Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Line Items]

Income Taxes

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 21% is as follows:

	Years Ended December 31,
PSEG	2020			2019			2018
	Millions
Net Income	$	1,905		$	1,693		$	1,438
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	385		$	84		$	(97)
State	48			18			83
Total Current	433			102			(14)
Deferred Expense (Benefit):
Federal	(164)			3			373
State	141			132			71
Total Deferred	(23)			135			444
ITC	(14)			20			(13)
Total Income Tax Expense (Benefit)	$	396		$	257		$	417
Pre-Tax Income	$	2,301		$	1,950		$	1,855
Tax Computed at Statutory Rate @ 21%	$	483		$	410		$	390
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	147			117			123
Uncertain Tax Positions	3			—			(24)
NDT Fund	32			34			(13)
Plant-Related Items	(9)			(2)			(10)
Tax Credits	(18)			(18)			(16)
Audit Settlement	(27)			—			—
Leasing Activities	(35)			—			—
Tax Adjustment Credit	(205)			(272)			(30)
Deferred Tax Expense (Benefit) - Tax Act	—			—			3
Bad Debt Flow-Through	28			—			—
Other	(3)			(12)			(6)
Subtotal	(87)			(153)			27
Total Income Tax Expense (Benefit)	$	396		$	257		$	417
Effective Income Tax Rate	17.2		%	13.2		%	22.5		%

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

	As of December 31,
PSEG	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	485	$	539
OPEB	135		151
Related to Uncertain Tax Positions	29		97
Interest Disallowance Carry Forward	39		76
Operating Leases	60		64
Other	170		128
Total Noncurrent Assets	$	918	$	1,055
Liabilities:
Noncurrent:
Plant-Related Items	$	5,163	$	5,051
New Jersey Corporate Business Tax	1,016		876
Leasing Activities	133		284
AROs and NDT Fund	324		277
Taxes Recoverable Through Future Rates (net)	114		108
Pension Costs	97		98
Operating Leases	55		59
Other	247		273
Total Noncurrent Liabilities	$	7,149	$	7,026
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	6,231	$	5,971
ITC	271		285
Net Total Noncurrent Deferred Income Taxes and ITC	$	6,502	$	6,256

The deferred tax effect of certain assets and liabilities is 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 PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
PSE&G	2020			2019			2018
	Millions
Net Income	$	1,327		$	1,250		$	1,067
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	179		$	121		$	(62)
State	8			—			1
Total Current	187			121			(61)
Deferred Expense (Benefit):
Federal	(71)			(156)			287
State	128			117			122
Total Deferred	57			(39)			409
ITC	(4)			11			(4)
Total Income Tax Expense	$	240		$	93		$	344
Pre-Tax Income	$	1,567		$	1,343		$	1,411
Tax Computed at Statutory Rate @ 21%	$	329		$	282		$	296
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	106			92			98
Uncertain Tax Positions	4			1			(1)
Plant-Related Items	(9)			(2)			(10)
Tax Credits	(9)			(8)			(8)
Audit Settlement	(2)			—			—
Tax Adjustment Credit	(205)			(272)			(30)
Bad Debt Flow-Through	28			—			—
Other	(2)			—			(1)
Subtotal	(89)			(189)			48
Total Income Tax Expense	$	240		$	93		$	344
Effective Income Tax Rate	15.3		%	6.9		%	24.4		%

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

	As of December 31,
PSE&G	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	485	$	539
OPEB	82		97
Related to Uncertain Tax Positions	—		42
Operating Leases	21		21
Other	92		55
Total Noncurrent Assets	$	680	$	754
Liabilities:
Noncurrent:
Plant-Related Items	$	3,874	$	3,754
New Jersey Corporate Business Tax	721		588
Pension Costs	166		160
Taxes Recoverable Through Future Rates (net)	114		108
Conservation Costs	61		44
Operating Leases	21		21
Related to Uncertain Tax Positions	5		—
Other	161		183
Total Noncurrent Liabilities	$	5,123	$	4,858
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	4,443	$	4,104
ITC	81		85
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,524	$	4,189

The deferred tax effect of certain assets and liabilities is 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 PSEG Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
PSEG Power	2020			2019			2018
	Millions
Net Income	$	594		$	468		$	365
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	135		$	(48)		$	(164)
State	(7)			3			24
Total Current	128			(45)			(140)
Deferred Expense (Benefit):
Federal	39			208			214
State	31			31			1
Total Deferred	70			239			215
ITC	(10)			9			(9)
Total Income Tax Expense (Benefit)	$	188		$	203		$	66
Pre-Tax Income	$	782		$	671		$	431
Tax Computed at Statutory Rate @ 21%	$	164		$	141		$	91
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	18			25			21
NDT Fund	32			34			(13)
Tax Credits	(9)			(10)			(7)
Uncertain Tax Positions	5			11			(24)
Audit Settlement	(21)			—			—
Deferred Tax Benefit - Tax Act	—			—			(1)
Other	(1)			2			(1)
Subtotal	24			62			(25)
Total Income Tax Expense (Benefit)	$	188		$	203		$	66
Effective Income Tax Rate	24.0		%	30.3		%	15.3		%

