XML 26 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes
 6 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
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)
2017
 
2016
 
2017
 
2016
Edison International:
 
 
 
 
 
 
 
Income from continuing operations before income taxes
$
335

 
$
259

 
$
687

 
$
591

Provision for income tax at federal statutory rate of 35%
117

 
91

 
241

 
207

Increase in income tax from:
 
 
 
 
 
 
 
State tax, net of federal benefit
6

 
4

 
16

 
11

Property-related1
(83
)
 
(138
)
 
(196
)
 
(217
)
Change related to uncertain tax positions
(6
)
 
2

 
(18
)
 
1

Shared-based compensation2
(3
)
 
(4
)
 
(46
)
 
(15
)
Other
(5
)
 
(6
)
 
(11
)
 
(11
)
Total income tax expense (benefit) from continuing operations
$
26

 
$
(51
)
 
$
(14
)
 
$
(24
)
Effective tax rate
7.8
%
 
(19.7
)%
 
(2.0
)%
 
(4.1
)%
SCE:
 
 
 
 
 
 
 
Income from continuing operations before income taxes
$
395

 
$
317

 
$
787

 
$
683

Provision for income tax at federal statutory rate of 35%
138

 
111

 
275

 
239

Increase in income tax from:
 
 
 
 
 
 
 
State tax, net of federal benefit
9

 
6

 
22

 
15

Property-related1
(83
)
 
(138
)
 
(196
)
 
(217
)
Change related to uncertain tax positions
—

 
(1
)
 
(11
)
 
(2
)
Shared-based compensation2
(1
)
 
(3
)
 
(9
)
 
(11
)
Other
(6
)
 
(7
)
 
(12
)
 
(14
)
Total income tax expense (benefit) from continuing operations
$
57

 
$
(32
)
 
$
69

 
$
10

Effective tax rate
14.4
%
 
(10.1
)%
 
8.8
 %
 
1.5
 %
1  
During the second quarter of 2016, SCE recorded $79 million for 2012 – 2014 incremental tax benefits related to repair deductions, which were flowed-through to customers ($133 million pre-tax).
2 
Includes state taxes for Edison International and SCE of $4 million and $1 million, respectively, for the three months ended June 30, 2017 and $10 million and $2 million, respectively, for the six months ended June 30, 2017. Includes state taxes for Edison International and SCE of $3 million and $2 million, respectively, for the six months ended June 30, 2016. Refer to Note 1 for further information.
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.
In March 2017, SCE received the final decision on claims against, and counterclaims of, Mitsubishi Heavy Industries, Inc. and related companies (together, "MHI") from the arbitration tribunal, the International Chamber of Commerce, discussed further in Note 11. San Onofre was permanently shut down on June 7, 2013 as a result of failure of replacement steam generators supplied by MHI. With the resolution of the insurance claim against Nuclear Electric Insurance Limited ("NEIL") in October 2015 and the conclusion of the arbitration proceeding against MHI, a tax abandonment loss of $691 million and $1.13 billion for federal and state income tax purposes, respectively, was claimed in the first six months of 2017, resulting in a flow-through tax benefit of approximately $39 million impacting the effective tax rate. Due to the tax abandonment loss recognized during the first six months of 2017, Edison International and SCE both expect to report federal and California tax losses in 2017.
Unrecognized Tax Benefits
In the first quarter of 2017, Edison International settled all open tax positions with the Internal Revenue Service ("IRS") for taxable years 2007 through 2012. The following table provides a reconciliation of unrecognized tax benefits for 2017 as a result of the audit settlement:
(in millions)
Edison International
 
SCE
Balance at January 1, 2017
$
471

 
$
371

Tax positions taken during the current year:
 
 
 
   Increases
20

 
20

Tax positions taken during a prior year:
 
 
 
   Increases
3

 
3

   Decreases
—

 
—

   Decreases for settlements during the period
(83
)
 
(78
)
Balance at June 30, 2017
$
411

 
$
316


Tax Disputes
In the first quarter of 2017, Edison International settled all open tax positions with the IRS for taxable years 2007 through 2012. Edison International has previously made cash deposits to cover the estimated tax and interest liability from this audit cycle and expects a $7 million refund of this deposited amount.
Tax years that remain open for examination by the IRS and the California Franchise Tax Board are 2013 – 2015 and 2010 – 2015, respectively. Edison International has settled all open tax position with the IRS for taxable years prior to 2013. Tax years 2003 – 2009 are currently under protest with the California Franchise Tax Board.