Income Taxes (Notes)

9 Months Ended

Sep. 30, 2018

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

The Company’s provision for income taxes is based on the estimated annual effective tax rate, plus discrete items. The effective tax rates for the three and nine month periods ended September 30, 2018 were 44% and 30%, respectively. The effective tax rates for the three and nine month periods ended September 30, 2017 were 31% and 36%, respectively. The difference between the Company’s effective tax rates for the 2018 and 2017 periods and the U.S. statutory tax rates of 21% and 35%, respectively, related primarily to U.S. taxes on foreign earnings, foreign tax

rate differentials, the impacts of foreign currency fluctuations at certain foreign subsidiaries, and nondeductible expenses.

The Tax Cuts and Jobs Act (“The TCJA”) was enacted on December 22, 2017. The TCJA reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings. We are applying the guidance in Staff Accounting Bulletin No. 118 (“SAB 118”) when accounting for the enactment date effect of the TCJA. We recognized a reasonable estimate of the tax effects of the TCJA as of December 31, 2017. In the third quarter of 2018, the Company recorded $33 million of discrete tax expense, increasing the provisional adjustment to the U.S. one-time transition tax to $708 million. However, as of September 30, 2018, our accounting is not complete. Our estimates may also be affected as we gain a more thorough understanding of the TCJA, including proposed regulations released by the U.S. Treasury Department on August 1 related to the one-time transition tax. We expect to complete our analysis of the final impacts of the TCJA in the fourth quarter. For further discussion on the TCJA, see Note 20—Income Taxes in Item 8.—Financial Statements and Supplementary Data of our 2017 Form 10-K.

In the first quarter of 2018, the Company completed the sale of its entire 51% equity interest in Masinloc, resulting in pre-tax gain of approximately $773 million. The sale resulted in approximately $155 million of discrete tax expense in the U.S. under the new GILTI provision, which subjects the earnings of foreign subsidiaries to current U.S. taxation to the extent those earnings exceed an allowable return. See Note 17—Held-for-Sale and Dispositions for details of the sale.

In the second quarter of 2018, the Company completed the sale of Electrica Santiago for total proceeds of $287 million, resulting in a pre-tax gain on sale of $69 million after post-closing adjustments. The sale resulted in approximately $25 million of discrete tax expense. See Note 17—Held-for-Sale and Dispositions for details of the sale.

The impact of foreign currency devaluation in Argentina was approximately $16 million and $38 million of discrete tax expense for the three and nine month periods ended September 30, 2018, respectively. The same amounts for the three and nine month periods ended September 30, 2017 are $4 million and $8 million, respectively.