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

	As of December 31,
PSEG Power	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Related to Uncertain Tax Positions	$	38	$	72
Pension Costs	68		61
OPEB	41		40
Operating Leases	13		15
Interest Disallowance Carry Forward	6		12
Contractual Liabilities & Environmental Costs	6		7
Other	36		30
Total Noncurrent Assets	$	208	$	237
Liabilities:
Noncurrent:
Plant-Related Items	$	1,286	$	1,292
New Jersey Corporate Business Tax	308		282
AROs and NDT Fund	325		278
Operating Leases	13		15
Other	21		45
Total Noncurrent Liabilities	$	1,953	$	1,912
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	1,745	$	1,675
ITC	191		201
Net Total Noncurrent Deferred Income Taxes and ITC	$	1,936	$	1,876

PSEG, PSE&G and PSEG 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 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. See Note 7. Regulatory Assets and Liabilities.

Effective January 1, 2018, the Tax Act established tax laws including, among other things, the reduction of the corporate income tax rate from a maximum of 35% to 21%, a limitation on deductible interest, and limitations on the utilization of net operating losses (NOLs).

The 2018 decrease in the federal tax rate resulted in PSE&G recording excess deferred income taxes. As of December 31, 2019, the balance was approximately $1.9 billion with a Regulatory Liability of approximately $2.6 billion. In 2020, PSE&G returned approximately $286 million of excess deferred income taxes and previously realized and current period deferred income taxes related to tax repair deductions to its customers with a reduction to tax expense of approximately $205 million. The flowback to customers of the excess deferred income taxes and previously realized tax repair deductions resulted in a decrease of approximately $255 million in the Regulatory Liability. The current period tax repair deduction reduces tax expense and revenue and recognizes a Regulatory Asset as PSE&G believes it is probable that the current period tax repair deductions flowed through to the customers will be recovered from customers in the future. See Note 7. Regulatory Assets and Liabilities for additional information.

In March 2020, the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted. Among other provisions, the CARES Act allows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021.

In April 2020, the IRS issued a PLR to PSE&G concluding that certain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the normalization rules

allowing them to be refunded to customers sooner as agreed to with FERC and the BPU. In July 2020, FERC and the BPU approved PSE&G’s requests to refund these unprotected excess deferred income taxes to customers. FERC approved the refund of these unprotected excess deferred income taxes within the 2019 true-up filing. The BPU approved the refund of these unprotected excess deferred income taxes within the next five years beginning in July 2020. See Note 7. Regulatory Assets and Liabilities for additional information.

In July 2020, the IRS issued final and proposed regulations addressing the limitation on deductible business interest expense contained in the Tax Act. These regulations retroactively allow depreciation to be added back in computing the 30% adjusted taxable income (ATI) cap, increasing the amount of interest that can be deducted by unregulated businesses in years before 2022. For 2022 and after, the regulations continue to disallow the addback of depreciation in the computation of ATI, effectively lowering the cap on the amount of deductible business interest and contain special rules in allocating interest between regulated and non-regulated businesses. The portion of PSEG’s and PSEG Power’s business interest expense that was disallowed in 2018 and 2019 under the previously issued proposed regulations will now be deductible in those respective years. These regulations remain uncertain in some respects.

In late December 2020, the Consolidated Appropriations Act (CAA), 2021 was enacted. PSEG’s initial analysis of the CAA indicates that this legislation will not have a material impact on the financial condition and cash flows of PSEG, PSE&G and PSEG Power.

We expect that a prolonged coronavirus pandemic or economic recovery may result in additional federal or state tax legislation which can have a material impact on PSEG’s, PSE&G’s and PSEG Power’s tax expense and cash tax position.

Amounts recorded under the Tax Act, CARES Act and CAA, including depreciation and interest disallowance regulations, are subject to change based on several factors, including, among other things, whether the IRS or state taxing authorities issue additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s, PSE&G’s and PSEG Power’s financial statements.

As of December 31, 2020, PSE&G had a $29 million New Jersey Corporate Business Tax NOL that is expected to be fully realized in the future. There are no other material tax carryforwards in other jurisdictions.

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

2020	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2020	$	321	$	124	$	161	$	33
Increases as a Result of Positions Taken in a Prior Period	33		21		10		1
Decreases as a Result of Positions Taken in a Prior Period	(91)		(51)		(36)		(4)
Increases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Settlements with Taxing Authorities	(116)		(64)		(52)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2020	$	147	$	30	$	83	$	30
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(69)		(12)		(49)		(8)
Regulatory Asset—Unrecognized Tax Benefits	(15)		(15)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	63	$	3	$	34	$	22

2019	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2019	$	318	$	108	$	151	$	54
Increases as a Result of Positions Taken in a Prior Period	17		5		8		5
Decreases as a Result of Positions Taken in a Prior Period	(37)		(1)		(13)		(22)
Increases as a Result of Positions Taken during the Current Period	27		12		15		—
Decreases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Settlements with Taxing Authorities	(4)		—		—		(4)
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2019	$	321	$	124	$	161	$	33
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(184)		(71)		(105)		(7)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	91	$	7	$	56	$	26

