Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Components of Income Tax Expense (Benefit)

Income tax expense (benefit) from continuing operations is comprised of the following components:

	For the Year Ended December 31, 2019
	Exelon			Generation			ComEd			PECO		BGE			PHI			Pepco			DPL			ACE
Included in operations:
Federal
Current	$	85		$	147		$	59		$	45	$	(51	)	$	43		$	16		$	29		$	(3	)
Deferred	489			346			15			20		95			(34		)	(6		)	(21		)	(6		)
Investment tax credit amortization	(72		)	(69		)	(2		)	—		—			(1		)	—			—			—
State
Current	5			10			(5		)	—		—			3			—			—			—
Deferred	267			82			96			—		35			27			6			14			9
Total	$	774		$	516		$	163		$	65	$	79		$	38		$	16		$	22		$	—

	For the Year Ended December 31, 2018
	Exelon			Generation			ComEd			PECO			BGE			PHI			Pepco			DPL			ACE
Included in operations:
Federal
Current	$	226		$	337		$	(63	)	$	11		$	(5	)	$	(4	)	$	28		$	(3	)	$	(14	)
Deferred	(99		)	(347		)	145			10			47			23			(22		)	13			18
Investment tax credit amortization	(24		)	(21		)	(2		)	—			—			(1		)	—			—			—
State
Current	(1		)	6			(29		)	1			—			7			—			—			—
Deferred	16			(83		)	117			(16		)	32			8			5			12			8
Total	$	118		$	(108	)	$	168		$	6		$	74		$	33		$	11		$	22		$	12

	For the Year Ended December 31, 2017
	Exelon			Generation			ComEd			PECO			BGE			PHI			Pepco			DPL			ACE
Included in operations:
Federal
Current	$	194		$	584		$	(191	)	$	71		$	74		$	(60	)	$	(20	)	$	(24	)	$	(12	)
Deferred	(470		)	(2,005		)	523			28			101			251			115			82			34
Investment tax credit amortization	(25		)	(21		)	(2		)	—			(1		)	(1		)	—			—			—
State
Current	14			65			(49		)	14			(5		)	(4		)	(2		)	—			—
Deferred	161			1			136			(9		)	49			31			12			13			4
Total	$	(126	)	$	(1,376	)	$	417		$	104		$	218		$	217		$	105		$	71		$	26

Effective Income Tax Rate Reconciliation

The effective income tax rate from continuing operations varies from the U.S. federal statutory rate principally due to the following:

	For the Year Ended December 31, 2019
	Exelon		Generation		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
U.S. Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) due to:
State income taxes, net of Federal income tax benefit	5.4		3.8		8.5		—		6.4		4.7		2.0		6.8		7.0
Qualified NDT fund income	5.9		12.3		—		—		—		—		—		—		—
Amortization of investment tax credit, including deferred taxes on basis difference	(1.5	)	(3.0	)	(0.2	)	—		(0.1	)	(0.2	)	(0.1	)	(0.2	)	(0.3	)
Plant basis differences	(1.4	)	—		—		(7.2	)	(1.2	)	(1.2	)	(1.8	)	(0.4	)	(0.7	)
Production tax credits and other credits	(3.1	)	(4.8	)	(1.2	)	—		(1.3	)	(0.2	)	(0.1	)	—		(0.1	)
Noncontrolling interests	(0.6	)	(1.2	)	—		—		—		—		—		—		—
Excess deferred tax amortization	(5.5	)	—		(9.7	)	(2.8	)	(6.8	)	(17.5	)	(15.1	)	(14.2	)	(27.0	)
Other	(0.8	)	(1.2	)	0.8		—		—		0.8		0.3		—		0.1
Effective income tax rate	19.4	%	26.9	%	19.2	%	11.0	%	18.0	%	7.4	%	6.2	%	13.0	%	—	%

