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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of Components of Income Tax Expense (Benefit)

Income tax expense (benefit) from continuing operations is comprised of the following components:


	For the Year Ended December 31, 2021
	Exelon		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
Included in operations:
Federal
Current	$	(152)	$	(30)	$	1	$	(18)	$	18	$	22	$	2	$	1
Deferred	89		113		20		34		(52)		(17)		(14)		(26)
Investment tax credit amortization	(2)		(1)		—		—		(1)		—		—		—
State
Current	(46)		(41)		—		—		—		1		1		—
Deferred	149		131		(9)		(51)		77		9		53		12
Total	$	38	$	172	$	12	$	(35)	$	42	$	15	$	42	$	(13)


	For the Year Ended December 31, 2020
	Exelon		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
Included in operations:
Federal
Current	$	(180)	$	(24)	$	(7)	$	4	$	25	$	40	$	(13)	$	(4)
Deferred	10		112		1		10		(129)		(62)		(20)		(43)
Investment tax credit amortization	(3)		(2)		—		—		(1)		—		—		—
State
Current	(37)		(27)		—		—		(5)		—		—		—
Deferred	203		118		(24)		27		33		15		8		6
Total	$	(7)	$	177	$	(30)	$	41	$	(77)	$	(7)	$	(25)	$	(41)


	For the Year Ended December 31, 2019
	Exelon		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
Included in operations:
Federal
Current	$	(143)	$	59	$	45	$	(51)	$	43	$	16	$	29	$	(3)
Deferred	139		15		20		95		(34)		(6)		(21)		(6)
Investment tax credit amortization	(3)		(2)		—		—		(1)		—		—		—
State
Current	(44)		(5)		—		—		3		—		—		—
Deferred	204		96		—		35		27		6		14		9
Total	$	153	$	163	$	65	$	79	$	38	$	16	$	22	$	—

Effective Income Tax Rate Reconciliation

The effective income tax rate from continuing operations varies from the U.S. federal statutory rate principally due to the following:


	For the Year Ended December 31, 2021(a)
	Exelon		ComEd		PECO(b)		BGE(b)		PHI		Pepco		DPL(b)		ACE(b)
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	5.0		7.8		(1.4)		(10.8)		10.1		2.7		25.0		7.4
Amortization of investment tax credit, including deferred taxes on basis differences	(0.1)		(0.1)		—		(0.1)		(0.1)		—		(0.2)		(0.2)
Plant basis differences	(5.4)		(0.8)		(13.6)		(1.7)		(1.1)		(1.6)		(0.8)		(0.2)
Tax credits	(0.7)		(0.5)		—		(0.9)		(0.5)		(0.5)		(0.4)		(0.5)
Excess deferred tax amortization	(17.2)		(7.6)		(3.8)		(16.3)		(22.4)		(16.4)		(20.0)		(37.1)
Other	(0.3)		(1.0)		0.1		(0.6)		—		(0.4)		0.1		(0.2)
Effective income tax rate	2.3	%	18.8	%	2.3	%	(9.4)	%	7.0	%	4.8	%	24.7	%	(9.8)	%


	For the Year Ended December 31, 2020(a)
	Exelon		ComEd(c)		PECO(c)		BGE(d)		PHI(d)		Pepco(d)		DPL(d)		ACE(d)
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	11.9		11.6		(4.5)		5.5		5.1		4.5		6.6		7.0
Deferred Prosecution Agreement payments	3.8		6.8		—		—		—		—		—		—
Amortization of investment tax credit, including deferred taxes on basis differences	(0.3)		(0.3)		—		(0.1)		(0.2)		(0.1)		(0.3)		(0.5)
Plant basis differences	(8.6)		(0.6)		(18.7)		(1.5)		(1.6)		(1.7)		(0.4)		(3.0)
Tax credits	(0.5)		(0.3)		—		(0.4)		(0.3)		(0.3)		(0.3)		(0.5)
Excess deferred tax amortization	(29.1)		(11.2)		(4.6)		(13.9)		(42.0)		(25.4)		(51.7)		(82.1)
Other	1.2		1.8		(0.4)		(0.1)		(0.4)		(0.7)		0.1		0.4
Effective income tax rate	(0.6)	%	28.8	%	(7.2)	%	10.5	%	(18.4)	%	(2.7)	%	(25.0)	%	(57.7)	%


	For the Year Ended December 31, 2019(a)
	Exelon		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit	7.8		8.5		—		6.4		4.7		2.0		6.8		7.0
Amortization of investment tax credit, including deferred taxes on basis differences	(0.2)		(0.2)		—		(0.1)		(0.2)		(0.1)		(0.2)		(0.3)
Plant basis differences	(3.3)		—		(7.2)		(1.2)		(1.2)		(1.8)		(0.4)		(0.7)
Tax credits	(1.9)		(1.2)		—		(1.3)		(0.2)		(0.1)		—		(0.1)
Excess deferred tax amortization	(13.4)		(9.7)		(2.8)		(6.8)		(17.5)		(15.1)		(14.2)		(27.0)
Other	(0.7)		0.8		—		—		0.8		0.3		—		0.1
Effective income tax rate	9.3	%	19.2	%	11.0	%	18.0	%	7.4	%	6.2	%	13.0	%	—	%

__________

(a)Positive percentages represent income tax expense. Negative percentages represent income tax benefit.