2018	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2018	$	334	$	135	$	142	$	53
Increases as a Result of Positions Taken in a Prior Period	11		4		4		3
Decreases as a Result of Positions Taken in a Prior Period	(70)		(31)		(37)		(2)
Increases as a Result of Positions Taken during the Current Period	52		3		48		—
Decreases as a Result of Positions Taken during the Current Period	(3)		(3)		—		—
Decreases as a Result of Settlements with Taxing Authorities	(6)		—		(6)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2018	$	318	$	108	$	151	$	54
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(173)		(57)		(104)		(12)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	99	$	5	$	47	$	42

In April 2020, the Joint Committee on Taxation approved PSEG’s nuclear carryback claim and federal tax returns for the years 2011 and 2012. In June 2020, the federal income tax audits for years 2011 through 2016 and the nuclear carryback claim were concluded.

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:

	Accumulated Interest and Penalties on Uncertain Tax Positions as of December 31,
	2020		2019		2018
	Millions
PSEG	$	29	$	40	$	43
PSE&G	$	9	$	16	$	12
PSEG Power	$	5	$	12	$	9
Energy Holdings	$	15	$	13	$	22

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

Possible (Increase)/Decrease in Total Unrecognized Tax Benefits	Over the next 12 Months
	Millions
PSEG	$	12
PSE&G	$	12
PSEG Power	$	—

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	PSEG Power
United States
Federal	2017-2019	N/A	N/A
New Jersey	2011-2019	2011-2019	N/A
Pennsylvania	2017-2019	2017-2019	N/A
Connecticut	2016-2019	N/A	N/A
Maryland	2017-2019	N/A	N/A
New York	2017-2019	N/A	N/A

New Jersey State Tax Reform

In September 2020, New Jersey enacted its State Fiscal Year 2021 Budget, which amended the temporary surtax originally enacted into law in 2018, from 1.5% to 2.5% for 2020 and 2021 and extended the 2.5% surtax to 2023. PSE&G continues to be exempt and this amendment will not have a material impact on PSEG’s and PSEG Power’s financial statements.

In July 2018, New Jersey made changes to its income tax laws, including imposing the aforementioned temporary surtax, as well as requiring corporate taxpayers to file in a combined reporting group as defined under New Jersey law starting in 2019. Both provisions include an exemption for public utilities. PSEG believes PSE&G meets the definition of a public utility and, therefore, will not be impacted by the temporary surtax or be included in the combined reporting group. PSEG anticipates New Jersey will be issuing clarifying guidance regarding combined reporting rules. Any further guidance or clarification could impact PSEG’s and PSEG Power’s financial statements.

PSEG Power LLC

Income Taxes [Line Items]

Income Taxes

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 21% is as follows:

	Years Ended December 31,
PSEG	2020			2019			2018
	Millions
Net Income	$	1,905		$	1,693		$	1,438
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	385		$	84		$	(97)
State	48			18			83
Total Current	433			102			(14)
Deferred Expense (Benefit):
Federal	(164)			3			373
State	141			132			71
Total Deferred	(23)			135			444
ITC	(14)			20			(13)
Total Income Tax Expense (Benefit)	$	396		$	257		$	417
Pre-Tax Income	$	2,301		$	1,950		$	1,855
Tax Computed at Statutory Rate @ 21%	$	483		$	410		$	390
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	147			117			123
Uncertain Tax Positions	3			—			(24)
NDT Fund	32			34			(13)
Plant-Related Items	(9)			(2)			(10)
Tax Credits	(18)			(18)			(16)
Audit Settlement	(27)			—			—
Leasing Activities	(35)			—			—
Tax Adjustment Credit	(205)			(272)			(30)
Deferred Tax Expense (Benefit) - Tax Act	—			—			3
Bad Debt Flow-Through	28			—			—
Other	(3)			(12)			(6)
Subtotal	(87)			(153)			27
Total Income Tax Expense (Benefit)	$	396		$	257		$	417
Effective Income Tax Rate	17.2		%	13.2		%	22.5		%

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

	As of December 31,
PSEG	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	485	$	539
OPEB	135		151
Related to Uncertain Tax Positions	29		97
Interest Disallowance Carry Forward	39		76
Operating Leases	60		64
Other	170		128
Total Noncurrent Assets	$	918	$	1,055
Liabilities:
Noncurrent:
Plant-Related Items	$	5,163	$	5,051
New Jersey Corporate Business Tax	1,016		876
Leasing Activities	133		284
AROs and NDT Fund	324		277
Taxes Recoverable Through Future Rates (net)	114		108
Pension Costs	97		98
Operating Leases	55		59
Other	247		273
Total Noncurrent Liabilities	$	7,149	$	7,026
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	6,231	$	5,971
ITC	271		285
Net Total Noncurrent Deferred Income Taxes and ITC	$	6,502	$	6,256

