PG&E 2014 Annual Report Download - page 104
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96
NOTE 8: INCOME TAXES
PG&E Corporation and the Utility use the liability method of accounting for income taxes. The income tax provision
includes current and deferred income taxes resulting from operations during the year. PG&E Corporation and the Utility estimate
current period tax expense in addition to calculating deferred tax assets and liabilities. Deferred tax assets and liabilities result from
temporary tax and accounting timing differences, such as those arising from depreciation expense.
PG&E Corporation and the Utility recognize a tax benefit if it is more likely than not that a tax position taken or expected
to be taken in a tax return will be sustained upon examination by taxing authorities based on the merits of the position. The tax
benefit recognized in the financial statements is measured based on the largest amount of benefit that is greater than 50% likely of
being realized upon settlement. As such, the difference between a tax position taken or expected to be taken in a tax return in future
periods and the benefit recognized and measured pursuant to this guidance represents an unrecognized tax benefit.
Investment tax credits are deferred and amortized to income over time. PG&E Corporation amortizes its investment tax
credits over the projected investment recovery period. The Utility amortizes its investment tax credits over the life of the related
property in accordance with regulatory treatment.
PG&E Corporation files a consolidated U.S. federal income tax return that includes the Utility and domestic subsidiaries
in which its ownership is 80% or more. PG&E Corporation files a combined state income tax return in California. PG&E
Corporation and the Utility are parties to a tax-sharing agreement under which the Utility determines its income tax provision
(benefit) on a stand-alone basis.
The significant components of income tax provision (benefit) by taxing jurisdiction were as follows:
PG&E Corporation Utility
Year Ended December 31,
(in millions) 2014 2013 2012 2014 2013 2012
Current:
Federal $ (84) $ (218) $ (74) $ (84) $ (222) $ (52)
State (41) (26) 33 (29) (23) 41
Deferred:
Federal 396 552 374 426 604 404
State 78 (35) (92) 75 (28) (91)
Tax credits (4) (5) (4) (4) (5) (4)
Income tax provision $ 345 $ 268 $ 237 $ 384 $ 326 $ 298
The following table describes net deferred income tax liabilities:
PG&E Corporation Utility
Year Ended December 31,
(in millions) 2014 2013 2014 2013
Deferred income tax assets:
Customer advances for construction $ 88 $ 90 $ 88 $ 90
Reserve for damages 137 161 137 161
Environmental reserve 111 152 111 152
Compensation 107 167 36 102
Net operating loss carryforward 1,177 890 946 670
GHG allowances 56 108 56 108
Other 74 135 100 128
Total deferred income tax assets $ 1,750 $ 1,703 $ 1,474 $ 1,411