Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Sources of income (loss) before income taxes

Edison International's sources of income (loss) before income taxes are:



	Years ended December 31,
(in millions)	2013		2012			2011
Income from continuing operations before income taxes	$	1,221	$	1,861		$	1,668
Discontinued operations before income taxes	—		(2,235		)	(1,931		)
Income (loss) before income tax	$	1,221	$	(374	)	$	(263	)

Components of income tax expense (benefit) by location of taxing jurisdiction

The components of income tax expense (benefit) by location of taxing jurisdiction are:



	Edison International									SCE
	Years ended December 31,
(in millions)	2013			2012			2011			2013			2012		2011
Current:
Federal	$	(97	)	$	—		$	(279	)	$	(119	)	$	—	$	(275	)
State	(9		)	—			80			(19		)	50		91
	(106		)	—			(199		)	(138		)	50		(184		)
Deferred:
Federal	317			132			727			345			136		757
State	31			135			40			72			28		28
	348			267			767			417			164		785
Total continuing operations	242			267			568			279			214		601
Discontinued operations	(36		)	(549		)	(853		)	—			—		—
Total	$	206		$	(282	)	$	(285	)	$	279		$	214	$	601

Components of net accumulated deferred income tax liability

The components of net accumulated deferred income tax liability are:



	Edison International					SCE
	December 31,
(in millions)	2013			2012		2013			2012
Deferred tax assets:
Property and software related	$	523		$	600	$	523		$	600
Unrealized gains and losses	579			491		569			477
Loss and credit carryforwards	2,228			1,515		427			125
Regulatory balancing accounts	139			80		139			80
Pension and PBOPs	264			275		86			99
Other	721			723		563			625
Sub-total	4,454			3,684		2,307			2,006
Less valuation allowance	1,380			1,017		—			—
Total	3,074			2,667		2,307			2,006
Deferred tax liabilities:
Property-related	7,879			7,289		7,869			7,279
Capitalized software costs	318			325		318			325
Regulatory balancing accounts	625			296		625			296
Unrealized gains and losses	569			477		569			477
Other	503			471		399			379
Total	9,894			8,858		9,780			8,756
Accumulated deferred income tax liability, net	$	6,820		$	6,191	$	7,473		$	6,750
Classification of accumulated deferred income taxes, net:
Included in deferred credits and other liabilities	$	7,241		$	6,127	$	7,737		$	6,669
Included in current liabilities (assets)	(421		)	64		(264		)	81

Reconciliation of income tax expense

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



	Edison International									SCE
	Years ended December 31,
(in millions)	2013			2012			2011			2013			2012			2011
Income from continuing operations before income taxes	$	1,221		$	1,861		$	1,668		$	1,279		$	1,874		$	1,745
Provision for income tax at federal statutory rate of 35%	427			652			584			448			656			611
Increase (decrease) in income tax from:
Items presented with related state income tax, net:
Repair deductions¹	—			(231		)	—			—			(231		)	—
State tax, net of federal benefit	18			108			85			34			54			80
Property-related²	(192		)	(223		)	(46		)	(192		)	(223		)	(46		)
Accumulated deferred income tax adjustments	—			(41		)	(30		)	—			(41		)	(30		)
Change related to uncertain tax positions	14			40			—			14			36			(3		)
Other	(25		)	(38		)	(25		)	(25		)	(37		)	(11		)
Total income tax expense from continuing operations	$	242		$	267		$	568		$	279		$	214		$	601
Effective tax rate	19.8		%	14.3		%	34.1		%	21.8		%	11.4		%	34.4		%


¹	Edison International made a voluntary election in 2009 to change its tax accounting method for certain repair costs incurred on SCE's transmission, distribution and generation assets. Regulatory treatment for the 2009 – 2011 incremental repairs deductions taken after the 2009 tax accounting method change resulted in SCE recognizing a $231 million earnings benefit in 2012.


²	Includes incremental repair benefit recorded in 2013 and 2012. See discussion of repair deductions below

Reconciliation of unrecognized tax benefits

The following table provides a reconciliation of unrecognized tax benefits for continuing and discontinued operations:



	Edison International									SCE
	December 31,
(in millions)	2013			2012			2011			2013			2012			2011
Balance at January 1,	$	812		$	631		$	565		$	571		$	373		$	329
Tax positions taken during the current year:
Increases	19			33			39			22			35			34
Tax positions taken during a prior year:
Increases	43			177			102			45			169			82
Decreases	(109		)	(11		)	(75		)	(106		)	(6		)	(72		)
Increases (decreases) – deconsolidation of EME¹	50			(18		)	—			—			—			—
Decreases for settlements during the period	—			—			—			—			—			—
Balance at December 31,	$	815		$	812		$	631		$	532		$	571		$	373

Unrecognized tax benefits of EME have been deconsolidated as a result of the bankruptcy filing by EME, except for tax liabilities that Edison International is jointly liable with EME under the Internal Revenue Code and applicable state statues. See Note 16 for further information. During 2013, Edison International increased the amount of unrecognized tax benefits related to the taxable gain on sale of EME’s international assets by $50 million as a result of unfavorable developments during the fourth quarter of 2013.

Schedule of interest and penalties related to income tax liabilities

The total amount of accrued interest and penalties related to income tax liabilities for continuing and discontinued operations are:



	Edison International				SCE
	December 31,
(in millions)	2013		2012		2013		2012
Accrued interest and penalties	$	406	$	278	$	88	$	87

The net after-tax interest and penalties recognized in income tax expense are:



	Edison International									SCE
	December 31,
(in millions)	2013			2012			2011			2013		2012			2011
Net after-tax interest and penalties tax benefit (expense)	$	(3	)	$	(10	)	$	(8	)	$	2	$	(11	)	$	(8	)