Income Taxes

12 Months Ended

Dec. 31, 2014

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	2014			2013			2012
	Millions
Net Income	$	1,518		$	1,243		$	1,275
Income Taxes:
Operating Income:
Current Expense:
Federal	$	335		$	487		$	(204	)
State	58			42			(2		)
Total Current	393			529			(206		)
Deferred Expense:
Federal	262			147			758
State	260			118			125
Total Deferred	522			265			883
Investment Tax Credit (ITC)	23			18			59
Total Income Taxes	$	938		$	812		$	736
Pre-Tax Income	$	2,456		$	2,055		$	2,011
Tax Computed at Statutory Rate @ 35%	$	860		$	719		$	704
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	145			108			115
Uncertain Tax Positions	(9		)	10			4
Manufacturing Deduction	(16		)	(9		)	—
NDT Fund	14			12			10
Plant-Related Items	(13		)	(14		)	(5		)
Tax Credits	(14		)	(9		)	(10		)
Audit Settlement	(12		)	—			(71		)
Other	(17		)	(5		)	(11		)
Sub-Total	78			93			32
Total Income Tax Provision	$	938		$	812		$	736
Effective Income Tax Rate	38.2		%	39.5		%	36.6		%

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




	As of December 31,
PSEG	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	11	$	24
Noncurrent
OPEB	$	269	$	280
Related to Uncertain Tax Position	160		201
Securitization-Overcollection	55		—
Accumulated Other Comprehensive Income (Loss)	—		3
Other	—		124
Total Noncurrent Assets	$	484	$	608
Total Assets	$	495	$	632
Liabilities:
Current (net)
Securitization	$	163	$	—
Other	$	10	$	—
Total Current Liabilities (net)	$	173	$	—
Noncurrent:
Plant-Related Items	$	5,422	$	4,865
New Jersey Corporate Business Tax	535		534
Securitization	—		279
Leasing Activities	623		639
Pension Costs	219		288
AROs and NDT Fund	419		523
Taxes Recoverable Through Future Rate (net)	196		181
Other	240		293
Total Noncurrent Liabilities	$	7,654	$	7,602
Total Liabilities	$	7,827	$	7,602
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	11	$	24
Net Current Deferred Income Tax Liabilities	$	173	$	—
Net Noncurrent Deferred Income Tax Liabilities	$	7,170	$	6,994
ITC	133		113
Net Total Noncurrent Deferred Income Taxes and ITC	$	7,303	$	7,107

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. Also, the deferred tax effect of AROs are presented net of the deferred tax effect of the associated funding of those obligations.

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	2014			2013			2012
	Millions
Net Income	$	725		$	612		$	528
Income Taxes:
Operating Income:
Current Expense:
Federal	$	124		$	183		$	(217	)
State	16			—			9
Total Current	140			183			(208		)
Deferred Expense:
Federal	214			101			409
State	84			92			83
Total Deferred	298			193			492
ITC	11			5			23
Total Income Taxes	$	449		$	381		$	307
Pre-Tax Income	$	1,174		$	993		$	835
Tax Computed at Statutory Rate @ 35%	$	411		$	348		$	292
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	65			59			52
Uncertain Tax Positions	—			—			7
Plant-Related Items	(13		)	(14		)	(4		)
Tax Credits	(7		)	(6		)	(3		)
Audit Settlement	1			—			(31		)
Other	(8		)	(6		)	(6		)
Sub-Total	38			33			15
Total Income Tax Provision	$	449		$	381		$	307
Effective Income Tax Rate	38.2		%	38.4		%	36.8		%

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




	As of December 31,
PSE&G	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	24	$	16
Noncurrent:
OPEB	$	173	$	182
Securitization-Overcollection	55		—
Total Noncurrent Assets	$	228	$	182
Total Assets	$	252	$	198
Liabilities:
Current (net)
Securitization	$	163	$	—
Other	2		30
Total Current Liabilities (net)	$	165	$	30
Noncurrent:
Plant-Related Items	$	3,869	$	3,439
New Jersey Corporate Business Tax	268		340
Securitization	—		279
Conservation Costs	48		52
Pension Costs	269		171
Taxes Recoverable Through Future Rate (net)	196		181
Other	84		68
Total Noncurrent Liabilities	$	4,734	$	4,530
Total Liabilities	$	4,899	$	4,560
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	24	$	16
Net Current Deferred Income Tax Liabilities	$	165	$	30
Net Noncurrent Deferred Income Tax Liabilities	$	4,506	$	4,348
ITC	69		58
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,575	$	4,406

