Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

FirstEnergy’s interim effective tax rates reflect the estimated annual effective tax rates for 2022 and 2021. These tax rates are affected by estimated annual permanent items, such as AFUDC equity and other flow-through items, as well as discrete items that may occur in any given period but are not consistent from period to period.

FirstEnergy’s effective tax rate on continuing operations for the three months ended March 31, 2022 and 2021, was 22.4% and 20.6%, respectively. The change in effective tax rate was primarily due to a valuation allowance against certain municipal deferred tax assets.

In February 2022, the IRS completed its examination of FirstEnergy’s 2020 federal income tax return and issued a Full Acceptance Letter with no adjustment to FirstEnergy’s taxable income. There was no material change to FirstEnergy’s reserve for uncertain tax positions for the first three months ended March 31, 2022, and it remains reasonably possible that

approximately $31 million of unrecognized tax benefits may be resolved in the next twelve months as a result of settlements with taxing authorities or the statute of limitations expiring, of which $24 million would ultimately affect FirstEnergy’s effective tax rate.