
Conservation Costs	52		101
Pension Costs	171		189
Taxes Recoverable Through Future Rate (net)	181		165
Other	68		—
Total Noncurrent Liabilities	$	4,530	$	4,453
Total Liabilities	$	4,560	$	4,513
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	16	$	49
Net Current Deferred Income Tax Liability	$	30	$	60
Net Noncurrent Deferred Income Tax Liability	$	4,348	$	4,171
Investment Tax Credit (ITC)	58		52
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,406	$	4,223

The deferred tax effect of certain assets and liabilities are presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

As of December 31, 2013, PSEG had a federal net operating loss (NOL) of $243 million and PSE&G had a New Jersey State NOL carryforward of $731 million. The federal loss will expire in 2033, while the New Jersey loss will expire between 2031 and 2033. PSEG and PSE&G believe that it is more-likely-than-not that the federal and the state benefits from the NOL will be realized.

Each of PSEG, Power and PSE&G provide deferred taxes at the enacted statutory tax rate for all temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities irrespective of the treatment for rate-making purposes. Management believes that it is probable that the accumulated tax benefits that previously have been treated as a flow-through item to PSE&G customers will be recovered from or refunded to PSE&G’s customers in the future. These amounts were determined using the enacted federal income tax rate of 35% and state income tax rate of 9%. For additional information, see Note 6. Regulatory Assets and Liabilities.

In September 2013, the U.S. Department of the Treasury and the IRS released final regulations that provide guidance on applying Section 263(a) of the Internal Revenue Code to amounts paid to acquire, produce, or improve tangible property, as well as rules for materials and supplies. These regulations become effective in 2014 and their implementation is not expected to have a material impact on PSEG’s and its subsidiaries’ results of operations, financial condition or cash flows.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 included a provision making qualified property placed into service after September 8, 2010 and before January 1, 2012, eligible for 100% bonus depreciation for tax purposes. In addition, qualified property placed into service in 2012 was eligible for 50% bonus depreciation for tax purposes. On January 2, 2013, the President signed into law the American Taxpayer Relief Act of 2012 that further extended the 50% bonus depreciation for qualified property placed into service before January 1, 2014. These provisions have generated cash for PSEG through tax benefits related to the accelerated depreciation. These tax benefits would have otherwise been received over an estimated average 20 year period.

With respect to ITC, for financial statement periods including 2010 and 2011, the law provided an option to claim either a grant or the ITC. Accordingly, in those periods, the ITC was accounted for as a reduction of the book basis of the related assets as opposed to being recorded in tax expense. In 2012 the law changed and the grant option is no longer available; as such, the accumulated deferred ITC generated in 2012 and thereafter has been recorded as a noncurrent deferred tax liability, which was included in Deferred Income Taxes and ITC on PSEG's and PSE&G's Consolidated Balance Sheets as of December 31, 2013.

PSEG recorded the following amounts related to its unrecognized tax benefits, which was primarily comprised of amounts recorded for Power, PSE&G and Energy Holdings:




2013	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2013	$	402		$	134		$	163		$	101
Increases as a Result of Positions Taken in a Prior Period	83			33			39			11
Decreases as a Result of Positions Taken in a Prior Period	(30		)	(19		)	(9		)	(2		)
Increases as a Result of Positions Taken during the Current Period	23			8			15			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2013	$	478		$	156		$	208		$	110
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(320		)	(105		)	(177		)	(37		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	128		$	51		$	1		$	73




2012	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	121		$	113		$	555
Increases as a Result of Positions Taken in a Prior Period	92			27			55			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(7		)	(47		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			3			42			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	(389		)	(10		)	—			(344		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2012	$	402		$	134		$	163		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(93		)	(133		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	108		$	41		$	—		$	66




2011	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2011	$	756		$	101		$	82		$	539
Increases as a Result of Positions Taken in a Prior Period	58			24			14			17
Decreases as a Result of Positions Taken in a Prior Period	(22		)	(9		)	—			(12		)
Increases as a Result of Positions Taken during the Current Period	37			8			18			11
Decreases as a Result of Positions Taken during the Current Period	(4		)	(3		)	(1		)	—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2011	$	825		$	121		$	113		$	555
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(379		)	(77		)	(65		)	(213		)
Regulatory Asset—Unrecognized Tax Benefits	(20		)	—			(20		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	426		$	44		$	28		$	342