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	2014			2013			2012
	Millions
Net Income	$	760		$	644		$	666
Income Taxes:
Operating Income:
Current Expense:
Federal	$	231		$	262		$	30
State	39			40			51
Total Current	270			302			81
Deferred Expense:
Federal	163			69			279
State	48			35			37
Total Deferred	211			104			316
ITC	10			13			36
Total Income Taxes	$	491		$	419		$	433
Pre-Tax Income	$	1,251		$	1,063		$	1,099
Tax Computed at Statutory Rate @ 35%	$	438		$	372		$	385
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	58			51			55
Manufacturing Deduction	(16		)	(10		)	—
NDT Fund	15			12			10
Tax Credits	(6		)	(2		)	(7		)
Uncertain Tax Positions	(8		)	3			(6		)
Audit Settlement	(4		)	—			(1		)
Other	14			(7		)	(3		)
Sub-Total	53			47			48
Total Income Tax Provision	$	491		$	419		$	433
Effective Income Tax Rate	39.2		%	39.4		%	39.4		%

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




	As of December 31,
Power	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current	$	—	$	30
Noncurrent:
Pension Costs	$	52	$	—
Contractual Liabilities & Environmental Costs	18		35
Related to Uncertain Tax Positions	23		32
Other	70		91
Total Noncurrent Assets	$	163	$	158
Total Assets	$	163	$	188
Liabilities:
Current (net)	$	43	$	—
Noncurrent:
Plant-Related Items	$	1,552	$	1,416
New Jersey Corporate Business Tax	192		81
Pension Costs	—		77
AROs and NDT Fund	420		523
Accumulated Other Comprehensive Income (Loss)	—		2
Other	—		36
Total Noncurrent Liabilities	$	2,164	$	2,135
Total Liabilities	$	2,207	$	2,135
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	—	$	30
Net Current Deferred Income Tax Liabilities	$	43	$	—
Net Noncurrent Deferred Income Tax Liabilities	$	2,001	$	1,977
ITC	64		54
Net Total Noncurrent Deferred Income Taxes and ITC	$	2,065	$	2,031

In the above table, the deferred tax effect of asset retirement obligations are presented net of the deferred tax effect of the associated funding of those obligations.

As of December 31, 2014, PSEG had a federal net operating loss (NOL) carryforward of $243 million. The loss was generated in 2012 and will expire in 2033. PSEG believes that it is more-likely-than-not that the federal benefit from the NOL will be realized.

PSEG, PSE&G and Power each 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 5. Regulatory Assets and Liabilities.

On August 11, 2014, PSEG received notice from the IRS that the audit settlement covering tax years 2007 through 2010 had been approved by the Joint Committee on Taxation. This effectively settles all issues with the IRS through 2010. On September 9, 2014, PSEG received refunds from the IRS totaling $121 million, representing the net settlement of all disputed amounts, including interest, through the tax year 2010. As a result of the settlement of this audit, PSEG recorded a $12 million reduction of tax expense in the quarter ended September 30, 2014.

In September 2013, the U.S. Department of the Treasury and the IRS released final regulations effective in 2014 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. Implementation of these regulations did not have any 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. The American Taxpayer Relief Act of 2012 extended the 50% bonus depreciation rules for qualified property placed into service before January 1, 2014. In addition, long production property placed into service in 2014 is eligible for 50% bonus depreciation for tax purposes. On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted. This act further extended the 50% bonus depreciation rules for qualified property that was placed into service before January 1, 2015 and for long production property that is to be placed into service in 2015. These provisions have generated cash for PSEG, PSE&G and Power through tax benefits related to the accelerated depreciation. These tax benefits would have otherwise been received over an estimated average 20 year period.