	For the Year Ended December 31, 2018
	Exelon		Generation		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
U.S. Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) due to:
State income taxes, net of Federal income tax benefit	0.5		(16.6	)	8.3		(2.6	)	6.6		2.9		2.0		6.7		7.4
Qualified NDT fund income	(1.9	)	(11.8	)	—		—		—		—		—		—		—
Amortization of investment tax credit, including deferred taxes on basis difference	(1.2	)	(6.5	)	(0.2	)	(0.1	)	(0.1	)	(0.2	)	(0.1	)	(0.3	)	(0.4	)
Plant basis differences	(3.5	)	—		(0.2	)	(14.1	)	(1.3	)	(1.6	)	(2.8	)	(0.3	)	(0.5	)
Production tax credits and other credits	(2.2	)	(13.5	)	—		—		—		—		—		—		—
Noncontrolling interests	(1.0	)	(6.1	)	—		—		—		—		—		—		—
Excess deferred tax amortization	(8.3	)	—		(9.1	)	(3.2	)	(8.0	)	(14.8	)	(15.3	)	(12.0	)	(14.9	)
Tax Cuts and Jobs Act of 2017	0.9		2.7		(0.1	)	—		—		0.1		—		—		—
Other	1.0		1.3		0.5		0.3		0.9		0.4		0.3		0.4		1.2
Effective income tax rate	5.3	%	(29.5	)%	20.2	%	1.3	%	19.1	%	7.8	%	5.1	%	15.5	%	13.8	%

	For the Year Ended December 31, 2017
	Exelon		Generation		ComEd		PECO		BGE		PHI		Pepco		DPL		ACE
U.S. Federal statutory rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
Increase (decrease) due to:
State income taxes, net of Federal income tax benefit	2.2		2.9		5.7		0.6		5.4		4.8		3.1		5.4		5.6
Qualified NDT fund income	3.8		9.9		—		—		—		—		—		—		—
Amortization of investment tax credit, including deferred taxes on basis difference	(0.9	)	(2.1	)	(0.2	)	(0.1	)	(0.1	)	(0.2	)	(0.1	)	(0.2	)	(0.4	)
Plant basis differences(a)	(1.7	)	—		0.3		(13.8	)	0.1		1.1		(0.4	)	2.0		3.6
Production tax credits and other credits	(1.8	)	(4.7	)	—		—		—		—		—		—		—
Like-kind exchange	(1.2	)	—		1.3		—		—		—		—		—		—
Merger expenses	(3.6	)	(1.2	)	—		—		—		(9.6	)	(6.4	)	(7.8	)	(19.8	)
FitzPatrick bargain purchase gain	(2.2	)	(5.6	)	—		—		—		—		—		—		—
Tax Cuts and Jobs Act of 2017(b)	(33.1	)	(128.3	)	0.1		(2.3	)	0.9		6.4		2.8		2.5		1.6
Other	0.2		(0.5	)	0.2		(0.1	)	0.2		0.5		0.7		0.1		(0.4	)
Effective income tax rate	(3.3	)%	(94.6	)%	42.4	%	19.3	%	41.5	%	38.0	%	34.7	%	37.0	%	25.2	%

__________

(a) Includes the charges related to the transmission-related income tax regulatory asset for Exelon, ComEd, BGE, PHI, Pepco, DPL and ACE of $35 million, $3 million, $5 million, $27 million, $14 million, $6 million and $7 million, respectively. See Note 3 - Regulatory Matters for additional information.

(b)

As a result of TCJA, Generation recorded a net decrease to income tax expense, while the Utility Registrants recorded corresponding regulatory liabilities or assets to the extent such amounts are probable of settlement or recovery through customer rates and an adjustment to income tax expense for all other amounts.

Tax Effects of Temporary Differences

The tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred tax assets (liabilities), as of December 31, 2019 and 2018 are presented below:

	As of December 31, 2019
	Exelon			Generation			ComEd			PECO			BGE			PHI			Pepco			DPL			ACE
Plant basis differences	$	(13,413	)	$	(2,814	)	$	(4,197	)	$	(1,978	)	$	(1,578	)	$	(2,681	)	$	(1,204	)	$	(753	)	$	(687	)
Accrual based contracts	61			(43		)	—			—			—			104			—			—			—
Derivatives and other financial instruments	165			88			84			—			—			2			—			—			—
Deferred pension and postretirement obligation	1,504			(220		)	(270		)	(28		)	(28		)	(89		)	(75		)	(42		)	(10		)
Nuclear decommissioning activities	(503		)	(503		)	—			—			—			—			—			—			—
Deferred debt refinancing costs	183			20			(7		)	—			(3		)	142			(3		)	(2		)	(1		)
Regulatory assets and liabilities	(884		)	—			183			(169		)	157			(10		)	55			88			77
Tax loss carryforward	240			55			—			25			49			93			13			44			31
Tax credit carryforward	892			897			—			—			—			—			—			—			—
Investment in partnerships	(830		)	(808		)	—			—			—			—			—			—			—
Other, net	926			236			196			70			10			181			85			12			16
Deferred income tax liabilities (net)	$	(11,659	)	$	(3,092	)	$	(4,011	)	$	(2,080	)	$	(1,393	)	$	(2,258	)	$	(1,129	)	$	(653	)	$	(574	)
Unamortized investment tax credits	(668		)	(648		)	(10		)	(1		)	(3		)	(7		)	(2		)	(2		)	(3		)
Total deferred income tax liabilities (net) and unamortized investment tax credits	$	(12,327	)	$	(3,740	)	$	(4,021	)	$	(2,081	)	$	(1,396	)	$	(2,265	)	$	(1,131	)	$	(655	)	$	(577	)

	As of December 31, 2018
	Exelon			Generation			ComEd			PECO			BGE			PHI			Pepco			DPL			ACE
Plant basis differences	$	(12,533	)	$	(2,495	)	$	(4,059	)	$	(1,862	)	$	(1,399	)	$	(2,577	)	$	(1,148	)	$	(743	)	$	(645	)
Accrual based contracts	117			(44		)	—			—			—			161			—			—			—
Derivatives and other financial instruments	89			35			69			—			—			3			—			—			—
Deferred pension and postretirement obligation	1,435			(188		)	(255		)	(26		)	(26		)	(102		)	(78		)	(46		)	(14		)
Nuclear decommissioning activities	(351		)	(351		)	—			—			—			—			—			—			—
Deferred debt refinancing costs	234			23			(7		)	—			(3		)	187			(4		)	(2		)	(1		)
Regulatory assets and liabilities	(740		)	—			300			(129		)	172			(81		)	67			96			83
Tax loss carryforward	237			78			—			18			25			96			12			52			26
Tax credit carryforward	811			816			—			—			—			—			—			—			—
Investment in partnerships	(797		)	(775		)	—			—			—			—			—			—			—
Other, net	934			239			151			67			12			196			98			17			19
Deferred income tax liabilities (net)	$	(10,564	)	$	(2,662	)	$	(3,801	)	$	(1,932	)	$	(1,219	)	$	(2,117	)	$	(1,053	)	$	(626	)	$	(532	)
Unamortized investment tax credits	(724		)	(700		)	(12		)	(1		)	(3		)	(8		)	(2		)	(2		)	(3		)
Total deferred income tax liabilities (net) and unamortized investment tax credits	$	(11,288	)	$	(3,362	)	$	(3,813	)	$	(1,933	)	$	(1,222	)	$	(2,125	)	$	(1,055	)	$	(628	)	$	(535	)

Summary of Loss Carryforwards

The following table provides Exelon’s, Generation’s, PECO’s, BGE’s, PHI’s, Pepco’s, DPL’s and ACE’s carryforwards, which are presented on a post-apportioned basis, and any corresponding valuation allowances as of December 31, 2019. ComEd does not have net operating losses or credit carryforwards for the year ended December 31, 2019.

	Exelon		Generation		PECO		BGE		PHI		Pepco		DPL		ACE
Federal
Federal general business credits carryforwards(a)	$	891	$	897	$	—	$	—	$	—	$	—	$	—	$	—
State
State net operating losses	3,986		1,142		312		762		1,360		202		654		438
Deferred taxes on state tax attributes (net)	264		78		25		50		93		13		44		31
Valuation allowance on state tax attributes	26		24		—		1		—		—		—		—
Year in which net operating loss or credit carryforwards will begin to expire	2025		2029		2031		2026		2028		2028		2030		2031

__________

(a)

Exelon's and Generation's federal general business credit carryforwards will begin expiring in 2034.