On January 31, 2012, PSEG signed a specific matter closing agreement with the IRS regarding disputed tax assessments associated with certain lease investments. On the same date, PSEG signed a Form 870-AD settlement agreement covering all audit issues for tax years 1997 through 2003. In March 2012, PSEG executed a Form 870-AD settlement agreement covering all audit issues for tax years 2004 through 2006. These agreements concluded the audits for these years for PSEG and the leasing issue for all tax years. The financial statement impacts of these agreements, net of existing financial statement reserves, was a net decrease in tax expense in the first quarter of 2012 of $71 million for PSEG, including $30 million and $1 million for PSE&G and Power, respectively.

PSEG and its subsidiaries include all accrued interest and penalties related to uncertain tax positions required to be recorded, as income tax expense. Interest and penalties on uncertain tax positions were as follows:




	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2013			2012			2011
	Millions
Power	$	(2	)	$	(2	)	$	(11	)
PSE&G	6			1			(24		)
Energy Holdings	44			39			420
Other	—			—			10
Total	$	48		$	38		$	395

It is reasonably possible that total unrecognized tax benefits will decrease within the next twelve months due to either agreements with various taxing authorities upon audit or the expiration of the Statute of Limitations. These potential decreases are as follows:




Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	157
Power	$	71
PSE&G	$	11

As a result of a change in accounting method for the capitalization of indirect costs, PSEG reduced the net amount of its uncertain tax positions (including interest) by $97 million, approximately $43 million of which related to PSE&G. Pursuant to an agreement signed with the IRS on January 31, 2012, this matter is settled and there is a resulting increase in uncertain tax positions. These amounts are not included in the table above.

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:




	PSEG	Power	PSE&G
United States
Federal	2007-2012	N/A	N/A
New Jersey	2006-2012	N/A	2006-2012
Pennsylvania	2001-2012	N/A	2000-2012
Connecticut	2002-2012	N/A	N/A
Texas	2007-2012	N/A	N/A
California	2003-2012	N/A	N/A
New York	2009-2012	2009-2012	N/A

Power [Member]

Income Taxes

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
PSEG	2013			2012			2011
	Millions
Net Income	$	1,243		$	1,275		$	1,503
Income (Loss) from Discontinued Operations, net of tax	—			—			96
Income from Continuing Operations	$	1,243		$	1,275		$	1,407
Income Taxes:
Operating Income:
Current Expense:
Federal	$	487		$	(204	)	$	258
State	42			(2		)	32
Total Current	529			(206		)	290
Deferred Expense:
Federal	147			758			501
State	118			125			191
Total Deferred	265			883			692
Investment Tax Credit	18			59			(5		)
Total Income Taxes	$	812		$	736		$	977
Pre-Tax Income	$	2,055		$	2,011		$	2,384
Tax Computed at Statutory Rate @ 35%	$	719		$	704		$	834
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	108			115			146
Uncertain Tax Positions	10			4			19
Manufacturing Deduction	(9		)	—			(15		)
Nuclear Decommissioning Trust	12			10			14
Plant-Related Items	(14		)	(5		)	(6		)
Tax Credits	(9		)	(10		)	(5		)
Audit Settlement	—			(71		)	—
Other	(5		)	(11		)	(10		)
Sub-Total	93			32			143
Total Income Tax Provision	$	812		$	736		$	977
Effective Income Tax Rate	39.5		%	36.6		%	41.0		%

The following is an analysis of deferred income taxes for PSEG:




	As of December 31,
PSEG	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	24	$	49
Noncurrent
OPEB	$	280	$	200
Related to Uncertain Tax Position	201		75
Accumulated Other Comprehensive Income (Loss)	3		40
Other	124		262
Total Noncurrent Assets	$	608	$	577
Total Assets	$	632	$	626
Liabilities:
Current (net)	$	—	$	72
Noncurrent:
Plant-Related Items	$	4,865	$	4,685
Nuclear Decommissioning	282		209
New Jersey Corporate Business Tax	534		343
Securitization	279		371
Leasing Activities	639		656
Pension Costs	288		180
AROs	241		297
Taxes Recoverable Through Future Rate (net)	181		165
Other	293		$	118
Total Noncurrent Liabilities	$	7,602	$	7,024
Total Liabilities	$	7,602	$	7,096
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	24	$	49
Net Current Deferred Income Tax Liability	$	—	$	72
Net Noncurrent Deferred Income Tax Liabilities	$	6,994	$	6,447
Investment Tax Credit (ITC)	113		95
Net Total Noncurrent Deferred Income Taxes and ITC	$	7,107	$	6,542

