SOUTHERN CALIFORNIA EDISON CoSCE-PG

SOUTHERN CALIFORNIA EDISON Co Income Taxes Disclosure

10-KFiled Feb 18, 20267 min read
Income Taxes
Current and Deferred Taxes
The components of income tax expense (benefit) by location of taxing jurisdiction are:
Edison InternationalSCE
Years ended December 31,
(in millions)202520242023202520242023
Current:
Federal$— $1 $— $28 $3 $— 
State83 7 — 99 48 5 
83 8 — 127 51 5 
Deferred:
Federal925 59 101976 118 149 
State308 (50)7 337 (49)30 
1,233 9 1081,313 69 179 
Tax Credits
(25)——(25)——
Total$1,291 $17 $108$1,415 $120 $184 
The components of net accumulated deferred income tax liability are:
Edison InternationalSCE
December 31,
(in millions)2025202420252024
Deferred tax assets:
Property$1,005 $943 $992 $929 
Wildfire-related1
339 254 336 251 
Nuclear decommissioning trust assets in excess of nuclear ARO liability455 373 455 373 
Loss and credit carryforwards2
3,246 3,703 1,702 2,242 
Regulatory balances600 610 600 610 
Pension and postretirement benefits other than pensions, net115 117 21 21 
Leases331 335 331 335 
Other199 177 188 167 
Sub-total6,290 6,512 4,625 4,928 
Less: valuation allowance3
14 17 — — 
Total6,276 6,495 4,625 4,928 
Deferred tax liabilities:
Property11,618 11,220 11,598 11,202 
Regulatory balances2,551 1,299 2,551 1,299 
Nuclear decommissioning trust assets455 373 455 373 
Leases331 335 331 335 
Other195 187 162 155 
Total15,150 13,414 15,097 13,364 
Accumulated deferred income tax liability, net4
$8,874 $6,919 $10,472 $8,436 
1Relates to estimated losses accrual for wildfire-related claims, net of expected insurance and regulatory recoveries, and contributions to the Wildfire Fund. For further information, see Note 12 and Note 1.
2As of December 31, 2025, unrecognized tax benefits of $404 million and $326 million for Edison International and SCE, respectively, are presented net against the deferred tax asset for the loss and tax credit carryforwards. As of December 31, 2024, the unrecognized tax benefits netted against deferred tax assets and tax credit carryforwards were $397 million and $327 million for Edison International and SCE, respectively.
3As of December 31, 2025 and 2024, Edison International has recorded $14 million and $17 million valuation allowance on deferred tax assets. The valuation allowance is related to non-California state net operating loss carryforwards which are expected to expire before being utilized.
4Included in "Deferred income taxes and credits" on the consolidated balance sheets.
Net Operating Loss and Tax Credit Carryforwards
The amounts of net operating loss and tax credit carryforwards (after-tax) are as follows:
Edison InternationalSCE
December 31, 2025
(in millions)Loss
Carryforwards		Credit
Carryforwards		Loss
Carryforwards		Credit
Carryforwards
Expire between 2027 to 2030$10 $96 $— $— 
Expire between 2031 to 20451,527 381 725 32 
No expiration date1
1,623 13 1,269 2 
Total$3,160 $490 $1,994 $34 
1Under the Tax Cut and Jobs Act signed into law on December 22, 2017 ("Tax Reform"), net operating losses generated after December 31, 2017 can carryforward indefinitely.
Edison International consolidates for federal income tax purposes, but not for financial accounting purposes, a group of wind projects referred to as "Capistrano Wind." The amount of net operating loss and tax credit carryforwards recognized as part of deferred income taxes includes $106 million and $107 million related to Capistrano Wind for 2025 and 2024, respectively. The tax attributes not utilized as of December 31, 2025 will be available for the Edison International consolidated group to utilize in the future. When the remaining Capistrano tax attributes are used in the future by Edison International, payments will be made to those entities under a tax allocation agreement. Under the tax allocation agreement, Edison International has recorded a corresponding liability as part of other long-term liabilities related to its obligation to make payments to Capistrano Wind when these tax benefits are realized.
Effective Tax Rate
The table below provides a reconciliation of income tax expense computed at the federal statutory income tax rate to the income tax provision:
Edison InternationalSCE
Years ended December 31,
202520242023202520242023
(in millions)Amount%Amount%Amount%Amount%Amount%Amount%
Income from operations before income taxes$5,992 $1,563 $1,515 $6,448 $1,914 $1,781 
Federal Statutory Tax Rate
$1,258 21.0%$328 21.0%$318 21.0%$1,354 21.0%$402 21.0%$374 21.0%
State Income Taxes, Net of Federal Income Tax Effect1
308 5.1%(24)(1.5)%3 0.2%342 5.3%— —%23 1.3%
Tax Credits
(25)(0.4)%——%——%(25)(0.4)%——%——%
Other Adjustments
Property-related
(251)(4.2)%(279)(17.9)%(205)(13.5)%(251)(3.9)%(279)(14.6)%(205)(11.5)%