Reconciliation of Unrecognized Tax Benefits Excluding Amounts Pertaining to Examined Tax Returns Roll Forward

	Exelon			Generation			ComEd			PECO		BGE			PHI			Pepco			DPL			ACE
Balance at January 1, 2017	$	916		$	490		$	(12	)	$	—	$	120		$	172		$	80		$	37		$	22
Increases based on tax positions prior to 2017	28			—			14			—		—			14			—			—			14
Decreases based on tax positions prior to 2017(a)	(196		)	(17		)	—			—		—			(61		)	(21		)	(16		)	(22		)
Decrease from settlements with taxing authorities	(5		)	(5		)	—			—		—			—			—			—			—
Balance at December 31, 2017	743			468			2			—		120			125			59			21			14
Change to positions that only affect timing	15			15			—			—		—			—			—			—			—
Increases based on tax positions prior to 2018	30			21			—			—		—			8			7			1			—
Decreases based on tax positions prior to 2018(b)	(251		)	(36		)	—			—		(120		)	(88		)	(66		)	(22		)	—
Decrease from settlements with taxing authorities	(53		)	(53		)	—			—		—			—			—			—			—
Decreases from expiration of statute of limitations	(7		)	(7		)	—			—		—			—			—			—			—
Balance at December 31, 2018	477			408			2			—		—			45			—			—			14
Change to positions that only affect timing	26			12			3			1		4			3			2			1			—
Increases based on tax positions related to 2019	2			1			—			—		—			—			—			—			—
Increases based on tax positions prior to 2019	34			19			3			2		3			—			—			—			—
Decreases based on tax positions prior to 2019	(3		)	(3		)	—			—		—			—			—			—			—
Decrease from settlements with taxing authorities	(29		)	4			(2		)	—		—			—			—			—			—
Balance at December 31, 2019	$	507		$	441		$	6		$	3	$	7		$	48		$	2		$	1		$	14

__________

(a) Exelon established a liability for an uncertain tax position associated with the tax deductibility of certain merger commitments incurred by Exelon in connection with the acquisitions of Constellation and PHI. In 2017, as a part of its examination of Exelon's return, the IRS National Office issued guidance concurring with Exelon's position that the merger commitments were deductible. As a result, Exelon, Generation, PHI, Pepco, DPL, and ACE decreased their liability for unrecognized tax benefits by $146 million, $19 million, $59 million, $21 million, $16 million and $22 million, respectively, resulting in a benefit to Income taxes on Exelon's, Generation's, PHI's, Pepco's, DPL's, and ACE's Consolidated Statements of Operations and Comprehensive Income and corresponding decreases in their effective tax rates.

(b)

Exelon, Generation, BGE, PHI, Pepco, and DPL decreased their unrecognized state tax benefits primarily due to the receipt of favorable guidance with respect to the deductibility of certain depreciable fixed assets. The recognition of the tax benefits related to BGE, PHI, Pepco, and DPL was offset by corresponding regulatory liabilities and that portion had no immediate impact to their effective tax rate.

Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Table Text Block]

The following table presents Exelon's, Generation's and PHI's unrecognized tax benefits that, if recognized, would decrease the effective tax rate. ComEd's, PECO's, BGE's, Pepco's, DPL's and ACE's amounts are not material.

	Exelon		Generation		PHI(a)
December 31, 2019	$	462	$	429	$	32
December 31, 2018	463		408		31
December 31, 2017	523		461		32

__________

(a) PHI has $21 million of unrecognized state tax benefits that, if recognized, $14 million would be in the form of a net operating loss carryforward, which is expected to require a full valuation allowance based on present circumstances.

The following table presents Exelon's, BGE's, PHI's, Pepco's, DPL's and ACE’s unrecognized tax benefits that, if recognized, may be included in future base rates and that portion would have no impact to the effective tax rate. ComEd's and PECO's amounts are not material.

	Exelon		BGE		PHI		Pepco		DPL		ACE
December 31, 2019	$	19	$	1	$	14	$	—	$	—	$	14
December 31, 2018	14		—		14		—		—		14
December 31, 2017	214		120		94		59		21		14

Reasonably possible the total amount of unrecognized tax benefits could significantly increase or decrease within 12 months after the reporting date

Settlement of Income Tax Audits, Refund Claims, and Litigation

The following table represents Exelon's, Generation's and ACE's unrecognized federal and state tax benefits that could significantly decrease within the 12 months after the reporting date as a result of completing audits, potential settlements, refund claims, and the outcomes of pending court cases as of December 31, 2019. ComEd's, PECO's, BGE's, PHI's, Pepco's and DPL's amounts are not material.

