Income Taxes

9 Months Ended

Sep. 30, 2022

Income Taxes [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)	2022			2021			2022			2021
Edison International:
(Loss) income from operations before income taxes	$	(261)		$	(326)		$	119		$	357
Provision for income tax at federal statutory rate of 21%		(55)			(68)			25			75
Increase (decrease) in income tax from:
State tax, net of federal benefit		(58)			(39)			(79)			(28)
Property-related		(79)			(33)			(172)			(159)
Average rate assumption method ("ARAM") adjustment 1		—			87			—			87
Insurance benefits		(2)			(2)			(6)			(7)
Wildfire related charges2		—			31			—			31
Other		7			(5)			(3)			4
Total income tax expense (benefit)	$	(187)		$	(29)		$	(235)		$	3
Effective tax rate		(71.6)	%		(8.9)	%		(197.5)	%		0.8	%
SCE:
Income from operations before income taxes	$	(230)		$	(268)		$	252		$	492
Provision for income tax at federal statutory rate of 21%		(48)			(56)			53			103
Increase (decrease) in income tax from:
State tax, net of federal benefit		(53)			(32)			(66)			(17)
Property-related		(79)			(33)			(172)			(159)
ARAM adjustment 1		—			87			—			87
Insurance benefits		(2)			(2)			(6)			(7)
Wildfire related charges2		—			31			—			31
Other		5			(6)			(4)			3
Total income tax expense (benefit)	$	(177)		$	(11)		$	(195)		$	41
Effective tax rate		(77.0)	%		(4.1)	%		(77.4)	%		8.3	%

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 recorded a cumulative true up of $87 million reduction in tax benefits in the third quarter of 2021, for the period of January 2018 to June 2021. The above true up has an offsetting revenue adjustment resulting in no impact on earnings.

2 Relates to portions of the estimated charge for the 2017/2018 Wildfire/Mudslide Events recorded in the third quarter of 2021, deemed 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.

Net Operating Loss and Tax Credit Carryforwards

Edison International consolidates for federal income tax purposes, but not for financial accounting purposes, a group of wind projects referred to as Capistrano Wind. A sale of the wind projects was consummated in the third quarter of 2022. The sale and cancellation of debt utilized approximately $125 million of tax attributes previously generated by the Capistrano entities. Remaining tax attributes not utilized in 2022 will be available for the Edison International consolidated group to utilize in the future. When the remaining Capistrano tax attributes are used in the future by Edison International, payments will be made to those entities under a tax allocation agreement.

Tax Disputes

Tax years that remain open for examination by the IRS and the California Franchise Tax Board ("FTB") are 2017 – 2021 and 2013 – 2021, respectively.