Exelon 2014 Annual Report Download - page 229

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Exelon, of which $29 million in tax benefit is recorded at PECO, partially offset by an expense recorded at Generation to reflect a
reduction in its domestic production activities deduction. BGE changed its method of accounting for gas distribution repairs for the
2008 tax year. The IRS is expected to issue industry guidance in the near future. Exelon, PECO and BGE will determine the financial
statement impacts of the gas distribution repair costs accounting method changes after guidance is issued.
Accounting for Final Tangible Property Regulations
On September 19, 2013, the Treasury Department and the IRS published final regulations regarding the tax treatment of costs
incurred to acquire, produce, or improve tangible property. The Registrants have assessed the financial impact of this guidance and
do not expect it to have a material impact. Any changes in method of accounting required to conform to the final regulations will be
made for the Registrant’s 2014 taxable year.
Long-Term State Tax Apportionment
As a result of the merger with Constellation, Exelon and Generation re-evaluated their long-term state tax apportionment in the first
quarter of 2012. The total effect of revising the long-term state tax apportionment resulted in the recording of a deferred state tax
asset of $72 million (net of Federal taxes) for Exelon. Of this, a benefit in the amount of $116 million and $14 million (net of Federal
taxes) was recorded for Exelon and Generation, respectively, for the three months ended March 31, 2012. Further, Exelon and
Generation recorded deferred state tax liabilities of $44 million and $14 million (net of Federal taxes), respectively, as part of
purchase accounting during the three months ended March 31, 2012. The long-term state tax apportionment also was updated in the
fourth quarter of 2012, resulting in the recording of a deferred state tax benefit of $3 million (net of Federal taxes) for Exelon, and a
deferred state tax expense of $7 million (net of Federal taxes) for Generation. There was no change to the long-term state tax
apportionment for BGE, ComEd and PECO.
The long-term state tax apportionment was revised in the fourth quarter of 2014 pursuant to Exelon’s long-term state tax
apportionment policy, resulting in the recording of a deferred state tax benefit for Exelon and Generation of $28 million (net of
Federal taxes) and $40 million (net of Federal taxes), respectively. The amounts recorded for 2013 in accordance with the policy
were immaterial.
Allocation of Tax Benefits
Generation, ComEd, PECO and BGE are all party to an agreement with Exelon and other subsidiaries of Exelon that provides for the
allocation of consolidated tax liabilities and benefits (Tax Sharing Agreement). The Tax Sharing Agreement provides that each party
is allocated an amount of tax similar to that which would be owed had the party been separately subject to tax. In addition, any net
benefit attributable to Exelon is reallocated to the other Registrants. That allocation is treated as a contribution to the capital of the
party receiving the benefit. During 2014, Generation and PECO recorded an allocation of Federal tax benefits from Exelon under the
Tax Sharing Agreement of $55 million and $25 million, respectively. ComEd and BGE did not record an allocation of Federal tax
benefits from Exelon under the Tax Sharing Agreement as a result of tax net operating losses.
During 2013, Generation and PECO recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of
$26 million and $27 million, respectively. During 2013, ComEd and BGE did not record an allocation of Federal tax benefits from
Exelon under the Tax Sharing Agreement as a result of ComEd’s and BGE’s tax net operating loss generated primarily by the bonus
depreciation deduction allowed under the Tax Relief Act of 2010.
During 2012, Generation and PECO recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of
$48 million and $9 million, respectively. During 2012, ComEd and BGE did not record an allocation of Federal tax benefits from
Exelon under the Tax Sharing Agreement as a result of ComEd’s and BGE’s tax net operating loss generated primarily by the bonus
depreciation deduction allowed under the Tax Relief Act of 2010.
ComEd received a non-cash contribution to equity from Exelon in 2012 of $11 million, related to tax benefits associated with capital
projects constructed by ComEd on behalf of Exelon and Generation.
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