The deferred tax effect of certain assets and liabilities is 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 PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
PSE&G	2020			2019			2018
	Millions
Net Income	$	1,327		$	1,250		$	1,067
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	179		$	121		$	(62)
State	8			—			1
Total Current	187			121			(61)
Deferred Expense (Benefit):
Federal	(71)			(156)			287
State	128			117			122
Total Deferred	57			(39)			409
ITC	(4)			11			(4)
Total Income Tax Expense	$	240		$	93		$	344
Pre-Tax Income	$	1,567		$	1,343		$	1,411
Tax Computed at Statutory Rate @ 21%	$	329		$	282		$	296
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	106			92			98
Uncertain Tax Positions	4			1			(1)
Plant-Related Items	(9)			(2)			(10)
Tax Credits	(9)			(8)			(8)
Audit Settlement	(2)			—			—
Tax Adjustment Credit	(205)			(272)			(30)
Bad Debt Flow-Through	28			—			—
Other	(2)			—			(1)
Subtotal	(89)			(189)			48
Total Income Tax Expense	$	240		$	93		$	344
Effective Income Tax Rate	15.3		%	6.9		%	24.4		%

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

	As of December 31,
PSE&G	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	485	$	539
OPEB	82		97
Related to Uncertain Tax Positions	—		42
Operating Leases	21		21
Other	92		55
Total Noncurrent Assets	$	680	$	754
Liabilities:
Noncurrent:
Plant-Related Items	$	3,874	$	3,754
New Jersey Corporate Business Tax	721		588
Pension Costs	166		160
Taxes Recoverable Through Future Rates (net)	114		108
Conservation Costs	61		44
Operating Leases	21		21
Related to Uncertain Tax Positions	5		—
Other	161		183
Total Noncurrent Liabilities	$	5,123	$	4,858
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	4,443	$	4,104
ITC	81		85
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,524	$	4,189

The deferred tax effect of certain assets and liabilities is 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 PSEG Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
PSEG Power	2020			2019			2018
	Millions
Net Income	$	594		$	468		$	365
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	135		$	(48)		$	(164)
State	(7)			3			24
Total Current	128			(45)			(140)
Deferred Expense (Benefit):
Federal	39			208			214
State	31			31			1
Total Deferred	70			239			215
ITC	(10)			9			(9)
Total Income Tax Expense (Benefit)	$	188		$	203		$	66
Pre-Tax Income	$	782		$	671		$	431
Tax Computed at Statutory Rate @ 21%	$	164		$	141		$	91
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	18			25			21
NDT Fund	32			34			(13)
Tax Credits	(9)			(10)			(7)
Uncertain Tax Positions	5			11			(24)
Audit Settlement	(21)			—			—
Deferred Tax Benefit - Tax Act	—			—			(1)
Other	(1)			2			(1)
Subtotal	24			62			(25)
Total Income Tax Expense (Benefit)	$	188		$	203		$	66
Effective Income Tax Rate	24.0		%	30.3		%	15.3		%

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

	As of December 31,
PSEG Power	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Related to Uncertain Tax Positions	$	38	$	72
Pension Costs	68		61
OPEB	41		40
Operating Leases	13		15
Interest Disallowance Carry Forward	6		12
Contractual Liabilities & Environmental Costs	6		7
Other	36		30
Total Noncurrent Assets	$	208	$	237
Liabilities:
Noncurrent:
Plant-Related Items	$	1,286	$	1,292
New Jersey Corporate Business Tax	308		282
AROs and NDT Fund	325		278
Operating Leases	13		15
Other	21		45
Total Noncurrent Liabilities	$	1,953	$	1,912
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	1,745	$	1,675
ITC	191		201
Net Total Noncurrent Deferred Income Taxes and ITC	$	1,936	$	1,876

PSEG, PSE&G and PSEG 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 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. See Note 7. Regulatory Assets and Liabilities.

Effective January 1, 2018, the Tax Act established tax laws including, among other things, the reduction of the corporate income tax rate from a maximum of 35% to 21%, a limitation on deductible interest, and limitations on the utilization of net operating losses (NOLs).

The 2018 decrease in the federal tax rate resulted in PSE&G recording excess deferred income taxes. As of December 31, 2019, the balance was approximately $1.9 billion with a Regulatory Liability of approximately $2.6 billion. In 2020, PSE&G returned approximately $286 million of excess deferred income taxes and previously realized and current period deferred income taxes related to tax repair deductions to its customers with a reduction to tax expense of approximately $205 million. The flowback to customers of the excess deferred income taxes and previously realized tax repair deductions resulted in a decrease of approximately $255 million in the Regulatory Liability. The current period tax repair deduction reduces tax expense and revenue and recognizes a Regulatory Asset as PSE&G believes it is probable that the current period tax repair deductions flowed through to the customers will be recovered from customers in the future. See Note 7. Regulatory Assets and Liabilities for additional information.

In March 2020, the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted. Among other provisions, the CARES Act allows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021.