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




2014	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2014	$	478		$	208		$	156		$	110
Increases as a Result of Positions Taken in a Prior Period	82			65			17			—
Decreases as a Result of Positions Taken in a Prior Period	(190		)	(92		)	(80		)	(18		)
Increases as a Result of Positions Taken during the Current Period	30			16			9			5
Decreases as a Result of Positions Taken during the Current Period	(8		)	—			(8		)	—
Decreases as a Result of Settlements with Taxing Authorities	(60		)	(32		)	(24		)	(2		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2014	$	332		$	165		$	70		$	95
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(225		)	(138		)	(52		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(27		)	(27		)	—			—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	80		$	—		$	18		$	60




2013	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2013	$	402		$	163		$	134		$	101
Increases as a Result of Positions Taken in a Prior Period	83			39			33			11
Decreases as a Result of Positions Taken in a Prior Period	(30		)	(9		)	(19		)	(2		)
Increases as a Result of Positions Taken during the Current Period	23			15			8			—
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		$	208		$	156		$	110
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(320		)	(177		)	(105		)	(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		$	1		$	51		$	73




2012	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	113		$	121		$	555
Increases as a Result of Positions Taken in a Prior Period	92			55			27			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(47		)	(7		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			42			3			—
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		$	163		$	134		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(133		)	(93		)	(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

PSEG and its subsidiaries include accrued interest and penalties related to uncertain tax positions required to be recorded, as Income Tax Expense in the Consolidated Statements of Operations. Accumulated interest and penalties that are recorded on the Consolidated Balance Sheets on uncertain tax positions were as follows:




	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2014		2013			2012
	Millions
PSE&G	$	15	$	6		$	1
Power	9		(2		)	(2		)
Energy Holdings	45		44			39
Total	$	69	$	48		$	38

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	$	59
PSE&G	$	2
Power	$	23

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




	PSEG	PSE&G	Power
United States
Federal	2011-2013	N/A	N/A
New Jersey	2006-2013	2006-2013	N/A
Pennsylvania	2001-2013	2000-2013	N/A
Connecticut	2002-2013	N/A	N/A
Texas	2007-2013	N/A	N/A
California	2003-2013	N/A	N/A
New York	2009-2013	N/A	2009-2013

PSE&G [Member]

Income Taxes [Line Items]

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	2014			2013			2012
	Millions
Net Income	$	1,518		$	1,243		$	1,275
Income Taxes:
Operating Income:
Current Expense:
Federal	$	335		$	487		$	(204	)
State	58			42			(2		)
Total Current	393			529			(206		)
Deferred Expense:
Federal	262			147			758
State	260			118			125
Total Deferred	522			265			883
Investment Tax Credit (ITC)	23			18			59
Total Income Taxes	$	938		$	812		$	736
Pre-Tax Income	$	2,456		$	2,055		$	2,011
Tax Computed at Statutory Rate @ 35%	$	860		$	719		$	704
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	145			108			115
Uncertain Tax Positions	(9		)	10			4
Manufacturing Deduction	(16		)	(9		)	—
NDT Fund	14			12			10
Plant-Related Items	(13		)	(14		)	(5		)
Tax Credits	(14		)	(9		)	(10		)
Audit Settlement	(12		)	—			(71		)
Other	(17		)	(5		)	(11		)
Sub-Total	78			93			32
Total Income Tax Provision	$	938		$	812		$	736
Effective Income Tax Rate	38.2		%	39.5		%	36.6		%

