INCOME TAXES

12 Months Ended

Dec. 31, 2018

income tax [Line Items]

Income Tax Disclosure [Text Block]

INCOME TAXES

Components of income tax expense (benefit) are as follows:

	The Company									Consolidated SCE&G
Millions of dollars	2018			2017			2016			2018			2017			2016
Current taxes (benefit):
Federal	$	(8	)	$	(414	)	$	36		$	(16	)	$	(410	)	$	50
State	5			18			13			—			(18		)	13
Total current taxes (benefit)	(3		)	(396		)	49			(16		)	(428		)	63
Deferred tax (benefit) expense, net:
Federal	(352		)	323			203			(346		)	261			167
State	(55		)	(37		)	21			(52		)	(2		)	20
Total deferred taxes (benefit)	(407		)	286			224			(398		)	259			187
Investment tax credits:
Amortization of amounts deferred-federal	(2		)	(2		)	(2		)	(2		)	(2		)	(2		)
Total income tax expense (benefit)	$	(412	)	$	(112	)	$	271		$	(416	)	$	(171	)	$	248

In December 2017, the Tax Act was enacted, resulting in the remeasurement of all federal deferred income tax assets and liabilities to reflect a 21% federal statutory tax rate. Due to the regulated nature of the Company’s and Consolidated SCE&G’s operations, the effect of this remeasurement is primarily reflected in excess deferred income tax balances within regulatory liabilities (see Note 2).

Included in the Company’s 2018 federal deferred income tax expense was $53 million for the utilization of operating loss carryforwards. Included in Consolidated SCE&G’s 2018 federal deferred income tax expense was $46 million for the utilization of operating loss carryforwards.

The difference between actual income tax expense and the amount calculated from the application of the statutory federal income tax rate to pre-tax income is reconciled as follows:

	The Company									Consolidated SCE&G
Millions of dollars	2018			2017			2016			2018			2017			2016
U.S. statutory rate	21		%	35		%	35		%	21		%	35		%	35		%
Net income (loss)	$	(528	)	$	(119	)	$	595		$	(614	)	$	(185	)	$	513
Income tax expense (benefit)	(412		)	(112		)	271			(416		)	(171		)	248
Noncontrolling interest	—			—			—			25			13			13
Total pre-tax income (loss)	$	(940	)	$	(231	)	$	866		$	(1,005	)	$	(343	)	$	774
Income taxes (benefit) on above at statutory federal income tax rate	$	(197	)	$	(81	)	$	303		$	(211	)	$	(120	)	$	271
Increases (decreases) attributed to:
State income taxes (less federal income tax effect)	(37		)	(7		)	27			(38		)	(8		)	26
State investment tax credits (less federal income tax effect)	(3		)	(5		)	(5		)	(3		)	(5		)	(5		)
Allowance for equity funds used during construction	(4		)	(8		)	(10		)	(2		)	(5		)	(9		)
Deductible dividends—401(k) Retirement Savings Plan	(2		)	(9		)	(10		)	—			—			—
Amortization of federal investment tax credits	(2		)	(2		)	(2		)	(2		)	(2		)	(2		)
Section 45 tax credits	(9		)	(8		)	(8		)	(9		)	(8		)	(8		)
Domestic production activities deduction	—			(18		)	(23		)	—			(18		)	(23		)
Remeasurement of deferred taxes in connection with enactment of Tax Act	(188		)	30			—			(176		)	(1		)	—
Nuclear Project impairment	23			—			—			23			—			—
Nondeductible merger-related costs	5			—			—			—			—			—
Other differences, net	2			(4		)	(1		)	2			(4		)	(2		)
Total income tax expense (benefit)	$	(412	)	$	(112	)	$	271		$	(416	)	$	(171	)	$	248

The Company and Consolidated SCE&G have completed their accounting for the effects of the Tax Act. In connection with the remeasurement of federal deferred income tax assets and liabilities, the Company recorded additional deferred income tax expense of approximately $30 million, and Consolidated SCE&G recorded a deferred income tax benefit of approximately $1 million in their respective statements of operations for the year ended December 31, 2017. As a result of the eventual filing of the Company's 2017 tax return in the fourth quarter of 2018 and the additional impairment charges recorded in 2018, adjustments to such excess deferred income taxes of approximately $188 million at the Company and approximately $176 million at Consolidated SCE&G were recorded. Also in connection with the additional impairment charges, the Company and Consolidated SCE&G recorded additional adjustments to deferred income taxes in the aggregate amount of approximately $23 million. Additional changes could occur as further Tax Act guidance is issued and finalized. In addition, certain states in which the Company and Consolidated SCE&G operate may or may not conform to some or all of the provisions of the Tax Act. Ultimate resolution or clarification of these matters may result in favorable or unfavorable impacts to results of operations and cash flows, and adjustments to tax-related assets and liabilities, and such impacts or adjustments could be material.