In April 2020, the IRS issued a PLR to PSE&G concluding that certain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the normalization rules

allowing them to be refunded to customers sooner as agreed to with FERC and the BPU. In July 2020, FERC and the BPU approved PSE&G’s requests to refund these unprotected excess deferred income taxes to customers. FERC approved the refund of these unprotected excess deferred income taxes within the 2019 true-up filing. The BPU approved the refund of these unprotected excess deferred income taxes within the next five years beginning in July 2020. See Note 7. Regulatory Assets and Liabilities for additional information.

In July 2020, the IRS issued final and proposed regulations addressing the limitation on deductible business interest expense contained in the Tax Act. These regulations retroactively allow depreciation to be added back in computing the 30% adjusted taxable income (ATI) cap, increasing the amount of interest that can be deducted by unregulated businesses in years before 2022. For 2022 and after, the regulations continue to disallow the addback of depreciation in the computation of ATI, effectively lowering the cap on the amount of deductible business interest and contain special rules in allocating interest between regulated and non-regulated businesses. The portion of PSEG’s and PSEG Power’s business interest expense that was disallowed in 2018 and 2019 under the previously issued proposed regulations will now be deductible in those respective years. These regulations remain uncertain in some respects.

In late December 2020, the Consolidated Appropriations Act (CAA), 2021 was enacted. PSEG’s initial analysis of the CAA indicates that this legislation will not have a material impact on the financial condition and cash flows of PSEG, PSE&G and PSEG Power.

We expect that a prolonged coronavirus pandemic or economic recovery may result in additional federal or state tax legislation which can have a material impact on PSEG’s, PSE&G’s and PSEG Power’s tax expense and cash tax position.

Amounts recorded under the Tax Act, CARES Act and CAA, including depreciation and interest disallowance regulations, are subject to change based on several factors, including, among other things, whether the IRS or state taxing authorities issue additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s, PSE&G’s and PSEG Power’s financial statements.

As of December 31, 2020, PSE&G had a $29 million New Jersey Corporate Business Tax NOL that is expected to be fully realized in the future. There are no other material tax carryforwards in other jurisdictions.

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

2020	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2020	$	321	$	124	$	161	$	33
Increases as a Result of Positions Taken in a Prior Period	33		21		10		1
Decreases as a Result of Positions Taken in a Prior Period	(91)		(51)		(36)		(4)
Increases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Settlements with Taxing Authorities	(116)		(64)		(52)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2020	$	147	$	30	$	83	$	30
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(69)		(12)		(49)		(8)
Regulatory Asset—Unrecognized Tax Benefits	(15)		(15)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	63	$	3	$	34	$	22

2019	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2019	$	318	$	108	$	151	$	54
Increases as a Result of Positions Taken in a Prior Period	17		5		8		5
Decreases as a Result of Positions Taken in a Prior Period	(37)		(1)		(13)		(22)
Increases as a Result of Positions Taken during the Current Period	27		12		15		—
Decreases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Settlements with Taxing Authorities	(4)		—		—		(4)
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2019	$	321	$	124	$	161	$	33
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(184)		(71)		(105)		(7)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	91	$	7	$	56	$	26

2018	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2018	$	334	$	135	$	142	$	53
Increases as a Result of Positions Taken in a Prior Period	11		4		4		3
Decreases as a Result of Positions Taken in a Prior Period	(70)		(31)		(37)		(2)
Increases as a Result of Positions Taken during the Current Period	52		3		48		—
Decreases as a Result of Positions Taken during the Current Period	(3)		(3)		—		—
Decreases as a Result of Settlements with Taxing Authorities	(6)		—		(6)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2018	$	318	$	108	$	151	$	54
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(173)		(57)		(104)		(12)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	99	$	5	$	47	$	42

In April 2020, the Joint Committee on Taxation approved PSEG’s nuclear carryback claim and federal tax returns for the years 2011 and 2012. In June 2020, the federal income tax audits for years 2011 through 2016 and the nuclear carryback claim were concluded.

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:

	Accumulated Interest and Penalties on Uncertain Tax Positions as of December 31,
	2020		2019		2018
	Millions
PSEG	$	29	$	40	$	43
PSE&G	$	9	$	16	$	12
PSEG Power	$	5	$	12	$	9
Energy Holdings	$	15	$	13	$	22

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

Possible (Increase)/Decrease in Total Unrecognized Tax Benefits	Over the next 12 Months
	Millions
PSEG	$	12
PSE&G	$	12
PSEG Power	$	—

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	PSEG Power
United States
Federal	2017-2019	N/A	N/A
New Jersey	2011-2019	2011-2019	N/A
Pennsylvania	2017-2019	2017-2019	N/A
Connecticut	2016-2019	N/A	N/A
Maryland	2017-2019	N/A	N/A
New York	2017-2019	N/A	N/A

New Jersey State Tax Reform

In September 2020, New Jersey enacted its State Fiscal Year 2021 Budget, which amended the temporary surtax originally enacted into law in 2018, from 1.5% to 2.5% for 2020 and 2021 and extended the 2.5% surtax to 2023. PSE&G continues to be exempt and this amendment will not have a material impact on PSEG’s and PSEG Power’s financial statements.