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




	As of December 31,
PSEG	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	11	$	24
Noncurrent
OPEB	$	269	$	280
Related to Uncertain Tax Position	160		201
Securitization-Overcollection	55		—
Accumulated Other Comprehensive Income (Loss)	—		3
Other	—		124
Total Noncurrent Assets	$	484	$	608
Total Assets	$	495	$	632
Liabilities:
Current (net)
Securitization	$	163	$	—
Other	$	10	$	—
Total Current Liabilities (net)	$	173	$	—
Noncurrent:
Plant-Related Items	$	5,422	$	4,865
New Jersey Corporate Business Tax	535		534
Securitization	—		279
Leasing Activities	623		639
Pension Costs	219		288
AROs and NDT Fund	419		523
Taxes Recoverable Through Future Rate (net)	196		181
Other	240		293
Total Noncurrent Liabilities	$	7,654	$	7,602
Total Liabilities	$	7,827	$	7,602
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	11	$	24
Net Current Deferred Income Tax Liabilities	$	173	$	—
Net Noncurrent Deferred Income Tax Liabilities	$	7,170	$	6,994
ITC	133		113
Net Total Noncurrent Deferred Income Taxes and ITC	$	7,303	$	7,107

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	2014			2013			2012
	Millions
Net Income	$	725		$	612		$	528
Income Taxes:
Operating Income:
Current Expense:
Federal	$	124		$	183		$	(217	)
State	16			—			9
Total Current	140			183			(208		)
Deferred Expense:
Federal	214			101			409
State	84			92			83
Total Deferred	298			193			492
ITC	11			5			23
Total Income Taxes	$	449		$	381		$	307
Pre-Tax Income	$	1,174		$	993		$	835
Tax Computed at Statutory Rate @ 35%	$	411		$	348		$	292
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	65			59			52
Uncertain Tax Positions	—			—			7
Plant-Related Items	(13		)	(14		)	(4		)
Tax Credits	(7		)	(6		)	(3		)
Audit Settlement	1			—			(31		)
Other	(8		)	(6		)	(6		)
Sub-Total	38			33			15
Total Income Tax Provision	$	449		$	381		$	307
Effective Income Tax Rate	38.2		%	38.4		%	36.8		%

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




	As of December 31,
PSE&G	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	24	$	16
Noncurrent:
OPEB	$	173	$	182
Securitization-Overcollection	55		—
Total Noncurrent Assets	$	228	$	182
Total Assets	$	252	$	198
Liabilities:
Current (net)
Securitization	$	163	$	—
Other	2		30
Total Current Liabilities (net)	$	165	$	30
Noncurrent:
Plant-Related Items	$	3,869	$	3,439
New Jersey Corporate Business Tax	268		340
Securitization	—		279
Conservation Costs	48		52
Pension Costs	269		171
Taxes Recoverable Through Future Rate (net)	196		181
Other	84		68
Total Noncurrent Liabilities	$	4,734	$	4,530
Total Liabilities	$	4,899	$	4,560
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	24	$	16
Net Current Deferred Income Tax Liabilities	$	165	$	30
Net Noncurrent Deferred Income Tax Liabilities	$	4,506	$	4,348
ITC	69		58
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,575	$	4,406

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	2014			2013			2012
	Millions
Net Income	$	760		$	644		$	666
Income Taxes:
Operating Income:
Current Expense:
Federal	$	231		$	262		$	30
State	39			40			51
Total Current	270			302			81
Deferred Expense:
Federal	163			69			279
State	48			35			37
Total Deferred	211			104			316
ITC	10			13			36
Total Income Taxes	$	491		$	419		$	433
Pre-Tax Income	$	1,251		$	1,063		$	1,099
Tax Computed at Statutory Rate @ 35%	$	438		$	372		$	385
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	58			51			55
Manufacturing Deduction	(16		)	(10		)	—
NDT Fund	15			12			10
Tax Credits	(6		)	(2		)	(7		)
Uncertain Tax Positions	(8		)	3			(6		)
Audit Settlement	(4		)	—			(1		)
Other	14			(7		)	(3		)
Sub-Total	53			47			48
Total Income Tax Provision	$	491		$	419		$	433
Effective Income Tax Rate	39.2		%	39.4		%	39.4		%