The deferred tax effect of certain assets and liabilities are presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

A reconciliation of reported income tax expense for Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
Power	2013			2012			2011
	Millions
Net Income	$	644		$	666		$	1,109
Income (Loss) from Discontinued Operations, net of tax	—			—			96
Income from Continuing Operations	$	644		$	666		$	1,013
Income Taxes:
Operating Income:
Current Expense:
Federal	$	262		$	30		$	400
State	40			51			39
Total Current	302			81			439
Deferred Expense:
Federal	69			279			156
State	35			37			95
Total Deferred	104			316			251
Investment Tax Credit	13			36			—
Total Income Taxes	$	419		$	433		$	690
Pre-Tax Income	$	1,063		$	1,099		$	1,703
Tax Computed at Statutory Rate @ 35%	$	372		$	385		$	596
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	51			55			90
Manufacturing Deduction	(10		)	—			(15		)
Nuclear Decommissioning Trust	12			10			14
Tax Credits	(2		)	(7		)	(1		)
Uncertain Tax Positions	3			(6		)	11
Audit Settlement	—			(1		)	—
Other	(7		)	(3		)	(5		)
Sub-Total	47			48			94
Total Income Tax Provision	$	419		$	433		$	690
Effective Income Tax Rate	39.4		%	39.4		%	40.5		%

The following is an analysis of deferred income taxes for Power:




	As of December 31,
Power	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current	$	30	$	—
Noncurrent:
Pension Costs	$	—	$	38
Accumulated Other Comprehensive Income (Loss)	—		40
Contractual Liabilities & Environmental Costs	35		35
Related to Uncertain Tax Positions	32		27
Other	91		61
Total Noncurrent Assets	$	158	$	201
Total Assets	$	188	$	201
Liabilities:
Current (net)	$	—	$	16
Noncurrent:
Plant-Related Items	$	1,416	$	1,291
New Jersey Corporate Business Tax	81		32
Nuclear Decommissioning	282		209
Pension Costs	77		—
AROs	241		297
Accumulated Other Comprehensive Income (Loss)	2		—
Other	36		—
Total Noncurrent Liabilities	2,135		$	1,829
Total Liabilities	$	2,135	$	1,845
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	30	$	—
Net Current Deferred Income Tax Liabilities	$	—	$	16
Net Noncurrent Deferred Income Tax Liabilities	$	1,977	$	1,628
Investment Tax Credit (ITC)	54		41
Net Total Noncurrent Deferred Income Taxes and ITC	$	2,031	$	1,669

A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
PSE&G	2013			2012			2011
	Millions
Net Income	$	612		$	528		$	521
Income Taxes:
Operating Income:
Current Expense:
Federal	$	183		$	(217	)	$	(225	)
State	—			9			(6		)
Total Current	183			(208		)	(231		)
Deferred Expense:
Federal	101			409			483
State	92			83			92
Total Deferred	193			492			575
Investment Tax Credit	5			23			(4		)
Total Income Taxes	$	381		$	307		$	340
Pre-Tax Income	$	993		$	835		$	861
Tax Computed at Statutory Rate @ 35%	$	348		$	292		$	301
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	59			52			56
Uncertain Tax Positions	—			7			(1		)
Plant-Related Items	(14		)	(4		)	(6		)
Tax Credits	(6		)	(3		)	(4		)
Audit Settlement	—			(31		)	—
Other	(6		)	(6		)	(6		)
Sub-Total	33			15			39
Total Income Tax Provision	$	381		$	307		$	340
Effective Income Tax Rate	38.4		%	36.8		%	39.5		%

The following is an analysis of deferred income taxes for PSE&G:




	As of December 31,
PSE&G	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	16	$	49
Noncurrent:
OPEB	$	182	$	189
Other	—		93
Total Noncurrent Assets	$	182	$	282
Total Assets	$	198	$	331
Liabilities:
Current (net)	$	30	$	60
Noncurrent:
Plant-Related Items	$	3,439	$	3,374
New Jersey Corporate Business Tax	340		253
Securitization	279		371
Conservation Costs	52		101
Pension Costs	171		189
Taxes Recoverable Through Future Rate (net)	181		165
Other	68		—
Total Noncurrent Liabilities	$	4,530	$	4,453
Total Liabilities	$	4,560	$	4,513
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	16	$	49
Net Current Deferred Income Tax Liability	$	30	$	60
Net Noncurrent Deferred Income Tax Liability	$	4,348	$	4,171
Investment Tax Credit (ITC)	58		52
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,406	$	4,223

The deferred tax effect of certain assets and liabilities are presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

PSEG recorded the following amounts related to its unrecognized tax benefits, which was primarily comprised of amounts recorded for Power, PSE&G and Energy Holdings:




2013	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2013	$	402		$	134		$	163		$	101
Increases as a Result of Positions Taken in a Prior Period	83			33			39			11
Decreases as a Result of Positions Taken in a Prior Period	(30		)	(19		)	(9		)	(2		)
Increases as a Result of Positions Taken during the Current Period	23			8			15			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2013	$	478		$	156		$	208		$	110
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(320		)	(105		)	(177		)	(37		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	128		$	51		$	1		$	73




2012	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	121		$	113		$	555
Increases as a Result of Positions Taken in a Prior Period	92			27			55			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(7		)	(47		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			3			42			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	(389		)	(10		)	—			(344		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2012	$	402		$	134		$	163		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(93		)	(133		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	108		$	41		$	—		$	66




2011	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2011	$	756		$	101		$	82		$	539
Increases as a Result of Positions Taken in a Prior Period	58			24			14			17
Decreases as a Result of Positions Taken in a Prior Period	(22		)	(9		)	—			(12		)
Increases as a Result of Positions Taken during the Current Period	37			8			18			11
Decreases as a Result of Positions Taken during the Current Period	(4		)	(3		)	(1		)	—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2011	$	825		$	121		$	113		$	555
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(379		)	(77		)	(65		)	(213		)
Regulatory Asset—Unrecognized Tax Benefits	(20		)	—			(20		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	426		$	44		$	28		$	342




	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2013			2012			2011
	Millions
Power	$	(2	)	$	(2	)	$	(11	)
PSE&G	6			1			(24		)
Energy Holdings	44			39			420
Other	—			—			10
Total	$	48		$	38		$	395




Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	157
Power	$	71
PSE&G	$	11

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:




	PSEG	Power	PSE&G
United States
Federal	2007-2012	N/A	N/A
New Jersey	2006-2012	N/A	2006-2012
Pennsylvania	2001-2012	N/A	2000-2012
Connecticut	2002-2012	N/A	N/A
Texas	2007-2012	N/A	N/A
California	2003-2012	N/A	N/A
New York	2009-2012	2009-2012	N/A

PSE&G [Member]

Income Taxes

A reconciliation of reported income tax expense for PSEG with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
PSEG	2013			2012			2011
	Millions
Net Income	$	1,243		$	1,275		$	1,503
Income (Loss) from Discontinued Operations, net of tax	—			—			96
Income from Continuing Operations	$	1,243		$	1,275		$	1,407
Income Taxes:
Operating Income:
Current Expense:
Federal	$	487		$	(204	)	$	258
State	42			(2		)	32
Total Current	529			(206		)	290
Deferred Expense:
Federal	147			758			501
State	118			125			191
Total Deferred	265			883			692
Investment Tax Credit	18			59			(5		)
Total Income Taxes	$	812		$	736		$	977
Pre-Tax Income	$	2,055		$	2,011		$	2,384
Tax Computed at Statutory Rate @ 35%	$	719		$	704		$	834
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	108			115			146
Uncertain Tax Positions	10			4			19
Manufacturing Deduction	(9		)	—			(15		)
Nuclear Decommissioning Trust	12			10			14
Plant-Related Items	(14		)	(5		)	(6		)
Tax Credits	(9		)	(10		)	(5		)
Audit Settlement	—			(71		)	—
Other	(5		)	(11		)	(10		)
Sub-Total	93			32			143
Total Income Tax Provision	$	812		$	736		$	977
Effective Income Tax Rate	39.5		%	36.6		%	41.0		%