In July 2018, New Jersey made changes to its income tax laws, including imposing the aforementioned temporary surtax, as well as requiring corporate taxpayers to file in a combined reporting group as defined under New Jersey law starting in 2019. Both provisions include an exemption for public utilities. PSEG believes PSE&G meets the definition of a public utility and, therefore, will not be impacted by the temporary surtax or be included in the combined reporting group. PSEG anticipates New Jersey will be issuing clarifying guidance regarding combined reporting rules. Any further guidance or clarification could impact PSEG’s and PSEG Power’s financial statements.

Public Service Electric and Gas Company

Income Taxes [Line Items]

Income Taxes

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 21% is as follows:

	Years Ended December 31,
PSEG	2020			2019			2018
	Millions
Net Income	$	1,905		$	1,693		$	1,438
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	385		$	84		$	(97)
State	48			18			83
Total Current	433			102			(14)
Deferred Expense (Benefit):
Federal	(164)			3			373
State	141			132			71
Total Deferred	(23)			135			444
ITC	(14)			20			(13)
Total Income Tax Expense (Benefit)	$	396		$	257		$	417
Pre-Tax Income	$	2,301		$	1,950		$	1,855
Tax Computed at Statutory Rate @ 21%	$	483		$	410		$	390
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	147			117			123
Uncertain Tax Positions	3			—			(24)
NDT Fund	32			34			(13)
Plant-Related Items	(9)			(2)			(10)
Tax Credits	(18)			(18)			(16)
Audit Settlement	(27)			—			—
Leasing Activities	(35)			—			—
Tax Adjustment Credit	(205)			(272)			(30)
Deferred Tax Expense (Benefit) - Tax Act	—			—			3
Bad Debt Flow-Through	28			—			—
Other	(3)			(12)			(6)
Subtotal	(87)			(153)			27
Total Income Tax Expense (Benefit)	$	396		$	257		$	417
Effective Income Tax Rate	17.2		%	13.2		%	22.5		%

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

	As of December 31,
PSEG	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	485	$	539
OPEB	135		151
Related to Uncertain Tax Positions	29		97
Interest Disallowance Carry Forward	39		76
Operating Leases	60		64
Other	170		128
Total Noncurrent Assets	$	918	$	1,055
Liabilities:
Noncurrent:
Plant-Related Items	$	5,163	$	5,051
New Jersey Corporate Business Tax	1,016		876
Leasing Activities	133		284
AROs and NDT Fund	324		277
Taxes Recoverable Through Future Rates (net)	114		108
Pension Costs	97		98
Operating Leases	55		59
Other	247		273
Total Noncurrent Liabilities	$	7,149	$	7,026
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	6,231	$	5,971
ITC	271		285
Net Total Noncurrent Deferred Income Taxes and ITC	$	6,502	$	6,256

The deferred tax effect of certain assets and liabilities is 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 PSE&G with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
PSE&G	2020			2019			2018
	Millions
Net Income	$	1,327		$	1,250		$	1,067
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	179		$	121		$	(62)
State	8			—			1
Total Current	187			121			(61)
Deferred Expense (Benefit):
Federal	(71)			(156)			287
State	128			117			122
Total Deferred	57			(39)			409
ITC	(4)			11			(4)
Total Income Tax Expense	$	240		$	93		$	344
Pre-Tax Income	$	1,567		$	1,343		$	1,411
Tax Computed at Statutory Rate @ 21%	$	329		$	282		$	296
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	106			92			98
Uncertain Tax Positions	4			1			(1)
Plant-Related Items	(9)			(2)			(10)
Tax Credits	(9)			(8)			(8)
Audit Settlement	(2)			—			—
Tax Adjustment Credit	(205)			(272)			(30)
Bad Debt Flow-Through	28			—			—
Other	(2)			—			(1)
Subtotal	(89)			(189)			48
Total Income Tax Expense	$	240		$	93		$	344
Effective Income Tax Rate	15.3		%	6.9		%	24.4		%

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

	As of December 31,
PSE&G	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Regulatory Liability Excess Deferred Tax	$	485	$	539
OPEB	82		97
Related to Uncertain Tax Positions	—		42
Operating Leases	21		21
Other	92		55
Total Noncurrent Assets	$	680	$	754
Liabilities:
Noncurrent:
Plant-Related Items	$	3,874	$	3,754
New Jersey Corporate Business Tax	721		588
Pension Costs	166		160
Taxes Recoverable Through Future Rates (net)	114		108
Conservation Costs	61		44
Operating Leases	21		21
Related to Uncertain Tax Positions	5		—
Other	161		183
Total Noncurrent Liabilities	$	5,123	$	4,858
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	4,443	$	4,104
ITC	81		85
Net Total Noncurrent Deferred Income Taxes and ITC	$	4,524	$	4,189