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




	As of December 31,
Power	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current	$	—	$	30
Noncurrent:
Pension Costs	$	52	$	—
Contractual Liabilities & Environmental Costs	18		35
Related to Uncertain Tax Positions	23		32
Other	70		91
Total Noncurrent Assets	$	163	$	158
Total Assets	$	163	$	188
Liabilities:
Current (net)	$	43	$	—
Noncurrent:
Plant-Related Items	$	1,552	$	1,416
New Jersey Corporate Business Tax	192		81
Pension Costs	—		77
AROs and NDT Fund	420		523
Accumulated Other Comprehensive Income (Loss)	—		2
Other	—		36
Total Noncurrent Liabilities	$	2,164	$	2,135
Total Liabilities	$	2,207	$	2,135
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	—	$	30
Net Current Deferred Income Tax Liabilities	$	43	$	—
Net Noncurrent Deferred Income Tax Liabilities	$	2,001	$	1,977
ITC	64		54
Net Total Noncurrent Deferred Income Taxes and ITC	$	2,065	$	2,031

In the above table, the deferred tax effect of asset retirement obligations are presented net of the deferred tax effect of the associated funding of those obligations.

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




2014	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2014	$	478		$	208		$	156		$	110
Increases as a Result of Positions Taken in a Prior Period	82			65			17			—
Decreases as a Result of Positions Taken in a Prior Period	(190		)	(92		)	(80		)	(18		)
Increases as a Result of Positions Taken during the Current Period	30			16			9			5
Decreases as a Result of Positions Taken during the Current Period	(8		)	—			(8		)	—
Decreases as a Result of Settlements with Taxing Authorities	(60		)	(32		)	(24		)	(2		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2014	$	332		$	165		$	70		$	95
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(225		)	(138		)	(52		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(27		)	(27		)	—			—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	80		$	—		$	18		$	60




2013	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2013	$	402		$	163		$	134		$	101
Increases as a Result of Positions Taken in a Prior Period	83			39			33			11
Decreases as a Result of Positions Taken in a Prior Period	(30		)	(9		)	(19		)	(2		)
Increases as a Result of Positions Taken during the Current Period	23			15			8			—
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		$	208		$	156		$	110
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(320		)	(177		)	(105		)	(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		$	1		$	51		$	73




2012	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	113		$	121		$	555
Increases as a Result of Positions Taken in a Prior Period	92			55			27			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(47		)	(7		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			42			3			—
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		$	163		$	134		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(133		)	(93		)	(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




	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2014		2013			2012
	Millions
PSE&G	$	15	$	6		$	1
Power	9		(2		)	(2		)
Energy Holdings	45		44			39
Total	$	69	$	48		$	38

are as follows:




Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	59
PSE&G	$	2
Power	$	23

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




	PSEG	PSE&G	Power
United States
Federal	2011-2013	N/A	N/A
New Jersey	2006-2013	2006-2013	N/A
Pennsylvania	2001-2013	2000-2013	N/A
Connecticut	2002-2013	N/A	N/A
Texas	2007-2013	N/A	N/A
California	2003-2013	N/A	N/A
New York	2009-2013	N/A	2009-2013

Power [Member]

Income Taxes [Line Items]

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	2014			2013			2012
	Millions
Net Income	$	1,518		$	1,243		$	1,275
Income Taxes:
Operating Income:
Current Expense:
Federal	$	335		$	487		$	(204	)
State	58			42			(2		)
Total Current	393			529			(206		)
Deferred Expense:
Federal	262			147			758
State	260			118			125
Total Deferred	522			265			883
Investment Tax Credit (ITC)	23			18			59
Total Income Taxes	$	938		$	812		$	736
Pre-Tax Income	$	2,456		$	2,055		$	2,011
Tax Computed at Statutory Rate @ 35%	$	860		$	719		$	704
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	145			108			115
Uncertain Tax Positions	(9		)	10			4
Manufacturing Deduction	(16		)	(9		)	—
NDT Fund	14			12			10
Plant-Related Items	(13		)	(14		)	(5		)
Tax Credits	(14		)	(9		)	(10		)
Audit Settlement	(12		)	—			(71		)
Other	(17		)	(5		)	(11		)
Sub-Total	78			93			32
Total Income Tax Provision	$	938		$	812		$	736
Effective Income Tax Rate	38.2		%	39.5		%	36.6		%