The State of North Carolina lowered its corporate income tax rate to 4.0% in 2016, 3.0% in 2017 and 2.5% effective January 1, 2019. In connection with these changes in tax rates, related state deferred tax amounts were remeasured, with the change in their balances being credited to a regulatory liability. The changes in income tax rates did not and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

The tax effects of significant temporary differences comprising net deferred tax liabilities are as follows:

	The Company				Consolidated SCE&G
Millions of dollars	2018		2017		2018		2017
Deferred tax assets:
Net operating loss and tax credit carryforward	$	539	$	600	$	493	$	541
Toshiba settlement	274		273		274		273
Nondeductible accruals	84		88		40		42
Asset retirement obligation, including nuclear decommissioning	143		141		135		132
Regulatory liability, non-property accumulated deferred income tax	—		54		—		54
Financial instruments	10		15		—		—
Unamortized investment tax credits	7		8		7		8
Other	4		6		5		5
Total deferred tax assets	1,061		1,185		954		1,055
Deferred tax liabilities:
Property, plant and equipment	1,227		1,220		1,033		1,035
Regulatory asset, unrecovered nuclear plant costs	668		962		668		962
Deferred employee benefit plan costs	60		60		53		53
Regulatory asset, asset retirement obligation	94		91		88		85
Regulatory asset, other unrecovered plant	24		27		24		27
Demand side management costs	16		16		16		16
Prepayments	21		21		20		19
Other	63		49		41		31
Total deferred tax liabilities	2,173		2,446		1,943		2,228
Net deferred tax liabilities	$	1,112	$	1,261	$	989	$	1,173

The federal and state tax credits and NOL carryforwards are presented below:

	December 31, 2018
Millions of dollars	The Company		Consolidated SCE&G		Expiration Year
Federal NOL Carryforwards	$	1,807	$	1,642	2037
Federal Tax Credits	83		83		2035	-	2038
State NOL Carryforwards	2,447		2,198		2037
State Tax Credits	30		30		2026	-	2033
Total Tax Credits and NOL Carryforwards	$	4,367	$	3,953

A valuation allowance is needed when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company and Consolidated SCE&G consider such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. Based on this evaluation, management has concluded that a valuation allowance is not needed.    

The Company files consolidated federal income tax returns and certain state returns, including the return for South Carolina, which returns include Consolidated SCE&G. The Company and its subsidiaries file various other applicable state and local income tax returns. Consolidated SCE&G's NOL shown above represents their portion on a stand-alone company basis. There is no material amount due to or from the Company.

The IRS has completed examinations of the Company’s federal returns through 2004, and the Company’s federal returns through 2009 are closed for additional assessment. The IRS is currently examining the Company's open federal returns through 2017 as a result of claims discussed below. With few exceptions, the Company, including Consolidated SCE&G, is no longer subject to state and local income tax examinations by tax authorities for years before 2010.

Changes in Unrecognized Tax Benefits

	The Company							Consolidated SCE&G
Millions of dollars	2018		2017			2016		2018		2017			2016
Unrecognized tax benefits, January 1	$	98	$	350		$	49	$	98	$	350		$	49
Gross increases—uncertain tax positions in prior period	8		—			94		8		—			94
Gross decreases—uncertain tax positions in prior period	—		(273		)	—		—		(273		)	—
Gross increases—current period uncertain tax positions	—		21			207		—		21			207
Unrecognized tax benefits, December 31	$	106	$	98		$	350	$	106	$	98		$	350

During 2013 and 2014, the Company amended certain of its income tax returns to claim additional tax-defined research and experimentation deductions (under IRC Section 174) and credits (under IRC Section 41) and to reflect related impacts on other items such as domestic production activities deductions (under IRC Section 199). The Company also made similar claims in filing its original 2013 and 2014 returns in 2014 and 2015, respectively. In 2016 and 2017, the Company claimed significant research and experimentation deductions and credits (offset by reductions in its domestic production activities deductions), related to the design and construction activities of the Nuclear Project, in its 2015 and 2016 income tax returns. The Company claimed similar deductions and credits in its 2017 tax return when it was filed in 2018. These claims followed the issuance of final IRS regulations in 2014 regarding such treatment with respect to expenditures related to the design and construction of pilot models.

