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.

				Year Ended December 31, 2012
(in millions)			Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Current income taxes
	Federal			$	(46)		$	(1)		$	(88)		$	(48)		$	6		$	26		$	(27)
	State				35			(25)			2			(6)			―			11			27
	Foreign				133			―			―			―			―			―			―
		Total current income taxes			122			(26)			(86)			(54)			6			37			―
Deferred income taxes
	Federal				513			408			226			162			121			72			(47)
	State				64			77			40			9			21			(9)			(25)
	Foreign				20			―			―			―			―			―			―
		Total deferred income taxes^(a)			597			485			266			171			142			63			(72)
Investment tax credit amortization					(14)			(6)			(8)			(7)			(1)			(2)			(1)
Income tax expense (benefit) from continuing operations^(b)					705			453			172			110			147			98			(73)
Tax expense from discontinued operations					24			―			29			―			―			―			―
Total income tax expense (benefit) included in Consolidated Statements of Operations				$	729		$	453		$	201		$	110		$	147		$	98		$	(73)

(a)	Includes benefits of net operating loss (NOL) carryforwards of $1,127 million at Duke Energy, $245 million at Duke Energy Carolinas, $357 million at Progress Energy, $257 million at Progress Energy Carolinas, $25 million at Progress Energy Florida, $99 million at Duke Energy Ohio and $205 million at Duke Energy Indiana.
(b)	Includes uncertain tax benefits relating primarily to certain temporary differences of $27 million at Duke Energy, $11 million at Duke Energy Carolinas, $(42) million at Progress Energy, $(6) million at Progress Energy Carolinas, $(36) million at Progress Energy Florida, $4 million at Duke Energy Ohio and $9 million at Duke Energy Indiana. The offset to these temporary differences are included in deferred income taxes.

				Year Ended December 31, 2011
(in millions)			Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Current income taxes
	Federal			$	(37)		$	(122)		$	(91)		$	(27)		$	(60)		$	(95)		$	95
	State				21			30			29			21			5			1			42
	Foreign				164			―			―			―			―			―			―
		Total current income taxes			148			(92)			(62)			(6)			(55)			(94)			137
Deferred income taxes
	Federal				526			531			365			262			214			194			(38)
	State				56			40			27			6			22			(2)			(23)
	Foreign				32			―			―			―			―			―			―
		Total deferred income taxes^(a)			614			571			392			268			236			192			(61)
Investment tax credit amortization					(10)			(7)			(7)			(6)			(1)			(2)			(2)
Income tax expense from continuing operations^(b)					752			472			323			256			180			96			74
Tax benefit from discontinued operations					―			―			(3)			―			―			―			―
Total income tax expense included in Consolidated Statements of Operations				$	752		$	472		$	320		$	256		$	180		$	96		$	74

(a)	Includes benefits of NOL carryforwards of $274 million at Duke Energy, $79 million at Duke Energy Carolinas, $213 million at Progress Energy, $54 million at Progress Energy Carolinas, $41 million at Progress Energy Florida and $47 million at Duke Energy Ohio.
(b)	Includes benefits of uncertain tax benefits relating primarily to certain temporary differences of $43 million at Duke Energy, $43 million at Duke Energy Carolinas, $(3) million at Progress Energy, $(1) million at Progress Energy Carolinas, $(19) million at Progress Energy Florida, $3 million at Duke Energy Ohio and $3 million at Duke Energy Indiana. The offset to these temporary differences are included in deferred income taxes.

				Year Ended December 31, 2010
(in millions)			Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Current income taxes
	Federal			$	(5)		$	3		$	(46)		$	73		$	(44)		$	107		$	(3)
	State				39			(2)			(13)			(8)			(4)			8			16
	Foreign				125			―			―			―			―			―			―
		Total current income taxes^(a)			159			1			(59)			65			(48)			115			13
Deferred income taxes
	Federal				639			388			505			238			286			6			123
	State				83			75			100			53			39			12			22
	Foreign				20			―			―			―			―			―			―
		Total deferred income taxes^(b)			742			463			605			291			325			18			145
Investment tax credit amortization					(11)			(7)			(7)			(6)			(1)			(1)			(2)
Income tax expense from continuing operations					890			457			539			350			276			132			156
Tax benefit from discontinued operations					(1)			―			(9)			―			―			―			―
Total income tax expense included in Consolidated Statements of Operations				$	889		$	457		$	530		$	350		$	276		$	132		$	156

(a)	Includes uncertain tax benefits relating primarily to certain temporary differences of $(392) million at Duke Energy, $(300) million at Duke Energy Carolinas, $16 million at Progress Energy, $15 million at Progress Energy Carolinas, $1 million at Progress Energy Florida, $(3) million at Duke Energy Ohio and $(7) million at Duke Energy Indiana. The offset to these temporary differences are included in deferred income taxes.
(b)	Includes benefits of NOL carryforwards of $37 million at Progress Energy and $9 million at Progress Energy Florida.