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




	As of December 31,
PSEG	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	11	$	24
Noncurrent
OPEB	$	269	$	280
Related to Uncertain Tax Position	160		201
Securitization-Overcollection	55		—
Accumulated Other Comprehensive Income (Loss)	—		3
Other	—		124
Total Noncurrent Assets	$	484	$	608
Total Assets	$	495	$	632
Liabilities:
Current (net)
Securitization	$	163	$	—
Other	$	10	$	—
Total Current Liabilities (net)	$	173	$	—
Noncurrent:
Plant-Related Items	$	5,422	$	4,865
New Jersey Corporate Business Tax	535		534
Securitization	—		279
Leasing Activities	623		639
Pension Costs	219		288
AROs and NDT Fund	419		523
Taxes Recoverable Through Future Rate (net)	196		181
Other	240		293
Total Noncurrent Liabilities	$	7,654	$	7,602
Total Liabilities	$	7,827	$	7,602
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	11	$	24
Net Current Deferred Income Tax Liabilities	$	173	$	—
Net Noncurrent Deferred Income Tax Liabilities	$	7,170	$	6,994
ITC	133		113
Net Total Noncurrent Deferred Income Taxes and ITC	$	7,303	$	7,107

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	2014			2013			2012
	Millions
Net Income	$	725		$	612		$	528
Income Taxes:
Operating Income:
Current Expense:
Federal	$	124		$	183		$	(217	)
State	16			—			9
Total Current	140			183			(208		)
Deferred Expense:
Federal	214			101			409
State	84			92			83
Total Deferred	298			193			492
ITC	11			5			23
Total Income Taxes	$	449		$	381		$	307
Pre-Tax Income	$	1,174		$	993		$	835
Tax Computed at Statutory Rate @ 35%	$	411		$	348		$	292
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	65			59			52
Uncertain Tax Positions	—			—			7
Plant-Related Items	(13		)	(14		)	(4		)
Tax Credits	(7		)	(6		)	(3		)
Audit Settlement	1			—			(31		)
Other	(8		)	(6		)	(6		)
Sub-Total	38			33			15
Total Income Tax Provision	$	449		$	381		$	307
Effective Income Tax Rate	38.2		%	38.4		%	36.8		%

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




	As of December 31,
PSE&G	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current (net)	$	24	$	16
Noncurrent:
OPEB	$	173	$	182
Securitization-Overcollection	55		—
Total Noncurrent Assets	$	228	$	182
Total Assets	$	252	$	198
Liabilities:
Current (net)
Securitization	$	163	$	—
Other	2		30
Total Current Liabilities (net)	$	165	$	30
Noncurrent:
Plant-Related Items	$	3,869	$	3,439
New Jersey Corporate Business Tax	268		340
Securitization	—		279
Conservation Costs	48		52
Pension Costs	269		171
Taxes Recoverable Through Future Rate (net)	196		181
Other	84		68
Total Noncurrent Liabilities	$	4,734	$	4,530
Total Liabilities	$	4,899	$	4,560
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	24	$	16
Net Current Deferred Income Tax Liabilities	$	165	$	30
Net Noncurrent Deferred Income Tax Liabilities	$	4,506	$	4,348
ITC	69		58
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,575	$	4,406

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	2014			2013			2012
	Millions
Net Income	$	760		$	644		$	666
Income Taxes:
Operating Income:
Current Expense:
Federal	$	231		$	262		$	30
State	39			40			51
Total Current	270			302			81
Deferred Expense:
Federal	163			69			279
State	48			35			37
Total Deferred	211			104			316
ITC	10			13			36
Total Income Taxes	$	491		$	419		$	433
Pre-Tax Income	$	1,251		$	1,063		$	1,099
Tax Computed at Statutory Rate @ 35%	$	438		$	372		$	385
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	58			51			55
Manufacturing Deduction	(16		)	(10		)	—
NDT Fund	15			12			10
Tax Credits	(6		)	(2		)	(7		)
Uncertain Tax Positions	(8		)	3			(6		)
Audit Settlement	(4		)	—			(1		)
Other	14			(7		)	(3		)
Sub-Total	53			47			48
Total Income Tax Provision	$	491		$	419		$	433
Effective Income Tax Rate	39.2		%	39.4		%	39.4		%