The following is an analysis of deferred income taxes for PSEG:




	As of December 31,
PSEG	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	24	$	49
Noncurrent
OPEB	$	280	$	200
Related to Uncertain Tax Position	201		75
Accumulated Other Comprehensive Income (Loss)	3		40
Other	124		262
Total Noncurrent Assets	$	608	$	577
Total Assets	$	632	$	626
Liabilities:
Current (net)	$	—	$	72
Noncurrent:
Plant-Related Items	$	4,865	$	4,685
Nuclear Decommissioning	282		209
New Jersey Corporate Business Tax	534		343
Securitization	279		371
Leasing Activities	639		656
Pension Costs	288		180
AROs	241		297
Taxes Recoverable Through Future Rate (net)	181		165
Other	293		$	118
Total Noncurrent Liabilities	$	7,602	$	7,024
Total Liabilities	$	7,602	$	7,096
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	24	$	49
Net Current Deferred Income Tax Liability	$	—	$	72
Net Noncurrent Deferred Income Tax Liabilities	$	6,994	$	6,447
Investment Tax Credit (ITC)	113		95
Net Total Noncurrent Deferred Income Taxes and ITC	$	7,107	$	6,542

The deferred tax effect of certain assets and liabilities are presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

A reconciliation of reported income tax expense for Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
Power	2013			2012			2011
	Millions
Net Income	$	644		$	666		$	1,109
Income (Loss) from Discontinued Operations, net of tax	—			—			96
Income from Continuing Operations	$	644		$	666		$	1,013
Income Taxes:
Operating Income:
Current Expense:
Federal	$	262		$	30		$	400
State	40			51			39
Total Current	302			81			439
Deferred Expense:
Federal	69			279			156
State	35			37			95
Total Deferred	104			316			251
Investment Tax Credit	13			36			—
Total Income Taxes	$	419		$	433		$	690
Pre-Tax Income	$	1,063		$	1,099		$	1,703
Tax Computed at Statutory Rate @ 35%	$	372		$	385		$	596
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	51			55			90
Manufacturing Deduction	(10		)	—			(15		)
Nuclear Decommissioning Trust	12			10			14
Tax Credits	(2		)	(7		)	(1		)
Uncertain Tax Positions	3			(6		)	11
Audit Settlement	—			(1		)	—
Other	(7		)	(3		)	(5		)
Sub-Total	47			48			94
Total Income Tax Provision	$	419		$	433		$	690
Effective Income Tax Rate	39.4		%	39.4		%	40.5		%

The following is an analysis of deferred income taxes for Power:




	As of December 31,
Power	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current	$	30	$	—
Noncurrent:
Pension Costs	$	—	$	38
Accumulated Other Comprehensive Income (Loss)	—		40
Contractual Liabilities & Environmental Costs	35		35
Related to Uncertain Tax Positions	32		27
Other	91		61
Total Noncurrent Assets	$	158	$	201
Total Assets	$	188	$	201
Liabilities:
Current (net)	$	—	$	16
Noncurrent:
Plant-Related Items	$	1,416	$	1,291
New Jersey Corporate Business Tax	81		32
Nuclear Decommissioning	282		209
Pension Costs	77		—
AROs	241		297
Accumulated Other Comprehensive Income (Loss)	2		—
Other	36		—
Total Noncurrent Liabilities	2,135		$	1,829
Total Liabilities	$	2,135	$	1,845
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	30	$	—
Net Current Deferred Income Tax Liabilities	$	—	$	16
Net Noncurrent Deferred Income Tax Liabilities	$	1,977	$	1,628
Investment Tax Credit (ITC)	54		41
Net Total Noncurrent Deferred Income Taxes and ITC	$	2,031	$	1,669

A reconciliation of reported income tax expense for PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 35% is as follows:




	Years Ended December 31,
PSE&G	2013			2012			2011
	Millions
Net Income	$	612		$	528		$	521
Income Taxes:
Operating Income:
Current Expense:
Federal	$	183		$	(217	)	$	(225	)
State	—			9			(6		)
Total Current	183			(208		)	(231		)
Deferred Expense:
Federal	101			409			483
State	92			83			92
Total Deferred	193			492			575
Investment Tax Credit	5			23			(4		)
Total Income Taxes	$	381		$	307		$	340
Pre-Tax Income	$	993		$	835		$	861
Tax Computed at Statutory Rate @ 35%	$	348		$	292		$	301
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	59			52			56
Uncertain Tax Positions	—			7			(1		)
Plant-Related Items	(14		)	(4		)	(6		)
Tax Credits	(6		)	(3		)	(4		)
Audit Settlement	—			(31		)	—
Other	(6		)	(6		)	(6		)
Sub-Total	33			15			39
Total Income Tax Provision	$	381		$	307		$	340
Effective Income Tax Rate	38.4		%	36.8		%	39.5		%

The following is an analysis of deferred income taxes for PSE&G:




	As of December 31,
PSE&G	2013		2012
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	16	$	49
Noncurrent:
OPEB	$	182	$	189
Other	—		93
Total Noncurrent Assets	$	182	$	282
Total Assets	$	198	$	331
Liabilities:
Current (net)	$	30	$	60
Noncurrent:
Plant-Related Items	$	3,439	$	3,374
New Jersey Corporate Business Tax	340		253
Securitization	279		371
Conservation Costs	52		101
Pension Costs	171		189
Taxes Recoverable Through Future Rate (net)	181		165
Other	68		—
Total Noncurrent Liabilities	$	4,530	$	4,453
Total Liabilities	$	4,560	$	4,513
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	16	$	49
Net Current Deferred Income Tax Liability	$	30	$	60
Net Noncurrent Deferred Income Tax Liability	$	4,348	$	4,171
Investment Tax Credit (ITC)	58		52
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,406	$	4,223

The deferred tax effect of certain assets and liabilities are presented in the table above net of the deferred tax effect associated with the respective regulatory deferrals.

PSEG recorded the following amounts related to its unrecognized tax benefits, which was primarily comprised of amounts recorded for Power, PSE&G and Energy Holdings:




2013	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2013	$	402		$	134		$	163		$	101
Increases as a Result of Positions Taken in a Prior Period	83			33			39			11
Decreases as a Result of Positions Taken in a Prior Period	(30		)	(19		)	(9		)	(2		)
Increases as a Result of Positions Taken during the Current Period	23			8			15			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2013	$	478		$	156		$	208		$	110
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(320		)	(105		)	(177		)	(37		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	128		$	51		$	1		$	73




2012	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	121		$	113		$	555
Increases as a Result of Positions Taken in a Prior Period	92			27			55			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(7		)	(47		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			3			42			—
Decreases as a Result of Positions Taken during the Current Period	—			—			—			—
Decreases as a Result of Settlements with Taxing Authorities	(389		)	(10		)	—			(344		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2012	$	402		$	134		$	163		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(93		)	(133		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(30		)	—			(30		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	108		$	41		$	—		$	66




2011	PSEG			Power			PSE&G			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2011	$	756		$	101		$	82		$	539
Increases as a Result of Positions Taken in a Prior Period	58			24			14			17
Decreases as a Result of Positions Taken in a Prior Period	(22		)	(9		)	—			(12		)
Increases as a Result of Positions Taken during the Current Period	37			8			18			11
Decreases as a Result of Positions Taken during the Current Period	(4		)	(3		)	(1		)	—
Decreases as a Result of Settlements with Taxing Authorities	—			—			—			—
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2011	$	825		$	121		$	113		$	555
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(379		)	(77		)	(65		)	(213		)
Regulatory Asset—Unrecognized Tax Benefits	(20		)	—			(20		)	—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	426		$	44		$	28		$	342




	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2013			2012			2011
	Millions
Power	$	(2	)	$	(2	)	$	(11	)
PSE&G	6			1			(24		)
Energy Holdings	44			39			420
Other	—			—			10
Total	$	48		$	38		$	395




Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	157
Power	$	71
PSE&G	$	11

A description of income tax years that remain subject to examination by material jurisdictions, where an examination has not already concluded are:




	PSEG	Power	PSE&G
United States
Federal	2007-2012	N/A	N/A
New Jersey	2006-2012	N/A	2006-2012
Pennsylvania	2001-2012	N/A	2000-2012
Connecticut	2002-2012	N/A	N/A
Texas	2007-2012	N/A	N/A
California	2003-2012	N/A	N/A
New York	2009-2012	2009-2012	N/A

- 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.

+ References+ Details