Duke Energy and its subsidiaries file income tax returns in the U.S. with federal and various state governmental authorities, and in certain foreign jurisdictions. The taxable income of Duke Energy and its subsidiaries is reflected in Duke Energy's U.S. federal and state income tax returns. These subsidiaries have a tax sharing agreement with Duke Energy where the separate return method is used to allocate tax expenses and benefits to the subsidiaries whose investments or results of operations provide these tax expenses and benefits. The accounting for income taxes essentially represents the income taxes that each of these subsidiaries would incur if it were a separate company filing its own tax return as a C-Corporation.

The following table includes information regarding the Duke Energy Registrants' unrecognized tax benefits.


		Nine Months Ended September 30, 2013
(in millions)		Duke Energy		Duke Energy Carolinas		Progress Energy		Duke Energy Progress		Duke Energy Florida		Duke Energy Ohio		Duke Energy Indiana
Unrecognized tax benefits - January 1		$	540	$	271	$	131	$	67	$	44	$	36	$	32
Gross decreases - tax positions in prior periods			(230)		(96)		(85)		(45)		(37)		(36)		(31)
Settlements			(66)		(4)		―		―		―		―		―
	Total changes		(296)		(100)		(85)		(45)		(37)		(36)		(31)
Unrecognized tax benefits - September 30^(a)		$	244	$	171	$	46	$	22	$	7	$	―	$	1

(a)	The Duke Energy Registrants do not anticipate a significant increase or decrease in unrecognized tax benefits in the next twelve months.

Duke Energy and its subsidiaries are no longer subject to U.S. federal examination for years before 2006. The years 2006 and 2007 are in Appeals. The Internal Revenue Service (IRS) is currently auditing the federal income tax returns for years 2008 and 2011. With few exceptions, Duke Energy and its subsidiaries are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 1999.

The effective tax rates for each of the Duke Energy Registrants are included in the following table.


	Three Months Ended September 30,					Nine Months Ended September 30,
		2013		2012			2013		2012
Duke Energy		31.5	%	29.4	%		32.6	%	29.6	%
Duke Energy Carolinas		37.9	%	34.2	%		37.5	%	35.8	%
Progress Energy		38.8	%	32.8	%		38.1	%	34.7	%
Duke Energy Progress		35.7	%	31.9	%		37.3	%	31.6	%
Duke Energy Florida		40.0	%	35.9	%		40.0	%	36.9	%
Duke Energy Ohio		42.9	%	45.2	%		40.4	%	38.9	%
Duke Energy Indiana		36.6	%	55.1	%		37.2	%	47.7	%

The increase in the effective tax rate for Duke Energy for the nine months ended September 30, 2013, is primarily due to lower pretax income in 2012 due to the Edwardsport IGCC project impairment, Progress Energy results of operations included in 2013 compared to post-merger inclusion in 2012, impact of lower AFUDC equity in 2013, and a reduction of foreign deferred taxes in 2012 due to changes in foreign tax rates.

The increase in the effective tax rate for Duke Energy Carolinas for the three months ended September 30, 2013, is primarily due to higher pretax book income and the impact of lower AFUDC equity in 2013.

The increase in the effective tax rate for Progress Energy for the three and nine months ended September 30, 2013, is primarily due to the charges related to the 2013 Settlement Agreement, the impact of lower AFUDC equity and the Employee Stock Ownership Plan (ESOP) dividend deduction being recorded at Duke Energy in 2013.

The increase in the effective tax rate for Duke Energy Progress for the three and nine months ended September 30, 2013, is primarily due to the favorable prior-year tax benefit related to the manufacturing deduction and the impact of lower AFUDC equity in 2013.

The increase in the effective tax rate for Duke Energy Florida for the three and nine months ended September 30, 2013, is primarily due to charges related to the 2013 FPSC settlement agreement, the favorable prior-year tax benefit related to the manufacturing deduction and the impact of lower AFUDC equity in 2013.

The decrease in the effective tax rate for Duke Energy Indiana for the three and nine months ended September 30, 2013, is primarily due to pretax income in 2013 compared to pretax loss in 2012 related to the Edwardsport IGCC project impairment and the impact of AFUDC equity in 2013 that reduced the tax expense compared to higher AFUDC in 2012, which increased the tax benefit.

On July 23, 2013, North Carolina House Bill 998 (HB 998) was signed into law. HB 998 reduces the North Carolina corporate income tax rate from a statutory 6.9 percent to 6.0 percent in January 2014 with a further reduction to 5.0 percent in January 2015. Duke Energy recorded a net reduction of approximately $145 million to its North Carolina deferred tax liability in the third quarter of 2013. The significant majority of this deferred tax liability reduction was offset by recording a regulatory liability pending NCUC determination of the disposition of the amounts related to Duke Energy Carolinas and Duke Energy Progress. The impact of HB 998 did not have a significant impact on the financial position, results of operation, or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy or Duke Energy Progress.

Certain excise taxes levied by state or local governments are collected by the Duke Energy Registrants from their customers. These taxes, which are required to be paid regardless of the Duke Energy Registrants' ability to collect from the customer, are accounted for on a gross basis. When the Duke Energy Registrants act as an agent, and the tax is not required to be remitted if it is not collected from the customer, the taxes are accounted for on a net basis. The Duke Energy Registrants' excise taxes accounted for on a gross basis and recorded as operating revenues in the Condensed Consolidated Statements of Operations are included in the following table.


	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)			2013		2012			2013		2012
Duke Energy		$	170	$	178		$	461	$	325
Duke Energy Carolinas			46		47			124		125
Progress Energy			89		95			230		241
Duke Energy Progress			33		33			88		85
Duke Energy Florida			56		62			142		156
Duke Energy Ohio			26		26			81		79
Duke Energy Indiana			9		9			26		25