Taxes (Tables)

12 Months Ended

Dec. 31, 2014



PROVISION FOR INCOME TAXES (BENEFITS)⁽¹⁾	2014			2013			2012
	(In millions)
FirstEnergy
Currently payable (receivable)-
Federal	$	(132	)	$	(118	)	$	(130	)
State	(72		)	70			28
	(204		)	(48		)	(102		)
Deferred, net-
Federal	214			305			580
State	(42		)	(54		)	78
	172			251			658
Investment tax credit amortization	(10		)	(8		)	(11		)
Total provision for income taxes (benefits)	$	(42	)	$	195		$	545

FES
Currently payable (receivable)-
Federal	$	(222	)	$	(300	)	$	(128	)
State	(13		)	(3		)	17
	(235		)	(303		)	(111		)
Deferred, net-
Federal	25			317			209
State	(14		)	(4		)	9
	11			313			218
Investment tax credit amortization	(4		)	(4		)	(4		)
Total provision for income taxes (benefits)	$	(228	)	$	6		$	103

⁽¹⁾Provision for Income Taxes (Benefits) on Income from Continuing Operations. Currently payable (receivable) in 2014 excludes $106 million and $12 million of federal and state taxes, respectively, associated with discontinued operations. Deferred, net in 2014 excludes $44 million and $5 million of federal and state tax benefits, respectively, associated with discontinued operations.

Reconciliation of federal income tax expense at the federal statutory rate to the total provision for income taxes

The following tables provide a reconciliation of federal income tax expense at the federal statutory rate to the total provision for income taxes on continuing operations for the three years ended December 31, 2014:



	2014			2013			2012
	(In millions)
FirstEnergy
Income from Continuing Operations before provision for income taxes	$	171		$	570		$	1,299
Federal income tax expense at statutory rate (35%)	$	60		$	199		$	455
Increases (reductions) in taxes resulting from-
Amortization of investment tax credits	(10		)	(8		)	(11		)
State income taxes, net of federal tax benefit	12			10			79
Medicare Part D	—			—			32
Effectively settled tax items, including interest	(35		)	(2		)	(20		)
ESOP dividend	(6		)	(9		)	—
Change in accounting method	(27		)	—			—
Tax basis balance sheet adjustments	(25		)	—			—
AFUDC equity and other flow-through	(13		)	(7		)	—
Other, net	2			12			10
Total provision for income taxes (benefits)	$	(42	)	$	195		$	545
Effective income tax rate	(24.6		)%	34.2		%	42.0		%

FES
Income (loss) from Continuing Operations before provision for income taxes (benefits)	$	(588	)	$	52		$	276
Federal income tax expense (benefit) at statutory rate (35%)	$	(206	)	$	18		$	97
Increases (reductions) in taxes resulting from-
Amortization of investment tax credits	(4		)	(4		)	(4		)
State income taxes, net of federal tax benefit	(14		)	(5		)	17
Effectively settled tax items	—			—			(11		)
ESOP dividend	(1		)	(2		)	—
Other, net	(3		)	(1		)	4
Total provision for income taxes (benefits)	$	(228	)	$	6		$	103
Effective income tax rate	38.8		%	11.5		%	37.3		%

Accumulated deferred income taxes

Accumulated deferred income taxes as of December 31, 2014 and 2013 are as follows:



	2014			2013
	(In millions)
FirstEnergy
Property basis differences	$	9,354		$	8,734
Deferred sale and leaseback gain	(381		)	(401		)
Pension and OPEB	(1,433		)	(972		)
Nuclear decommissioning activities	458			460
Asset retirement obligations	(641		)	(651		)
Regulatory asset/liability	768			750
Loss carryforwards and AMT credits	(1,932		)	(1,598		)
Loss carryforward valuation reserve	174			125
All other	172			155
Net deferred income tax liability	$	6,539		$	6,602

FES
Property basis differences	$	1,749		$	1,354
Deferred sale and leaseback gain	(356		)	(370		)
Pension and OPEB	(373		)	(66		)
Lease market valuation liability	75			54
Nuclear decommissioning activities	489			470
Asset retirement obligations	(486		)	(439		)
Loss carryforwards and AMT credits	(631		)	(354		)
Loss carryforward valuation reserve	32			27
All other	(15		)	40
Net deferred income tax liability	$	484		$	716

Pre-tax net operating loss expiration period

The ultimate utilization of these NOLs may be impacted by statutory limitations on the use of NOLs imposed by state and local tax jurisdictions, changes in statutory tax rates, and changes in business which, among other things, impact both future profitability and the manner in which future taxable income is apportioned to various state and local tax jurisdictions.



Expiration Period	FirstEnergy				FES
	(In millions)
	State		Local		State		Local
2015-2019	$	63	$	2,524	$	—	$	1,874
2020-2024	1,813		646		182		—
2025-2029	1,704		—		88		—
2030-2034	3,172		—		1,001		—
	$	6,752	$	3,170	$	1,271	$	1,874

Changes in unrecognized tax benefits

The following table summarizes the changes in unrecognized tax positions for the years ended 2014, 2013 and 2012:



	FirstEnergy			FES
	(In millions)
Balance, January 1, 2012	$	117		$	45
Current year increases	2			—
Current year decreases	(7		)	—
Prior years increases	6			6
Prior years decreases	(37		)	(13		)
Decrease for settlements	(38		)	(35		)
Balance, December 31, 2012	$	43		$	3
Prior years increases	10			—
Prior years decreases	(5		)	—
Balance, December 31, 2013	$	48		$	3
Current year increases	4			—
Prior years increases	5			—
Prior years decreases	(23		)	—
Balance, December 31, 2014	$	34		$	3

Net interest expense (income) and cumulative net interest payable (receivable)

The following table summarizes the net interest expense (income) for the three years ended December 31, 2014 and the cumulative net interest payable as of December 31, 2014 and 2013:



	Net Interest Expense (Income) For the Years Ended December 31,								Net Interest Payable As of December 31,
	2014			2013		2012			2014		2013
	(In millions)								(In millions)
FirstEnergy	$	(6	)	$	1	$	(4	)	$	2	$	9
FES	—			—		(4		)	—		1

Details of general taxes

General Taxes



	2014		2013		2012
	(In millions)
FirstEnergy
KWH excise	$	194	$	219	$	230
State gross receipts	226		240		251
Real and personal property	393		368		328
Social security and unemployment	112		110		126
Other	37		41		49
Total general taxes	$	962	$	978	$	984

FES
State gross receipts	$	69	$	77	$	77
Real and personal property	39		40		35
Social security and unemployment	17		19		20
Other	3		2		4
Total general taxes	$	128	$	138	$	136

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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