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




	As of December 31,
Power	2014		2013
	Millions
Deferred Income Taxes
Assets:
Current	$	—	$	30
Noncurrent:
Pension Costs	$	52	$	—
Contractual Liabilities & Environmental Costs	18		35
Related to Uncertain Tax Positions	23		32
Other	70		91
Total Noncurrent Assets	$	163	$	158
Total Assets	$	163	$	188
Liabilities:
Current (net)	$	43	$	—
Noncurrent:
Plant-Related Items	$	1,552	$	1,416
New Jersey Corporate Business Tax	192		81
Pension Costs	—		77
AROs and NDT Fund	420		523
Accumulated Other Comprehensive Income (Loss)	—		2
Other	—		36
Total Noncurrent Liabilities	$	2,164	$	2,135
Total Liabilities	$	2,207	$	2,135
Summary of Accumulated Deferred Income Taxes:
Net Current Deferred Income Tax Assets	$	—	$	30
Net Current Deferred Income Tax Liabilities	$	43	$	—
Net Noncurrent Deferred Income Tax Liabilities	$	2,001	$	1,977
ITC	64		54
Net Total Noncurrent Deferred Income Taxes and ITC	$	2,065	$	2,031

In the above table, the deferred tax effect of asset retirement obligations are presented net of the deferred tax effect of the associated funding of those obligations.

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




2014	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2014	$	478		$	208		$	156		$	110
Increases as a Result of Positions Taken in a Prior Period	82			65			17			—
Decreases as a Result of Positions Taken in a Prior Period	(190		)	(92		)	(80		)	(18		)
Increases as a Result of Positions Taken during the Current Period	30			16			9			5
Decreases as a Result of Positions Taken during the Current Period	(8		)	—			(8		)	—
Decreases as a Result of Settlements with Taxing Authorities	(60		)	(32		)	(24		)	(2		)
Decreases due to Lapses of Applicable Statute of Limitations	—			—			—			—
Total Amount of Unrecognized Tax Benefits as of December 31, 2014	$	332		$	165		$	70		$	95
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(225		)	(138		)	(52		)	(35		)
Regulatory Asset—Unrecognized Tax Benefits	(27		)	(27		)	—			—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	80		$	—		$	18		$	60




2013	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2013	$	402		$	163		$	134		$	101
Increases as a Result of Positions Taken in a Prior Period	83			39			33			11
Decreases as a Result of Positions Taken in a Prior Period	(30		)	(9		)	(19		)	(2		)
Increases as a Result of Positions Taken during the Current Period	23			15			8			—
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		$	208		$	156		$	110
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(320		)	(177		)	(105		)	(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		$	1		$	51		$	73




2012	PSEG			PSE&G			Power			Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2012	$	825		$	113		$	121		$	555
Increases as a Result of Positions Taken in a Prior Period	92			55			27			9
Decreases as a Result of Positions Taken in a Prior Period	(173		)	(47		)	(7		)	(119		)
Increases as a Result of Positions Taken during the Current Period	47			42			3			—
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		$	163		$	134		$	101
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(264		)	(133		)	(93		)	(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




	Interest and Penalties on Uncertain Tax Positions Years Ended December 31,
	2014		2013			2012
	Millions
PSE&G	$	15	$	6		$	1
Power	9		(2		)	(2		)
Energy Holdings	45		44			39
Total	$	69	$	48		$	38

are as follows:




Possible Decrease in Total Unrecognized Tax Benefits including Interest	Over the next 12 Months
	Millions
PSEG	$	59
PSE&G	$	2
Power	$	23

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




	PSEG	PSE&G	Power
United States
Federal	2011-2013	N/A	N/A
New Jersey	2006-2013	2006-2013	N/A
Pennsylvania	2001-2013	2000-2013	N/A
Connecticut	2002-2013	N/A	N/A
Texas	2007-2013	N/A	N/A
California	2003-2013	N/A	N/A
New York	2009-2013	N/A	2009-2013

- 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