PG&E 2015 Annual Report Download - page 99

91
PART II
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Unrecognized tax benefits
The following table reconciles the changes in unrecognized tax benefits:
PG&ECorporation Utility
(inmillions)      
Balanceatbeginningofyear
        
Additionsfortaxpositiontaken
duringaprioryear      
Reductionsfortaxpositiontaken
duringaprioryear () () () () () ()
Additionsfortaxpositiontaken
duringthecurrentyear      
Settlements - () - - () -
Balanceatendofyear            
The component of unrecognized tax benefits that, if
recognized, would aect the eective tax rate at December
31, 2015 for PG&E Corporation and the Utility was $50 million.
PG&E Corporation’s and the Utility’s unrecognized tax
benefits may change significantly within the next 12 months
due to the resolution of several matters, including audits.
As of December 31, 2015, it is reasonably possible that
unrecognized tax benefits will decrease by approximately
$60 million within the next 12 months.
Interest income, interest expense and penalties associated
with income taxes are reflected in income tax expense
on the Consolidated Statements of Income. For the years
ended December 31, 2015, 2014, and 2013, these amounts
were immaterial.
IRS settlements
PG&E Corporation participated in the Compliance
Assurance Process in 2015, a real-time IRS audit intended
to expedite resolution of tax matters. The Compliance
Assurance Process audit culminates with a letter from
the IRS indicating its acceptance of the return.
PG&E Corporation’s tax returns have been accepted
through 2014 except for a few matters, the most significant
of which relates to deductible repair costs. In December
2015, PG&E Corporation reached an agreement with
the IRS on deductible repair costs for the 2011 tax year,
subject to approval by the Joint Committee on Taxation.
Deductible repair costs will continue to be subject to
examination by the IRS for subsequent years. The IRS is
expected to issue guidance in 2016 that clarifies which
repair costs are deductible for the natural gas transmission
and distribution businesses. Tax years after 2004 remain
subject to examination by the state of California.
Carryforwards
The following table describes PG&E Corporation’s operating loss and tax credit carryforward balances:
December

Expiration
Year
(inmillions)
Federal
Netoperatinglosscarryforward   -
Taxcreditcarryforward  -
Charitablecontributionlosscarryforward  -
State
Netoperatinglosscarryforward   -
Taxcreditcarryforward  Various
Charitablecontributionlosscarryforward  -
PG&E Corporation believes it is more likely than not the
tax benefits associated with the federal and California
net operating losses, charitable contributions and tax
credits can be realized within the carryforward periods,
therefore no valuation allowance was recognized as of
December 31, 2015 for these tax attributes. As of
December31, 2015, PG&E Corporation had approximately
$29 million of federal net operating loss carryforwards
related to the tax benefit on employee stock plans that
would be recorded in additional paid-in capital when used.