Percent of tax group's consolidated assets that consist of regulated utility property

[Table of Contents](#i6266d2788e5849989ad57be380853c2d_7)Entergy Corporation and SubsidiariesNotes to Financial Statements  
of income tax expense of approximately $32 million. As a result of the settlement, the position was partially sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.  
Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax Accounting Methods.  
Other Tax Matters  
Tax Cuts and Jobs Act (TCJA)  
The most significant effect of the TCJA for Entergy and the Registrant Subsidiaries was the change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018.   
TCJA also limited the deduction for net business interest expense to 30 percent of adjusted taxable income, which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 or 2020.  
The IRS issued final regulations which are effective for Entergy beginning with the 2021 tax year. The regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest expense will be currently tax deductible. Entergy expects that this provision will continue to apply to Entergy’s business operations making the application of this limitation to Entergy less likely. The provision has not resulted in Entergy having to report any significant business interest expense limitations on its tax returns.  
With respect to the federal corporate income tax rate change from 35% to 21% in 2017, Entergy and the Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2019, 2020 and 2021 in the form of lower rates. Entergy’s December 31, 2021 and December 31, 2020 balance sheets reflect a regulatory liability of $1.3 billion and $1.6 billion, respectively, as a result of the re-measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during 2019, 2020 and 2021. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting in excess ADIT, and b) the tax gross-up of excess ADIT. The Registrant Subsidiaries’ December 31, 2021 and December 31, 2020 balance sheets reflect net regulatory liabilities for income taxes as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |
|  | (In Millions) |
| Entergy Arkansas | $432  |  |  | $467  |  |
| Entergy Louisiana | $338  |  |  | $479  |  |
| Entergy Mississippi | $212  |  |  | $224  |  |
| Entergy New Orleans | $42  |  |  | $59  |  |
| Entergy Texas | $171  |  |  | $205  |  |
| System Energy | $113  |  |  | $152  |  |

  
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