(b)For PECO, the lower effective tax rate is primarily related to plant basis differences attributable to tax repair deductions. For BGE, the income tax benefit is primarily due to the Maryland multi-year plan which resulted in the acceleration of certain income tax benefits. For DPL, the higher effective tax rate is primarily related to a state income tax expense, net of federal income tax benefit, due to the recognition of a valuation allowance of approximately $31 million against a deferred tax asset associated with Delaware net operating loss carryforwards as a result of a change in Delaware tax law. For ACE, the income tax benefit is primarily due to a distribution rate case settlement which allows ACE to retain certain tax benefits.

(c)At ComEd, the higher effective tax rate is primarily related to the nondeductible Deferred Prosecution Agreement payments. At PECO, the negative effective tax rate is primarily related to an increase in plant basis differences attributable to tax repair deductions related to an increase in storms and qualifying projects in 2021.

(d)For BGE, PHI, Pepco, DPL, and ACE, the income tax benefit is primarily attributable to accelerated amortization of transmission related deferred income tax regulatory liabilities as a result of regulatory settlements. See Note 3 — Regulatory Matters for additional information.

Tax Effects of Temporary Differences

The tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred tax assets (liabilities), as of December 31, 2021 and 2020 are presented below:


	As of December 31, 2021
	Exelon		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
Plant basis differences	$	(11,606)	$	(4,648)	$	(2,271)	$	(1,826)	$	(2,976)	$	(1,321)	$	(853)	$	(777)
Accrual based contracts	56		—		—		—		56		—		—		—
Derivatives and other financial instruments	63		61		—		—		2		—		—		—
Deferred pension and postretirement obligation	641		(308)		(32)		(37)		(90)		(76)		(40)		(6)
Deferred debt refinancing costs	146		(6)		—		(2)		123		(2)		(1)		(1)
Regulatory assets and liabilities	(1,130)		8		(280)		92		(53)		24		55		31
Tax loss carryforward, net of valuation allowances	242		—		65		68		64		2		18		42
Tax credit carryforward	584		—		—		—		—		—		—		—
Investment in partnerships	(21)		—		—		—		—		—		—		—
Other, net	449		216		97		21		212		99		19		34
Deferred income tax liabilities (net)	$	(10,576)	$	(4,677)	$	(2,421)	$	(1,684)	$	(2,662)	$	(1,274)	$	(802)	$	(677)
Unamortized investment tax credits	(15)		(8)		—		(2)		(5)		(1)		(1)		(2)
Total deferred income tax liabilities (net) and unamortized investment tax credits	$	(10,591)	$	(4,685)	$	(2,421)	$	(1,686)	$	(2,667)	$	(1,275)	$	(803)	$	(679)


	As of December 31, 2020
	Exelon		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
Plant basis differences	$	(11,272)	$	(4,432)	$	(2,131)	$	(1,711)	$	(2,822)	$	(1,259)	$	(806)	$	(725)
Accrual based contracts	77		—		—		—		77		—		—		—
Derivatives and other financial instruments	82		84		—		—		2		—		—		—
Deferred pension and postretirement obligation	954		(288)		(30)		(33)		(80)		(74)		(40)		(7)
Deferred debt refinancing costs	153		(6)		—		(2)		131		(3)		(1)		(1)
Regulatory assets and liabilities	(1,107)		87		(231)		142		(41)		38		67		46
Tax loss carryforward, net of valuation allowances	231		—		47		57		90		4		49		38
Tax credit carryforward	648		—		—		—		—		—		—		—
Investment in partnerships	(22)		—		—		—		—		—		—		—
Other, net	701		223		104		29		220		107		18		27
Deferred income tax liabilities (net)	$	(9,555)	$	(4,332)	$	(2,241)	$	(1,518)	$	(2,423)	$	(1,187)	$	(713)	$	(622)
Unamortized investment tax credits	(19)		(9)		(1)		(3)		(6)		(2)		(2)		(3)
Total deferred income tax liabilities (net) and unamortized investment tax credits	$	(9,574)	$	(4,341)	$	(2,242)	$	(1,521)	$	(2,429)	$	(1,189)	$	(715)	$	(625)

Summary of Loss Carryforwards

The following table provides Exelon’s, PECO’s, BGE’s, PHI’s, Pepco’s, DPL’s, and ACE’s carryforwards, of which the state related items are presented on a post-apportioned basis, and any corresponding valuation allowances as of December 31, 2021. ComEd does not have net operating losses or credit carryforwards for the year ended December 31, 2021.


