Income Taxes

Effective Tax Rate

The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:



	Three months ended June 30,						Six months ended June 30,
(in millions)	2013			2012			2013			2012
Edison International:
Income (loss) from continuing operations before income taxes	$	(184	)	$	307		$	199		$	593
Provision for income tax at federal statutory rate of 35%	(64		)	107			70			207
Increase (decrease) in income tax from:
State tax, net of federal benefit	(20		)	8			(17		)	14
Property-related	(22		)	(10		)	(64		)	(19		)
Uncertain tax positions	11			—			18			1
Other	(7		)	(5		)	(11		)	(11		)
Total income tax expense (benefit) from continuing operations	$	(102	)	$	100		$	(4	)	$	192
Effective tax rate	*			32.6		%	*			32.4		%
SCE:
Income (loss) from continuing operations before income taxes	$	(166	)	$	322		$	229		$	622
Provision for income tax at federal statutory rate of 35%	(58		)	113			80			218
Increase (decrease) in income tax from:
State tax, net of federal benefit	(23		)	10			(9		)	20
Property-related	(22		)	(10		)	(64		)	(20		)
Uncertain tax positions	11			(1		)	17			—
Other	(7		)	(4		)	(11		)	(10		)
Total income tax expense (benefit) from continuing operations	$	(99	)	$	108		$	13		$	208
Effective tax rate	*			33.5		%	5.7		%	33.4		%


^*	Not meaningful

The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. The accounting treatment for these temporary differences results in recording regulatory assets and liabilities for amounts that would otherwise be recorded to deferred income tax expense.

Property-related items include recognition of income tax benefits from repair deductions for income tax purposes.

Tax Disputes

Edison International's federal income tax returns and its California combined franchise tax returns are currently open for years subsequent to 2002. In addition, specific California refund claims made by Edison International for years 1991 through 2002 are currently under review by the Franchise Tax Board.

Tax Years 2003 – 2006

The IRS examination phase of tax years 2003 through 2006 was completed in the fourth quarter of 2010, which included proposed adjustments for the following two items:


•	A proposed adjustment increasing the taxable gain on the 2004 sale of EME's international assets, which if sustained, would result in a federal tax payment of approximately $203 million, including interest and penalties through June 30, 2013 (the IRS has asserted a 40% penalty for understatement of tax liability related to this matter).


•	A proposed adjustment to disallow a component of SCE's repair allowance deduction, which if sustained, would result in a federal tax payment of approximately $98 million, including interest through June 30, 2013.

Edison International disagrees with the proposed adjustments and filed a protest with the IRS in the first quarter of 2011. The appeals process to date has not resulted in a change in the proposed adjustment by the IRS on the taxable gain on the 2004 sale of EME's international assets. If a deficiency notice is issued on this item, it would require payment of the tax, interest and any penalties within 90 days of its issuance or a filing of a petition in United States Tax Court.

Tax Years 2007 – 2009

The IRS examination phase of tax years 2007 through 2009 was completed during the first quarter of 2013. Edison International received a Revenue Agent Report from the IRS on February 28, 2013 which included a proposed adjustment to disallow a component of SCE's repair allowance deduction (similar to the 2003 – 2006 tax years). The proposed adjustment to disallow a component of SCE's repair allowance deduction, which if sustained, would result in a federal tax payment of approximately $74 million, including interest through June 30, 2013. Edison International disagrees with the proposed adjustments and filed a protest with the IRS in April 2013.