The IRS examined the claims in the amended returns, and as the examination progressed without resolution, the Company and Consolidated SCE&G evaluated and recorded adjustments to unrecognized tax benefits; however, none of these changes materially affected the Company's and Consolidated SCE&G's effective tax rate. In October 2016, the examination of the amended tax returns progressed to the IRS Office of Appeals. In addition, the IRS has begun an examination of SCANA's 2013 through 2017 income tax returns.

These IRC Section 174 income tax deductions and IRC Section 41 credits were considered to be uncertain tax positions, and under relevant accounting guidance, estimates of the amounts of related tax benefits which may not be sustained upon examination by the taxing authorities were recorded as unrecognized tax benefits in the financial statements. Following the abandonment of the Nuclear Project, the Company and Consolidated SCE&G claimed an abandonment loss deduction under IRC Section 165 on the 2017 tax return. As such, certain of the IRC Section 174 deductions, to the extent they are denied, are instead expected to be deductible in 2017 under IRC Section 165. The Company received a favorable PLR from the IRS stating the Company has a valid tax deduction for abandonment under IRC Section 165. Although the IRS does not verify the amount of the deduction, there is no reserve against these costs. The remaining unrecognized tax benefits include the impact of the IRC Section 174 deductions on domestic production activities deductions, Section 41 credits, and certain unrecognized state tax benefits.

As of December 31, 2018, the Company and Consolidated SCE&G have recorded an unrecognized tax benefit of $106 million ($38 million net of the impact of state deductions on federal returns, net of NOL and credit carryforwards, and net of receivables related to the uncertain tax positions). If recognized, $106 million of the tax benefit would affect the Company’s and Consolidated SCE&G's effective tax rates. Due to the merger with Dominion Energy, it is reasonably possible that these unrecognized tax benefits could increase within the next 12 months, although such increase cannot be reasonably estimated. It is reasonably possible that these unrecognized tax benefits may decrease by $11 million within the next 12 months. No other material changes in the status of the Company’s or Consolidated SCE&G's tax positions have occurred through December 31, 2018.

The Company and Consolidated SCE&G recognize interest accrued related to unrecognized tax benefits within interest expense or interest income and recognize tax penalties within other expenses. Amounts recorded for such interest income, interest expense or tax penalties have not been material for any period presented.

SCE&G

income tax [Line Items]

Income Tax Disclosure [Text Block]

INCOME TAXES

Components of income tax expense (benefit) are as follows:

	The Company									Consolidated SCE&G
Millions of dollars	2018			2017			2016			2018			2017			2016
Current taxes (benefit):
Federal	$	(8	)	$	(414	)	$	36		$	(16	)	$	(410	)	$	50
State	5			18			13			—			(18		)	13
Total current taxes (benefit)	(3		)	(396		)	49			(16		)	(428		)	63
Deferred tax (benefit) expense, net:
Federal	(352		)	323			203			(346		)	261			167
State	(55		)	(37		)	21			(52		)	(2		)	20
Total deferred taxes (benefit)	(407		)	286			224			(398		)	259			187
Investment tax credits:
Amortization of amounts deferred-federal	(2		)	(2		)	(2		)	(2		)	(2		)	(2		)
Total income tax expense (benefit)	$	(412	)	$	(112	)	$	271		$	(416	)	$	(171	)	$	248

In December 2017, the Tax Act was enacted, resulting in the remeasurement of all federal deferred income tax assets and liabilities to reflect a 21% federal statutory tax rate. Due to the regulated nature of the Company’s and Consolidated SCE&G’s operations, the effect of this remeasurement is primarily reflected in excess deferred income tax balances within regulatory liabilities (see Note 2).

Included in the Company’s 2018 federal deferred income tax expense was $53 million for the utilization of operating loss carryforwards. Included in Consolidated SCE&G’s 2018 federal deferred income tax expense was $46 million for the utilization of operating loss carryforwards.

