Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 8.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 September 30,						Nine months ended September 30,
(in millions)	2021			2020			2021			2020
Edison International:
(Loss) income from operations before income taxes	$	(326)		$	(517)		$	357		$	(36)
Provision for income tax at federal statutory rate of 21%		(68)			(108)			75			(7)
Increase (decrease) in income tax from:
State tax, net of federal benefit		(39)			(67)			(28)			(74)
Property-related		(33)			(81)			(159)			(228)
Average rate assumption method ("ARAM") adjustment 1		87			—			87			—
Change related to uncertain tax position2		—			—			—			(15)
Insurance benefits		(2)			(5)			(7)			(12)
Wildfire related charges3		31			—			31			—
Other		(5)			(14)			4			(19)
Total income tax expense (benefit)	$	(29)		$	(275)		$	3		$	(355)
Effective tax rate		(8.9)	%		(53.2)	%		0.8	%		(986.1)	%
SCE:
(Loss) income from operations before income taxes	$	(268)		$	(469)		$	492		$	142
Provision for income tax at federal statutory rate of 21%		(56)			(98)			103			30
Increase (decrease) in income tax from:
State tax, net of federal benefit		(32)			(61)			(17)			(62)
Property-related		(33)			(81)			(159)			(228)
ARAM adjustment 1		87			—			87			—
Change related to uncertain tax position2		—			—			—			(18)
Insurance benefits		(2)			(5)			(7)			(12)
Wildfire related charges3		31			—			31			—
Other		(6)			(6)			3			(10)
Total income tax expense (benefit)	$	(11)		$	(251)		$	41		$	(300)
Effective tax rate		(4.1)	%		(53.5)	%		8.3	%		(211.3)	%

1 In July 2021, SCE received the IRS's response to its private letter ruling request, regarding the scope of the deferred tax normalization requirements and the computations required to comply with the average rate assumption method. As a result, SCE's estimate changed and a cumulative true up of $87 million reduction in tax benefits was recorded in the third quarter of 2021, for the period of January 1, 2018 to June 30, 2021. The above true up has an offsetting revenue adjustment resulting in no impact on earnings.

2 Primarily relates to the re-measurement of uncertain tax positions related to the 2010 – 2012 California state tax filings currently under audit.

3 Relates to portions of the estimated charge for the 2017/2018 Wildfire/Mudslide Events recorded in the third quarter of 2021, assumed to be non-deductible for tax purposes.

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. For further information, see Note 11.

Tax Disputes

Tax years that remain open for examination by the IRS and the California Franchise Tax Board ("FTB") are 2016 – 2020 and 2013 – 2020, respectively.

In October 2021, Edison International and subsidiaries reached a settlement with the FTB for tax years 2007 – 2012. Edison International anticipates recording a $60 million cash refund and approximately $148 million of earnings benefit resulting from the settlement in the fourth quarter of 2021.