The deferred tax effect of certain assets and liabilities is 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 PSEG Power with the amount computed by multiplying pre-tax income by the statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
PSEG Power	2020			2019			2018
	Millions
Net Income	$	594		$	468		$	365
Income Taxes:
Operating Income:
Current (Benefit) Expense:
Federal	$	135		$	(48)		$	(164)
State	(7)			3			24
Total Current	128			(45)			(140)
Deferred Expense (Benefit):
Federal	39			208			214
State	31			31			1
Total Deferred	70			239			215
ITC	(10)			9			(9)
Total Income Tax Expense (Benefit)	$	188		$	203		$	66
Pre-Tax Income	$	782		$	671		$	431
Tax Computed at Statutory Rate @ 21%	$	164		$	141		$	91
Increase (Decrease) Attributable to Flow-Through of Certain Tax Adjustments:
State Income Taxes (net of federal income tax)	18			25			21
NDT Fund	32			34			(13)
Tax Credits	(9)			(10)			(7)
Uncertain Tax Positions	5			11			(24)
Audit Settlement	(21)			—			—
Deferred Tax Benefit - Tax Act	—			—			(1)
Other	(1)			2			(1)
Subtotal	24			62			(25)
Total Income Tax Expense (Benefit)	$	188		$	203		$	66
Effective Income Tax Rate	24.0		%	30.3		%	15.3		%

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

	As of December 31,
PSEG Power	2020		2019
	Millions
Deferred Income Taxes
Assets:
Noncurrent:
Related to Uncertain Tax Positions	$	38	$	72
Pension Costs	68		61
OPEB	41		40
Operating Leases	13		15
Interest Disallowance Carry Forward	6		12
Contractual Liabilities & Environmental Costs	6		7
Other	36		30
Total Noncurrent Assets	$	208	$	237
Liabilities:
Noncurrent:
Plant-Related Items	$	1,286	$	1,292
New Jersey Corporate Business Tax	308		282
AROs and NDT Fund	325		278
Operating Leases	13		15
Other	21		45
Total Noncurrent Liabilities	$	1,953	$	1,912
Summary of Accumulated Deferred Income Taxes:
Net Noncurrent Deferred Income Tax Liabilities	$	1,745	$	1,675
ITC	191		201
Net Total Noncurrent Deferred Income Taxes and ITC	$	1,936	$	1,876

PSEG, PSE&G and PSEG 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 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. See Note 7. Regulatory Assets and Liabilities.

Effective January 1, 2018, the Tax Act established tax laws including, among other things, the reduction of the corporate income tax rate from a maximum of 35% to 21%, a limitation on deductible interest, and limitations on the utilization of net operating losses (NOLs).

The 2018 decrease in the federal tax rate resulted in PSE&G recording excess deferred income taxes. As of December 31, 2019, the balance was approximately $1.9 billion with a Regulatory Liability of approximately $2.6 billion. In 2020, PSE&G returned approximately $286 million of excess deferred income taxes and previously realized and current period deferred income taxes related to tax repair deductions to its customers with a reduction to tax expense of approximately $205 million. The flowback to customers of the excess deferred income taxes and previously realized tax repair deductions resulted in a decrease of approximately $255 million in the Regulatory Liability. The current period tax repair deduction reduces tax expense and revenue and recognizes a Regulatory Asset as PSE&G believes it is probable that the current period tax repair deductions flowed through to the customers will be recovered from customers in the future. See Note 7. Regulatory Assets and Liabilities for additional information.

In March 2020, the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted. Among other provisions, the CARES Act allows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021.

In April 2020, the IRS issued a PLR to PSE&G concluding that certain excess deferred taxes previously classified as protected should be classified as unprotected. Unprotected excess deferred income taxes are not subject to the normalization rules

allowing them to be refunded to customers sooner as agreed to with FERC and the BPU. In July 2020, FERC and the BPU approved PSE&G’s requests to refund these unprotected excess deferred income taxes to customers. FERC approved the refund of these unprotected excess deferred income taxes within the 2019 true-up filing. The BPU approved the refund of these unprotected excess deferred income taxes within the next five years beginning in July 2020. See Note 7. Regulatory Assets and Liabilities for additional information.

In July 2020, the IRS issued final and proposed regulations addressing the limitation on deductible business interest expense contained in the Tax Act. These regulations retroactively allow depreciation to be added back in computing the 30% adjusted taxable income (ATI) cap, increasing the amount of interest that can be deducted by unregulated businesses in years before 2022. For 2022 and after, the regulations continue to disallow the addback of depreciation in the computation of ATI, effectively lowering the cap on the amount of deductible business interest and contain special rules in allocating interest between regulated and non-regulated businesses. The portion of PSEG’s and PSEG Power’s business interest expense that was disallowed in 2018 and 2019 under the previously issued proposed regulations will now be deductible in those respective years. These regulations remain uncertain in some respects.

In late December 2020, the Consolidated Appropriations Act (CAA), 2021 was enacted. PSEG’s initial analysis of the CAA indicates that this legislation will not have a material impact on the financial condition and cash flows of PSEG, PSE&G and PSEG Power.