	Exelon		PECO		BGE		PHI		Pepco		DPL		ACE
Federal


Federal general business credits carryforwards and other carryforwards(a)	$	584	$	—	$	—	$	—	$	—	$	—	$	—
State
State net operating losses and other carryforwards	4,616		890		1,098		1,512		42		736		605
Deferred taxes on state tax attributes (net of federal taxes)	291		70		72		104		3		50		43
Valuation allowance on state tax attributes (net of federal taxes)(b)	37		3		—		31		—		31		—
Year in which net operating loss or credit carryforwards will begin to expire(c)	2035		2032		2033		2029		N/A		2032		2031

__________

(a)For Exelon, the federal general business credit carryforward will begin expiring in 2035.

(b)At Exelon, a full valuation allowance has been recorded against certain separate company state net operating loss carryforwards that are expected to expire before realization. At PECO, a full valuation allowance has been recorded against Pennsylvania charitable contributions carryforwards that are expected to expire before realization. At DPL, a full valuation allowance has been recorded against Delaware net operating losses carryforwards due to a change in Delaware tax law.

(c)A portion of Exelon's, BGE's, Pepco's, and DPL's Maryland state net operating loss carryforward have an indefinite carryforward period.

Schedule of Unrecognized Tax Benefits Roll Forward

The following table presents changes in unrecognized tax benefits, for Exelon, PHI, and ACE. ComEd's, PECO's, BGE's, Pepco's, and DPL's amounts are not material.


	Exelon		PHI		ACE
Balance at January 1, 2019	$	65	$	45	$	14
Change to positions that only affect timing	26		3		—
Increases based on tax positions related to 2019	2		—		—
Increases based on tax positions prior to 2019	34		—		—
Decreases based on tax positions prior to 2019	(3)		—		—
Decrease from settlements with taxing authorities	(29)		—		—
Balance at December 31, 2019	95		48		14
Change to positions that only affect timing	6		3		1
Increases based on tax positions related to 2020	3		—		—
Increases based on tax positions prior to 2020	26		1		—
Decreases based on tax positions prior to 2020	(5)		—		—
Balance at December 31, 2020	125		52		15
Change to positions that only affect timing	13		3		1
Increases based on tax positions related to 2021	4		1		—
Increases based on tax positions prior to 2021	4		—		—
Decreases based on tax positions prior to 2021	(3)		—		—

Balance at December 31, 2021	$	143	$	56	$	16

Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible

The following table presents Exelon's unrecognized tax benefits that, if recognized, would decrease the effective tax rate. The Utility Registrants' amounts are not material.


	Exelon



December 31, 2021	$	77
December 31, 2020	73
December 31, 2019	51

Total amounts of interest and penalties recognized

The following table represents the net interest and penalties receivable (payable) related to tax positions reflected in Exelon's Consolidated Balance Sheets. The Utility Registrants' amounts are not material.


Net interest and penalties receivable as of	Exelon
December 31, 2021(a)	$	43
December 31, 2020	314

__________

(a)As of December 31, 2021, the interest receivable balance is not expected to be settled in cash within the next twelve months and therefore classified as non-current receivable. In December of 2021, Exelon received a refund of approximately $272 million related to an interest netting refund claim.

Long-Term Marginal State Income Tax Rate

The impacts to the Utility Registrants for the years ended December 31, 2021, 2020, and 2019 were not material.


December 31, 2021	Exelon
Increase to Deferred Income Tax Liability and Income Tax Expense, Net of Federal Taxes	$	27

December 31, 2020
Increase to Deferred Income Tax Liability and Income Tax Expense, Net of Federal Taxes	$	66

December 31, 2019
Increase to Deferred Income Tax Liability and Income Tax Expense, Net of Federal Taxes	$	20

Allocation of Federal Tax Benefit Under Tax Sharing Agreement

The following table presents the allocation of tax benefits from Exelon under the Tax Sharing Agreement.


	ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
December 31, 2021(a)	$	1	$	19	$	—	$	17	$	16	$	—	$	—
December 31, 2020(b)	14		17		—		17		8		6		1
December 31, 2019(c)	—		14		3		7		6		1		—

__________

(a)BGE, DPL, and ACE did not record an allocation of federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.

(b)BGE did not record an allocation of federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.

(c)ComEd and ACE did not record an allocation of federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.