Income Tax Credits and Adjustments

[Table of Contents](#i59ca7ab3cc784e42904d434b0008a7a9_10) Notes to Consolidated Financial Statements(Dollars in millions, unless otherwise noted)  
 Note 14 — Income TaxesWe did not record material interest and penalty expense related to tax positions reflected in the Consolidated Balance Sheets. Interest expense and penalty expense are recorded in Interest expense, net and Other, net, respectively, in Other income and deductions in the Consolidated Statements of Operations and Comprehensive Income. Description of tax years open to assessment by major jurisdiction

|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |
| Major Jurisdiction | Open Years(a) |
| Federal consolidated income tax returns | 2010-2020 |
| Illinois unitary corporate income tax returns | 2012-2020 |
| New Jersey separate corporate income tax returns | 2017-2018 |
| New York combined corporate income tax returns | 2011-2020 |
| Pennsylvania separate corporate income tax returns | 2011-2016 |
| Pennsylvania separate corporate income tax returns | 2018-2020 |

\_\_\_\_\_\_\_\_\_\_(a)Tax years open to assessment include years when we were consolidated by Exelon. See discussion below under the Tax Matters Agreement for responsibility of taxes of these open years.Other Tax MattersCENG Put OptionOn August 6, 2021, we entered into a settlement agreement with EDF pursuant to which we purchased EDF’s equity interest in CENG. We recorded deferred tax liabilities of $288 million against Membership interest in the Consolidated Balance Sheet. The deferred tax liabilities represent the tax effect on the difference between the net purchase price and EDF’s noncontrolling interest as of August 6, 2021. The deferred tax liabilities will reverse during the remaining operating lives and during decommissioning of the CENG nuclear plants. See Note 2 – Mergers, Acquisitions, and Dispositions for additional information.Allocation of Tax BenefitsWe are a 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 federal and state benefits attributable to Exelon were reallocated to the parties. That allocation was treated as a contribution from Exelon to the party receiving the benefit. The following table presents the allocation of tax benefits from Exelon to us under the Tax Sharing Agreement.

|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |
| December 31, 2021 | $ | 64  |  |
| December 31, 2020 | 64  |  |
| December 31, 2019 | 41  |  |

Research and Development Activities In the fourth quarter of 2019, we recognized additional tax benefits related to certain research and development activities that qualify for federal and state tax incentives for the 2010 through 2018 tax years, which resulted in an increase in net income of $75 million for the year ended December 31, 2019, reflecting a decrease in Income tax expense of $66 million.Tax Matters AgreementIn connection with the separation, we entered into a Tax Matters Agreement (“TMA”) with Exelon. The TMA will govern the respective rights, responsibilities, and obligations between us and Exelon after the separation with respect to tax liabilities and benefits, tax attributes, tax returns, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns.123  
  
  