The difference between actual income tax expense and the amount calculated from the application of the statutory federal income tax rate to pre-tax income is reconciled as follows:

	The Company									Consolidated SCE&G
Millions of dollars	2018			2017			2016			2018			2017			2016
U.S. statutory rate	21		%	35		%	35		%	21		%	35		%	35		%
Net income (loss)	$	(528	)	$	(119	)	$	595		$	(614	)	$	(185	)	$	513
Income tax expense (benefit)	(412		)	(112		)	271			(416		)	(171		)	248
Noncontrolling interest	—			—			—			25			13			13
Total pre-tax income (loss)	$	(940	)	$	(231	)	$	866		$	(1,005	)	$	(343	)	$	774
Income taxes (benefit) on above at statutory federal income tax rate	$	(197	)	$	(81	)	$	303		$	(211	)	$	(120	)	$	271
Increases (decreases) attributed to:
State income taxes (less federal income tax effect)	(37		)	(7		)	27			(38		)	(8		)	26
State investment tax credits (less federal income tax effect)	(3		)	(5		)	(5		)	(3		)	(5		)	(5		)
Allowance for equity funds used during construction	(4		)	(8		)	(10		)	(2		)	(5		)	(9		)
Deductible dividends—401(k) Retirement Savings Plan	(2		)	(9		)	(10		)	—			—			—
Amortization of federal investment tax credits	(2		)	(2		)	(2		)	(2		)	(2		)	(2		)
Section 45 tax credits	(9		)	(8		)	(8		)	(9		)	(8		)	(8		)
Domestic production activities deduction	—			(18		)	(23		)	—			(18		)	(23		)
Remeasurement of deferred taxes in connection with enactment of Tax Act	(188		)	30			—			(176		)	(1		)	—
Nuclear Project impairment	23			—			—			23			—			—
Nondeductible merger-related costs	5			—			—			—			—			—
Other differences, net	2			(4		)	(1		)	2			(4		)	(2		)
Total income tax expense (benefit)	$	(412	)	$	(112	)	$	271		$	(416	)	$	(171	)	$	248

The Company and Consolidated SCE&G have completed their accounting for the effects of the Tax Act. In connection with the remeasurement of federal deferred income tax assets and liabilities, the Company recorded additional deferred income tax expense of approximately $30 million, and Consolidated SCE&G recorded a deferred income tax benefit of approximately $1 million in their respective statements of operations for the year ended December 31, 2017. As a result of the eventual filing of the Company's 2017 tax return in the fourth quarter of 2018 and the additional impairment charges recorded in 2018, adjustments to such excess deferred income taxes of approximately $188 million at the Company and approximately $176 million at Consolidated SCE&G were recorded. Also in connection with the additional impairment charges, the Company and Consolidated SCE&G recorded additional adjustments to deferred income taxes in the aggregate amount of approximately $23 million. Additional changes could occur as further Tax Act guidance is issued and finalized. In addition, certain states in which the Company and Consolidated SCE&G operate may or may not conform to some or all of the provisions of the Tax Act. Ultimate resolution or clarification of these matters may result in favorable or unfavorable impacts to results of operations and cash flows, and adjustments to tax-related assets and liabilities, and such impacts or adjustments could be material.

The State of North Carolina lowered its corporate income tax rate to 4.0% in 2016, 3.0% in 2017 and 2.5% effective January 1, 2019. In connection with these changes in tax rates, related state deferred tax amounts were remeasured, with the change in their balances being credited to a regulatory liability. The changes in income tax rates did not and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

The tax effects of significant temporary differences comprising net deferred tax liabilities are as follows:

	The Company				Consolidated SCE&G
Millions of dollars	2018		2017		2018		2017
Deferred tax assets:
Net operating loss and tax credit carryforward	$	539	$	600	$	493	$	541
Toshiba settlement	274		273		274		273
Nondeductible accruals	84		88		40		42
Asset retirement obligation, including nuclear decommissioning	143		141		135		132
Regulatory liability, non-property accumulated deferred income tax	—		54		—		54
Financial instruments	10		15		—		—
Unamortized investment tax credits	7		8		7		8
Other	4		6		5		5
Total deferred tax assets	1,061		1,185		954		1,055
Deferred tax liabilities:
Property, plant and equipment	1,227		1,220		1,033		1,035
Regulatory asset, unrecovered nuclear plant costs	668		962		668		962
Deferred employee benefit plan costs	60		60		53		53
Regulatory asset, asset retirement obligation	94		91		88		85
Regulatory asset, other unrecovered plant	24		27		24		27
Demand side management costs	16		16		16		16
Prepayments	21		21		20		19
Other	63		49		41		31
Total deferred tax liabilities	2,173		2,446		1,943		2,228
Net deferred tax liabilities	$	1,112	$	1,261	$	989	$	1,173

The federal and state tax credits and NOL carryforwards are presented below:

	December 31, 2018
Millions of dollars	The Company		Consolidated SCE&G		Expiration Year
Federal NOL Carryforwards	$	1,807	$	1,642	2037
Federal Tax Credits	83		83		2035	-	2038
State NOL Carryforwards	2,447		2,198		2037
State Tax Credits	30		30		2026	-	2033
Total Tax Credits and NOL Carryforwards	$	4,367	$	3,953

A valuation allowance is needed when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company and Consolidated SCE&G consider such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. Based on this evaluation, management has concluded that a valuation allowance is not needed.    

