INCOME TAXES

Tax Act

On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35 percent to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate alternative minimum tax (AMT) and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019 and 2020 with all remaining AMT credits to be refunded in tax year 2021.

At this time, AMT credits that are treated as refundable under the Tax Act are among the certain refundable tax credits that are subject to sequestration. During the three months ended March 31, 2018, the company has revised the December 31, 2017, estimate of the income tax effects of the Tax Act by recording a $76 million valuation allowance against these AMT credits based on additional interpretative guidance from the Internal Revenue Service related to the Tax Act. See Note 22 to the Consolidated Financial Statements in the Annual Report on Form 10-K/A for the year ended December 31, 2017, for information on the U.S. Securities and Exchange Commission staff's guidance on accounting for the Tax Act (Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act).

EFFECTIVE TAX RATES

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



	Three Months Ended
	March 31,
	2018		2017
Duke Energy	22.5	%	32.4	%
Duke Energy Carolinas	22.0	%	35.4	%
Progress Energy	13.2	%	34.1	%
Duke Energy Progress	14.1	%	34.1	%
Duke Energy Florida	16.3	%	36.6	%
Duke Energy Ohio	32.4	%	35.4	%
Duke Energy Indiana	25.9	%	39.3	%
Piedmont	24.1	%	37.9	%

The decrease in the effective tax rate (ETR) for Duke Energy and the Subsidiary Registrants for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act partially offset by a valuation allowance against AMT credits discussed above.

The decrease in the ETR for Duke Energy Carolinas for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act.

The decrease in the ETR for Progress Energy for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal and state excess deferred taxes.

The decrease in the ETR for Duke Energy Progress for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of state excess deferred taxes.

The decrease in the ETR for Duke Energy Florida for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal excess deferred taxes.

The decrease in the ETR for Duke Energy Ohio for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act partially offset by tax levelization related to federal excess deferred taxes on a pretax loss for the three months ended March 31, 2018.

The decrease in the ETR for Duke Energy Indiana for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act.

The decrease in the ETR for Piedmont for the three months ended March 31, 2018, is primarily due to the lower statutory federal corporate tax rate under the Tax Act.