Exelon(a)		Generation(a)		ACE(b)
$	425	$	411	$	14

__________

(a) Exelon and Generation have $411 million that, if recognized, would decrease the effective tax rate.

(b) The unrecognized tax benefit related to ACE, if recognized, may be included in future base rates and that portion would have no impact to the effective tax rate.

Total amounts of interest and penalties recognized

The following table represents the net interest and penalties receivable (payable) related to tax positions reflected in Exelon's Consolidated Balance Sheets. Generation's and the Utility Registrants' amounts are not material.

Net interest and penalties receivable as of	Exelon
December 31, 2019	$	318
December 31, 2018	219

Schedule of Remeasurement Of Deferred Income Taxes Due to Tax Reform [Table Text Block]

The one-time impacts recorded by the Registrants to remeasure their deferred income tax balances at the 21% corporate federal income tax rate as of December 31, 2017 are presented below:

	Exelon(b)	Generation	ComEd	PECO(c)	BGE	PHI	Pepco	DPL	ACE
Net Decrease to Deferred Income Tax Liability Balances	$8,624	$1,895	$2,819	$1,407	$1,120	$1,944	$968	$540	$456
Net Increase to Regulatory Liabilities Recorded(a)	7,315	N/A	2,818	1,394	1,124	1,979	976	545	458
Net Deferred Income Tax Benefit/(Expense) Recorded	$1,309	$1,895	$1	$13	$(4)	$(35)	$(8)	$(5)	$(2)

__________

(a) Reflects the net regulatory liabilities recorded on a pre-tax basis before taking into consideration the income tax benefits associated with the ultimate settlement with customers.

(b) Amounts do not sum across due to deferred tax adjustments recorded at the Exelon Corporation parent company, primarily related to certain employee compensation plans.

(c)

Given the regulatory treatment of income tax benefits related to electric and gas distribution repairs, PECO remained in an overall net regulatory asset position as of December 31, 2017 after recording the impacts related to the TCJA.

State Income Tax Law Changes [Table Text Block]

The following table provides the one-time impact of the rate changes in 2017 for Exelon, Generation and ComEd:

	Exelon			Generation		ComEd
Increase to Deferred Income Taxes	$	250		$	20	$	270
Increase in Regulatory Assets	270			—		270
(Decrease)/Increase to Income Tax Expense	(20		)	20		—

Long-Term Marginal State Income Tax Rate [Table Text Block]

Quarterly, Exelon reviews and updates its marginal state income tax rates for changes in state apportionment. The Registrants remeasure their existing deferred income tax balances to reflect the changes in marginal rates, which results in either an increase or decrease to their net deferred income tax liability balances. Utility Registrants record corresponding regulatory liabilities or assets to the extent such amounts are probable of settlement or recovery through customer rates and an adjustment to income tax expense for all other amounts.

December 31, 2019	Exelon		Generation		PHI		DPL
Increase to Deferred Income Tax Liability	$	23	$	9	$	—	$	—
Increase to Income Tax Expense, Net of Federal Taxes	23		9		—		—
December 31, 2018
Decrease to Deferred Income Tax Liability	$	50	$	53	$	4	$	2
Decrease to Income Tax Expense, Net of Federal Taxes	50		53		3		—

Allocation of Federal Tax Benefit Under Tax Sharing Agreement [Table Text Block] [Table Text Block]

The following table presents the allocation of federal tax benefits from Exelon under the Tax Sharing Agreement.

	Generation		ComEd		PECO		BGE		PHI		Pepco		DPL
December 31, 2019(a)	$	41	$	—	$	14	$	3	$	7	$	6	$	1
December 31, 2018(b)	155		1		48		26		2		—		—
December 31, 2017(c)	102		—		16		10		7		—		—

__________

(a) ACE did not record an allocation of federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.

(b) Pepco, DPL and ACE did not record an allocation of federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.

(c)

ComEd, Pepco, DPL and ACE did not record an allocation of federal tax benefits from Exelon under the Tax Sharing Agreement as a result of a tax net operating loss.