The Company files consolidated federal income tax returns and certain state returns, including the return for South Carolina, which returns include Consolidated SCE&G. The Company and its subsidiaries file various other applicable state and local income tax returns. Consolidated SCE&G's NOL shown above represents their portion on a stand-alone company basis. There is no material amount due to or from the Company.

The IRS has completed examinations of the Company’s federal returns through 2004, and the Company’s federal returns through 2009 are closed for additional assessment. The IRS is currently examining the Company's open federal returns through 2017 as a result of claims discussed below. With few exceptions, the Company, including Consolidated SCE&G, is no longer subject to state and local income tax examinations by tax authorities for years before 2010.

Changes in Unrecognized Tax Benefits

	The Company							Consolidated SCE&G
Millions of dollars	2018		2017			2016		2018		2017			2016
Unrecognized tax benefits, January 1	$	98	$	350		$	49	$	98	$	350		$	49
Gross increases—uncertain tax positions in prior period	8		—			94		8		—			94
Gross decreases—uncertain tax positions in prior period	—		(273		)	—		—		(273		)	—
Gross increases—current period uncertain tax positions	—		21			207		—		21			207
Unrecognized tax benefits, December 31	$	106	$	98		$	350	$	106	$	98		$	350

During 2013 and 2014, the Company amended certain of its income tax returns to claim additional tax-defined research and experimentation deductions (under IRC Section 174) and credits (under IRC Section 41) and to reflect related impacts on other items such as domestic production activities deductions (under IRC Section 199). The Company also made similar claims in filing its original 2013 and 2014 returns in 2014 and 2015, respectively. In 2016 and 2017, the Company claimed significant research and experimentation deductions and credits (offset by reductions in its domestic production activities deductions), related to the design and construction activities of the Nuclear Project, in its 2015 and 2016 income tax returns. The Company claimed similar deductions and credits in its 2017 tax return when it was filed in 2018. These claims followed the issuance of final IRS regulations in 2014 regarding such treatment with respect to expenditures related to the design and construction of pilot models.

The IRS examined the claims in the amended returns, and as the examination progressed without resolution, the Company and Consolidated SCE&G evaluated and recorded adjustments to unrecognized tax benefits; however, none of these changes materially affected the Company's and Consolidated SCE&G's effective tax rate. In October 2016, the examination of the amended tax returns progressed to the IRS Office of Appeals. In addition, the IRS has begun an examination of SCANA's 2013 through 2017 income tax returns.

These IRC Section 174 income tax deductions and IRC Section 41 credits were considered to be uncertain tax positions, and under relevant accounting guidance, estimates of the amounts of related tax benefits which may not be sustained upon examination by the taxing authorities were recorded as unrecognized tax benefits in the financial statements. Following the abandonment of the Nuclear Project, the Company and Consolidated SCE&G claimed an abandonment loss deduction under IRC Section 165 on the 2017 tax return. As such, certain of the IRC Section 174 deductions, to the extent they are denied, are instead expected to be deductible in 2017 under IRC Section 165. The Company received a favorable PLR from the IRS stating the Company has a valid tax deduction for abandonment under IRC Section 165. Although the IRS does not verify the amount of the deduction, there is no reserve against these costs. The remaining unrecognized tax benefits include the impact of the IRC Section 174 deductions on domestic production activities deductions, Section 41 credits, and certain unrecognized state tax benefits.

As of December 31, 2018, the Company and Consolidated SCE&G have recorded an unrecognized tax benefit of $106 million ($38 million net of the impact of state deductions on federal returns, net of NOL and credit carryforwards, and net of receivables related to the uncertain tax positions). If recognized, $106 million of the tax benefit would affect the Company’s and Consolidated SCE&G's effective tax rates. Due to the merger with Dominion Energy, it is reasonably possible that these unrecognized tax benefits could increase within the next 12 months, although such increase cannot be reasonably estimated. It is reasonably possible that these unrecognized tax benefits may decrease by $11 million within the next 12 months. No other material changes in the status of the Company’s or Consolidated SCE&G's tax positions have occurred through December 31, 2018.

The Company and Consolidated SCE&G recognize interest accrued related to unrecognized tax benefits within interest expense or interest income and recognize tax penalties within other expenses. Amounts recorded for such interest income, interest expense or tax penalties have not been material for any period presented.