We expect that a prolonged coronavirus pandemic or economic recovery may result in additional federal or state tax legislation which can have a material impact on PSEG’s, PSE&G’s and PSEG Power’s tax expense and cash tax position.

Amounts recorded under the Tax Act, CARES Act and CAA, including depreciation and interest disallowance regulations, are subject to change based on several factors, including, among other things, whether the IRS or state taxing authorities issue additional guidance and/or further clarification. Any further guidance or clarification could impact PSEG’s, PSE&G’s and PSEG Power’s financial statements.

As of December 31, 2020, PSE&G had a $29 million New Jersey Corporate Business Tax NOL that is expected to be fully realized in the future. There are no other material tax carryforwards in other jurisdictions.

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

2020	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2020	$	321	$	124	$	161	$	33
Increases as a Result of Positions Taken in a Prior Period	33		21		10		1
Decreases as a Result of Positions Taken in a Prior Period	(91)		(51)		(36)		(4)
Increases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Settlements with Taxing Authorities	(116)		(64)		(52)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2020	$	147	$	30	$	83	$	30
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(69)		(12)		(49)		(8)
Regulatory Asset—Unrecognized Tax Benefits	(15)		(15)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	63	$	3	$	34	$	22

2019	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2019	$	318	$	108	$	151	$	54
Increases as a Result of Positions Taken in a Prior Period	17		5		8		5
Decreases as a Result of Positions Taken in a Prior Period	(37)		(1)		(13)		(22)
Increases as a Result of Positions Taken during the Current Period	27		12		15		—
Decreases as a Result of Positions Taken during the Current Period	—		—		—		—
Decreases as a Result of Settlements with Taxing Authorities	(4)		—		—		(4)
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2019	$	321	$	124	$	161	$	33
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(184)		(71)		(105)		(7)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	91	$	7	$	56	$	26

2018	PSEG		PSE&G		PSEG Power		Energy Holdings
	Millions
Total Amount of Unrecognized Tax Benefits as of January 1, 2018	$	334	$	135	$	142	$	53
Increases as a Result of Positions Taken in a Prior Period	11		4		4		3
Decreases as a Result of Positions Taken in a Prior Period	(70)		(31)		(37)		(2)
Increases as a Result of Positions Taken during the Current Period	52		3		48		—
Decreases as a Result of Positions Taken during the Current Period	(3)		(3)		—		—
Decreases as a Result of Settlements with Taxing Authorities	(6)		—		(6)		—
Decreases due to Lapses of Applicable Statute of Limitations	—		—		—		—
Total Amount of Unrecognized Tax Benefits as of December 31, 2018	$	318	$	108	$	151	$	54
Accumulated Deferred Income Taxes Associated with Unrecognized Tax Benefits	(173)		(57)		(104)		(12)
Regulatory Asset—Unrecognized Tax Benefits	(46)		(46)		—		—
Total Amount of Unrecognized Tax Benefits that if Recognized, would Impact the Effective Tax Rate (including Interest and Penalties)	$	99	$	5	$	47	$	42

In April 2020, the Joint Committee on Taxation approved PSEG’s nuclear carryback claim and federal tax returns for the years 2011 and 2012. In June 2020, the federal income tax audits for years 2011 through 2016 and the nuclear carryback claim were concluded.

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:

	Accumulated Interest and Penalties on Uncertain Tax Positions as of December 31,
	2020		2019		2018
	Millions
PSEG	$	29	$	40	$	43
PSE&G	$	9	$	16	$	12
PSEG Power	$	5	$	12	$	9
Energy Holdings	$	15	$	13	$	22

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

Possible (Increase)/Decrease in Total Unrecognized Tax Benefits	Over the next 12 Months
	Millions
PSEG	$	12
PSE&G	$	12
PSEG Power	$	—

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	PSEG Power
United States
Federal	2017-2019	N/A	N/A
New Jersey	2011-2019	2011-2019	N/A
Pennsylvania	2017-2019	2017-2019	N/A
Connecticut	2016-2019	N/A	N/A
Maryland	2017-2019	N/A	N/A
New York	2017-2019	N/A	N/A

New Jersey State Tax Reform

In September 2020, New Jersey enacted its State Fiscal Year 2021 Budget, which amended the temporary surtax originally enacted into law in 2018, from 1.5% to 2.5% for 2020 and 2021 and extended the 2.5% surtax to 2023. PSE&G continues to be exempt and this amendment will not have a material impact on PSEG’s and PSEG Power’s financial statements.

In July 2018, New Jersey made changes to its income tax laws, including imposing the aforementioned temporary surtax, as well as requiring corporate taxpayers to file in a combined reporting group as defined under New Jersey law starting in 2019. Both provisions include an exemption for public utilities. PSEG believes PSE&G meets the definition of a public utility and, therefore, will not be impacted by the temporary surtax or be included in the combined reporting group. PSEG anticipates New Jersey will be issuing clarifying guidance regarding combined reporting rules. Any further guidance or clarification could impact PSEG’s and PSEG Power’s financial statements.