Income Taxes

PSEG’s, PSE&G’s and Power’s effective tax rates for the three months and nine months ended September 30, 2017 and 2016 were as follows:




	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
PSEG	38.9%	36.5%	35.5%	36.3%
PSE&G	38.8%	36.1%	37.4%	36.1%
Power	41.9%	39.3%	37.9%	39.4%

For the three months and nine months ended September 30, 2017, the differences in PSEG’s effective tax rates as compared to the same periods in the prior year, as well as to the statutory tax rate of 40.85%, were due primarily to changes in uncertain tax positions and the NDT Fund. For the nine months ended September 30, 2017, the effective tax rate was also favorably impacted by interest from a New Jersey State income tax refund.

For the three months and nine months ended September 30, 2017, the differences in PSE&G’s effective tax rates as compared to the same periods in the prior year, as well as to the statutory tax rate of 40.85%, were due primarily to changes in uncertain tax positions, plant and other flow-through items.

For the three months and nine months ended September 30, 2017, the differences in Power’s effective tax rates as compared to the same periods in the prior year, as well as to the statutory tax rate of 40.85%, were due primarily to changes in uncertain tax positions, manufacturing deduction and the NDT Fund.

PSEG’s federal tax returns for the years 2011 and 2012 are currently being audited by the IRS. The audit and other related claims are reasonably expected to be completed within the next 12 months. As a result, it is reasonably possible that a decrease in PSEG’s total unrecognized tax benefits may be necessary in the range of $80 million to $180 million based on current estimates.

The Protecting Americans from Tax Hikes Act of 2015 (Tax Act) extended the 50% bonus depreciation rules for qualified property placed in service from January 1, 2015 through December 31, 2017. The rate is reduced to 40% and 30% for eligible property placed in service in 2018 and 2019, respectively. On May 8, 2017 the IRS issued guidance allowing for 50% bonus depreciation on long production property that is placed in service in 2018. For long production property placed in service in 2019, qualified costs incurred before January 1, 2019 is afforded a 40% rate, while qualified costs incurred during 2019 receives a 30% rate. For long production property placed in service in 2020, subject to a written binding contract entered into before 2020, a 30% rate is allowed for qualified costs incurred before January 1, 2020, with a 0% rate thereafter. The Tax Act also extended the 30% ITC for qualified property placed in service starting January 1, 2016 through December 31, 2019 but reduces the ITC rate to 26% and 22% for projects commenced in 2020 and 2021, respectively. The financial impact of the extensions of the ITC rate will depend upon future transactions.

This provision has generated significant cash tax benefits 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. However, these tax benefits will have a negative impact on the rate base of several of PSE&G’s programs.

Income Taxes [Line Items]

Income Taxes

PSEG’s, PSE&G’s and Power’s effective tax rates for the three months and nine months ended September 30, 2017 and 2016 were as follows:




	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
PSEG	38.9%	36.5%	35.5%	36.3%
PSE&G	38.8%	36.1%	37.4%	36.1%
Power	41.9%	39.3%	37.9%	39.4%

For the three months and nine months ended September 30, 2017, the differences in PSEG’s effective tax rates as compared to the same periods in the prior year, as well as to the statutory tax rate of 40.85%, were due primarily to changes in uncertain tax positions and the NDT Fund. For the nine months ended September 30, 2017, the effective tax rate was also favorably impacted by interest from a New Jersey State income tax refund.

For the three months and nine months ended September 30, 2017, the differences in PSE&G’s effective tax rates as compared to the same periods in the prior year, as well as to the statutory tax rate of 40.85%, were due primarily to changes in uncertain tax positions, plant and other flow-through items.

For the three months and nine months ended September 30, 2017, the differences in Power’s effective tax rates as compared to the same periods in the prior year, as well as to the statutory tax rate of 40.85%, were due primarily to changes in uncertain tax positions, manufacturing deduction and the NDT Fund.

PSEG’s federal tax returns for the years 2011 and 2012 are currently being audited by the IRS. The audit and other related claims are reasonably expected to be completed within the next 12 months. As a result, it is reasonably possible that a decrease in PSEG’s total unrecognized tax benefits may be necessary in the range of $80 million to $180 million based on current estimates.

The Protecting Americans from Tax Hikes Act of 2015 (Tax Act) extended the 50% bonus depreciation rules for qualified property placed in service from January 1, 2015 through December 31, 2017. The rate is reduced to 40% and 30% for eligible property placed in service in 2018 and 2019, respectively. On May 8, 2017 the IRS issued guidance allowing for 50% bonus depreciation on long production property that is placed in service in 2018. For long production property placed in service in 2019, qualified costs incurred before January 1, 2019 is afforded a 40% rate, while qualified costs incurred during 2019 receives a 30% rate. For long production property placed in service in 2020, subject to a written binding contract entered into before 2020, a 30% rate is allowed for qualified costs incurred before January 1, 2020, with a 0% rate thereafter. The Tax Act also extended the 30% ITC for qualified property placed in service starting January 1, 2016 through December 31, 2019 but reduces the ITC rate to 26% and 22% for projects commenced in 2020 and 2021, respectively. The financial impact of the extensions of the ITC rate will depend upon future transactions.

This provision has generated significant cash tax benefits 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. However, these tax benefits will have a negative impact on the rate base of several of PSE&G’s programs.