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:



	Edison International						SCE
	Three months ended March 31,
(in millions)	2016			2015			2016			2015
Income from continuing operations before income taxes	$	333		$	424		$	367		$	440
Provision for income tax at federal statutory rate of 35%	117			148			128			154
Increase in income tax from:
State tax, net of federal benefit	6			11			9			14
Property-related	(79		)	(60		)	(79		)	(60		)
Change related to uncertain tax positions	(1		)	15			(1		)	10
Other	(5		)	(8		)	(7		)	(11		)
Total income tax expense from continuing operations	$	38		$	106		$	50		$	107
Effective tax rate	11.4		%	25.0		%	13.6		%	24.3		%

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. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates.

Tax Disputes

Tax Years 2007 – 2009

Edison International received a Revenue Agent Report from the IRS in February 2013 which included a proposed adjustment to disallow deductions related to certain capitalized overhead costs. Edison International has tentatively reached an agreement with the IRS regarding this matter, which if finalized, would result in a federal tax liability of approximately $64 million, including interest through March 31, 2016.

Tax Years 2010 – 2012

The IRS Revenue Agent Report was received in June 2015. As a result, Edison International and SCE have re-measured their Federal and State uncertain tax positions and recorded $94 million and $100 million, respectively, of income tax benefits including interest and penalty during the second quarter of 2015. The Revenue Agent Report included a proposed adjustment to disallow deductions related to certain capitalized overhead expenses. Edison International has tentatively reached an agreement with IRS regarding this matter, which if finalized, would result in a federal tax liability of approximately

$9 million, including interest through March 31, 2016.

Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2007 – 2015 and 2003 – 2015, respectively.