ComEd 2013 Annual Report Download - page 201

Accounting for Electric Transmission and Distribution Property Repairs
OnAugust19, 2011,theIRS issuedRevenue Procedure 2011-43 providingasafeharbor methodoftaxaccountingfor repaircosts
associatedwithelectric transmission and distribution property. ComEd and PECO adoptedthesafeharbor intheRevenue
Procedure for the 2011 and2010 taxyears, respectively. For theyear endedDecember 31,2011,theadoption ofthesafeharbor
resultedina$35million reduction to incometaxexpenseatPECO, while Generation incurredadditional incometaxexpenseinthe
amount of$28million due to a decreaseinitsdomestic production activitiesdeduction, which are reflectedintheeffectiveincome
taxrate reconciliation aboveinthe plant basis differencesanddomestic production activitiesdeduction lines, respectively. For
Exelon,theadoption hadaminimal effectonconsolidatedearnings. Inaddition,theadoption ofthesafeharbor resultedinacash
taxbenefitatExelon,ComEd and PECO intheamount ofapproximately$300 million,$250million, $95 million respectively, partially
offset by acash taxdetriment at Generation intheamount of$28million relatedto a decreaseddomestic production activities
deduction.
BGE adoptedthesafeharbor for theshort period2012 pre-merger taxyear.For theyear endedDecember 31,2012,theadoption of
thesafeharbor resultedinacash taxbenefitatBGE intheamount of$27million.
See Note 3—RegulatoryMattersfor discussion oftheregulatorytreatment prescribedinthe 2010 electric distribution rate case
settlement for PECO’s cash taxbenefitresultingfromthe application ofthemethodchangetoyearsprior to 2010.
Accounting for Gas Distribution Property Repairs
InSeptember 2012, PECO filedan application withtheIRSto changeitsmethodofaccountingfor gas distribution repairsfor the
2011 taxyear.Thechangetothenewlyadoptedmethodfor the 2011 taxyear and2012 resultedinataxbenefitof$26million at
Exelon,of which $29million intaxbenefitis recordedat PECO, partiallyoffset by an expenserecordedat Generation to reflecta
reduction initsdomestic production activitiesdeduction. BGE changeditsmethodofaccountingfor gas distribution repairsfor the
2008taxyear.TheIRSisexpectedto issue industryguidanceinthe near future.Exelon, PECO and BGE will then determine the
financial statement impactsofthegas distribution repaircostsaccountingmethodchangesafter guidanceis issued.
Accounting for Final Tangible Property Regulations
OnSeptember 19, 2013,theTreasuryDepartment andtheIRSpublishedfinal regulationsregardingthetaxtreatment ofcosts
incurredto acquire,produce,or improve tangible property. TheRegistrantshaveassessedthefinancial impactofthis guidanceand
do not expectittohaveamaterial impact.Anychangesinmethodofaccountingrequiredto conformto thefinal regulationswill be
madefor theRegistrant’s 2014taxable year.
2011 Illinois State Tax Rate Legislation
TheTaxpayer AccountabilityandBudget Stabilization Act, (SB 2505), enactedinto lawinIllinois on January13,2011,increasesthe
corporate taxrate inIllinois from7.3%to 9.5% for taxyears2011—2014, providesfor a reduction inthe rate from 9.5% to 7.75% for
taxyears2015—2024andfurther reducesthe rate from 7.75% to 7.3%for taxyears2025andthereafter.Pursuant to the rate
change,Exelon re-evaluateditsdeferredstate incometaxesduringthefirstquarter of2011.Illinois’ corporate incometaxrate
changesresultedinachargetostate deferredtaxes(net ofFederal taxes) duringthefirstquarter of2011 of$7million,$11 million
and$4million for Exelon,Generation andComEd, respectively. Exelon’s andComEd’s chargeis net ofaregulatoryasset of
$15million.
In 2011,theincometaxrate changeincreasedExelon’s Illinois incometaxprovision (net ofFederal taxes) by approximately
$7 million,of which $12 million and$5million ofadditional taxrelatesto Exelon Corporate andGeneration,respectively, anda
$10 million benefitfor ComEd. The 2011 taxbenefitatComEd reflectstheimpactofa 2011 taxnet operatingloss generated
primarilybythebonusdepreciation deduction allowedunder theTaxReliefActof2010 andthe electric transmission and distribution
propertyrepairsdeduction discussedbelow.
Long-Term State Tax Apportionment
Exelon andGeneration periodicallyrevieweventsthat may significantlyimpacthowincomeis apportionedamongthestatesand,
therefore,thecalculation ofExelon’s andGeneration’s deferredstate incometaxes. In 2011 asaresult ofthe 2011 Illinois State Tax
Rate Legislation discussedabove,Exelon andGeneration re-evaluatedtheir long-termstate taxapportionment for Illinois andall
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