Other
1 —%(8)(0.5)%(8)(0.6)%(5)(0.1)%(3)(0.1)%(8)(0.5)%
Effective Tax Rate
$1,291 21.5%$17 1.1%$108 7.1%$1,415 21.9%$120 6.3%$184 10.3%
1State taxes in California represents substantially all of the tax effect in this category.
The CPUC requires flow-through ratemaking treatment for the current tax benefit arising from certain property-related and other temporary differences which reverse over time. Flow-through items reduce current authorized revenue requirements in SCE's rate cases and result in a regulatory asset for recovery of deferred income taxes in future periods. The difference between the authorized amounts as determined in SCE's rate cases, adjusted for balancing and memorandum account activities, and the recorded flow-through items also result in increases or decreases in regulatory assets with a corresponding impact on the effective tax rate to the extent that recorded deferred amounts are expected to be recovered in future rates. For further information, see Note 11.
The IRA imposes a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income ("AFSI") of corporations with average AFSI exceeding $1.0 billion over the three preceding calendar years. The CAMT was effective beginning January 1, 2023. Based on the current interpretation of the law and historical financial data, Edison International estimates that it will exceed the $1.0 billion threshold and be subject to CAMT on its consolidated federal tax returns beginning in 2026. SCE will also be subject to CAMT in 2026.
Under the IRA, SCE generated investment tax credits of approximately $231 million in 2024 related to utility owned storage projects and $29 million in nuclear production tax credits. In 2025, SCE monetized the majority of these credits for $236 million. SCE expects to pass the proceeds, net of transaction fees, back to customers.
Income taxes Paid/(Refunded)
The components of income tax paid net of (refunds) by location of taxing jurisdiction are:
Edison InternationalSCE
Years ended December 31,
(in millions)202520242023202520242023
Federal$(236)$— $— $(236)$4 $— 
California— 51 — 8 74 — 
SCE makes tax-allocation payments to Edison International under the applicable tax-allocation agreement. It does not make payments to the tax authorities directly. The amount included in 2025 relates to proceeds from the monetization of investment and production tax credits.
Accounting for Uncertainty in Income Taxes
Authoritative guidance related to accounting for uncertainty in income taxes requires an enterprise to recognize, in its financial statements, the best estimate of the impact of a tax position by determining if the weight of available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained upon examination. The guidance requires the disclosure of all unrecognized tax benefits, which includes both the reserves recorded for tax positions on filed tax returns and the unrecognized portion of affirmative claims.
Unrecognized Tax Benefits
The following table provides a reconciliation of unrecognized tax benefits:
Edison InternationalSCE
(in millions)202520242023202520242023
Balance at January 1,$463 $430 $646 $457 $418 $374 
Tax positions taken during the current year:
Increases50 66 65 50 66 65 
Tax positions taken during a prior year:
Increases— 1 13 — — 4 
Decreases1
(30)(34)(294)(30)(27)(25)
Balance at December 31,$483 $463 $430 $477 $457 $418 
1The Edison International decrease in 2023 was mainly related to a write-off of a reserve for a claim related to the Edison Mission Energy bankruptcy.
As of December 31, 2025, if recognized, $70 million of unrecognized tax benefits would impact Edison International's effective tax rate and $64 million of the unrecognized tax benefits would impact SCE's effective tax rate.
Tax Disputes
Tax years that remain open for examination by the Internal Revenue Service and Franchise Tax Board are 2022 – 2024 and 2013 – 2018 & 2021 - 2024, respectively.
Accrued Interest and Penalties
The total amount of accrued interest and penalties related to unrecognized tax benefits are:
Edison InternationalSCE
December 31,
(in millions)2025202420252024
Accrued interest and penalties$2 $— $42 $36 
The net after-tax interest and penalties recognized in income tax expense are:
Edison InternationalSCE
Years ended December 31,
(in millions)202520242023202520242023
Net after-tax interest and penalties tax expense$2$—$—$4$7$4

Historical Timeline

Fiscal YearFiled
2025Feb 18, 2026Showing above
2024Feb 27, 2025
2023Feb 22, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 25, 2021
2019Feb 27, 2020
2018Feb 28, 2019
2017Feb 22, 2018
2016Feb 21, 2017

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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