Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Sources of Income (Loss) Before Income Taxes

Edison International's sources of income before income taxes are:



	Years ended December 31,
(in millions)	2017		2016		2015
Income from continuing operations before income taxes	$	949	$	1,590	$	1,568
Income from discontinued operations before income taxes	—		1		15
Income before income tax	$	949	$	1,591	$	1,583

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)	2017			2016			2015			2017			2016			2015
Current:
Federal	$	(221	)	$	(46	)	$	18		$	(253	)	$	75		$	72
State	4			33			19			(81		)	93			127
	(217		)	(13		)	37			(334		)	168			199
Deferred:
Federal	570			176			340			265			112			298
State	(72		)	14			109			39			(24		)	10
	498			190			449			304			88			308
Total continuing operations	281			177			486			(30		)	256			507
Discontinued operations	—			(11		)	(21		)	—			—			—
Total	$	281		$	166		$	465		$	(30	)	$	256		$	507

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)	2017		2016		2017		2016
Deferred tax assets:
Property and software related	$	358	$	549	$	357	$	548
Nuclear decommissioning trust assets in excess of nuclear ARO liability	404		348		404		348
Loss and credit carryforwards¹	1,346		1,418		150		—
Regulatory asset²	812		15		812		15
Pension and postretirement benefits other than pensions	214		300		86		93
Other	277		419		236		408
Sub-total	3,411		3,049		2,045		1,412
Less valuation allowance	28		24		—		—
Total	3,383		3,025		2,045		1,412
Deferred tax liabilities:
Property-related	6,970		10,330		6,962		10,330
Capitalized software costs	160		237		160		237
Regulatory liability	158		134		158		134
Nuclear decommissioning trust assets	404		348		404		348
Postretirement benefits other than pensions	36		13		36		13
Other	140		202		133		148
Total	7,868		11,264		7,853		11,210
Accumulated deferred income tax liability, net³	$	4,485	$	8,239	$	5,808	$	9,798

As of December 31, 2017, Edison International has recorded a valuation allowance of $28 million for non-California state net operating loss carryforwards estimated to expire unused. In addition, as of December 31, 2017, deferred tax assets for net operating loss and tax credit carryforwards are reduced by unrecognized tax benefits of $77 million and $75 million for Edison International and SCE, respectively.

² Includes an $809 million deferred tax asset, related to certain regulatory liabilities established as part of Tax Reform discussed below.


³	Included in deferred income taxes and credits on the consolidated balance sheets.

Summary of Net Operating Loss and Tax Credit Carryforwards

The amounts of net operating loss and tax credit carryforwards (after-tax) are as follows:



	Edison International				SCE
	December 31, 2017
(in millions)	Loss Carryforwards		Credit Carryforwards		Loss Carryforwards		Credit Carryforwards
Expire between 2018 to 2036	$	901	$	451	$	162	$	25
No expiration date	—		71		—		38
Total¹	$	901	$	522	$	162	$	63

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)	2017			2016			2015			2017			2016			2015
Income from continuing operations before income taxes	$	949		$	1,590		$	1,568		$	1,106		$	1,755		$	1,618
Provision for income tax at federal statutory rate of 35%	332			556			549			387			614			566
Increase in income tax from:
Items presented with related state income tax, net:
Regulatory asset write-off¹	—			—			382			—			—			382
State tax, net of federal benefit	2			29			5			8			43			34
Property-related²	(439		)	(362		)	(341		)	(439		)	(362		)	(341		)
Change related to uncertain tax positions	(18		)	(4		)	(67		)	(13		)	(8		)	(94		)
Revised San Onofre Settlement Agreement³	25			—			—			25			—			—
Share-based compensation⁴	(55		)	(28		)	—			(11		)	(13		)	—
Deferred tax re-measurement⁵	466			—			—			33			—			—
Other	(32		)	(14		)	(42		)	(20		)	(18		)	(40		)
Total income tax expense (income)from continuing operations	$	281		$	177		$	486		$	(30	)	$	256		$	507
Effective tax rate	29.6		%	11.1		%	31.0		%	(2.7		)%	14.6		%	31.3		%

¹Includes federal and state.


²	Includes incremental repair benefits. See discussion of repair deductions below. In addition, during 2017, SCE recorded $80 million ($135 million pre-tax) of tax benefits related to tax accounting method changes resulting from the filing of SCE's 2016 tax returns.

³ Includes the write-off of an unrecovered tax regulatory asset related to the Revised San Onofre Settlement Agreement. See Note 11 for further information.


⁴	Includes state taxes of $(11) million and $(2) million for Edison International and SCE, respectively, for the year ended December 31, 2017. Includes state taxes of $(4) million and $(1) million for Edison International and SCE, respectively, for the year ended December 31, 2016. Refer to Note 1 for further information.


⁵	In 2017, Edison International and SCE recorded a charge to earnings related to the re-measurement of deferred taxes resulting from Tax Reform. See further discussion above.

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)	2017			2016			2015			2017			2016			2015
Balance at January 1,	$	471		$	529		$	576		$	371		$	353		$	441
Tax positions taken during the current year:
Increases	51			36			54			51			36			48
Tax positions taken during a prior year:
Increases	—			2			66			—			—			23
Decreases¹	(7		)	(96		)	(165		)	(13		)	(18		)	(159		)
Decreases for settlements during the period²	(83		)	—			(2		)	(78		)	—			—
Balance at December 31,	$	432		$	471		$	529		$	331		$	371		$	353

Decreases in prior year tax positions for 2016 relate to state tax receivables on various claims. Due to the tax risks associated with these claims, the tax benefits were fully reserved at the time the asset was recorded. During 2016, the Company has determined that it will not recognize these assets so the tax benefit and related tax reserve were written off. Decreases in tax positions for 2015 relate primarily to re-measurement of uncertain tax positions in connection with receipt of the Internal Revenue Service ("IRS") Revenue Agent Report in June 2015. See discussions in Tax Disputes below.


²	In the first quarter of 2017, Edison International settled all open tax positions with the IRS for taxable years 2007 through 2012.

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
	Years ended December 31,
(in millions)	2017		2016		2017		2016
Accrued interest and penalties	$	115	$	128	$	41	$	41

The net after-tax interest and penalties recognized in income tax expense for continuing and discontinued operations are:



	Edison International							SCE
	December 31,
(in millions)	2017		2016		2015			2017		2016		2015
Net after-tax interest and penalties tax expense (benefit)	$	6	$	6	$	(9	)	$	4	$	2	$	(14	)