Reconciliation of Income Tax Expense at the U.S. Federal Statutory Tax Rate to the Actual Tax Expense from Continuing Operations (Statutory Rate Reconciliation)

				Year Ended December 31, 2012
(in millions)			Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Income tax expense, computed at the statutory rate of 35%				$	858		$	461		$	185		$	134		$	145		$	96		$	(43)
	State income tax, net of federal income tax effect				64			34			33			1			14			1			1
	Tax differential on foreign earnings				(66)			―			―			―			―			―			―
	AFUDC equity income				(101)			(54)			(37)			(24)			(13)			(2)			(26)
	Other items, net				(50)			12			(9)			(1)			1			3			(5)
		Income tax expense from continuing operations		$	705		$	453		$	172		$	110		$	147		$	98		$	(73)
Effective tax rate					28.8	%		34.3	%		32.7	%		28.7	%		35.7	%		36.0	%		59.5	%

				Year Ended December 31, 2011
(in millions)			Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Income tax expense, computed at the statutory rate of 35%				$	863		$	457		$	319		$	270		$	173		$	102		$	85
	State income tax, net of federal income tax effect				50			46			39			18			17			(1)			13
	Tax differential on foreign earnings				(44)			―			―			―			―			―			―
	AFUDC equity income				(91)			(59)			(36)			(25)			(11)			(2)			(31)
	Other items, net				(26)			28			1			(7)			1			(3)			7
		Income tax expense from continuing operations		$	752		$	472		$	323		$	256		$	180		$	96		$	74
Effective tax rate					30.5	%		36.1	%		35.6	%		33.2	%		36.3	%		33.1	%		30.6	%

				Year Ended December 31, 2010
(in millions)			Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Income tax expense, computed at the statutory rate of 35%				$	774		$	454		$	492		$	333		$	255		$	(108)		$	155
	State income tax, net of federal income tax effect				82			48			60			30			23			14			26
	Tax differential on foreign earnings				(22)			―			―			―			―			―			―
	Goodwill impairment charges				175			―			―			―			―			237			―
	AFUDC equity income				(82)			(61)			(32)			(22)			(10)			(2)			(20)
	Other items, net				(37)			16			19			9			8			(9)			(5)
		Income tax expense from continuing operations		$	890		$	457		$	539		$	350		$	276		$	132		$	156
Effective tax rate					40.3	%		35.3	%		38.3	%		36.8	%		37.9	%		(43.0)	%		35.5	%

Valuation allowances have been established for certain foreign and state net operating loss carryforwards that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in Tax differential on foreign earnings and State income tax, net of federal income tax effect in the above tables.

Net Deferred Income Tax Liability Components

			December 31, 2012
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Deferred credits and other liabilities			$	2,948		$	194		$	822		$	342		$	333		$	52		$	115
Tax credits and NOL carryforwards				3,311			447			1,536			309			91			152			340
Other				408			22			230			82			126			10			27
Valuation allowance				(226)			―			(77)			―			―			(1)			―
	Total deferred income tax assets			6,441			663			2,511			733			550			213			482
Investments and other assets				(1,093)			(838)			(112)			(108)			(6)			(25)			(18)
Accelerated depreciation rates				(11,208)			(4,289)			(2,803)			(2,178)			(592)			(1,823)			(1,131)
Regulatory assets and deferred debits				(3,819)			(627)			(1,775)			(465)			(1,318)			(197)			(185)
	Total deferred income tax liabilities			(16,120)			(5,754)			(4,690)			(2,751)			(1,916)			(2,045)			(1,334)
	Net deferred income tax liabilities		$	(9,679)		$	(5,091)		$	(2,179)		$	(2,018)		$	(1,366)		$	(1,832)		$	(852)

The following table presents the expiration of tax credits and NOL carryforwards.

			December 31, 2012
(in millions)			Amount		Expiration year
Investment Tax Credits			$	391		2029-2032
Alternative Minimum Tax Credits				1,033		Indefinite
Federal NOL carryforwards				1,604		2031-2032
State NOL carryforwards^(a)				166		2013-2032
Foreign NOL carryforwards^(b)				117		2015-2032; Indefinite
	Total tax credits and NOL carryforwards		$	3,311

(a)		A valuation allowance of $121 million has been recorded on the state NOL carryforwards and state capital loss carryforwards, as presented in the Net Deferred Income Tax Liability Components table.
(b)		A valuation allowance of $105 million has been recorded on the foreign NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.

			December 31, 2011
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Deferred credits and other liabilities			$	790		$	228		$	900		$	441		$	513		$	68		$	92
Tax credits and NOL carryforwards				930			199			1,163			57			42			―			95
Regulatory liabilities and deferred credits				―			―			375			142			198			―			―
Investments and other assets				―			―			―			―			―			3			―
Other				137			18			522			168			101			31			5
Valuation allowance				(144)			―			(71)			―			―			―			―
	Total deferred income tax assets			1,713			445			2,889			808			854			102			192
Investments and other assets				(809)			(720)			―			(103)			(56)			―			(2)
Accelerated depreciation rates				(6,989)			(3,576)			(3,098)			(1,908)			(1,180)			(1,706)			(968)
Regulatory assets and deferred debits				(1,219)			(658)			(1,271)			(541)			(685)			(216)			(136)
Other				―			―			(315)			(17)			(120)			―			―
	Total deferred income tax liabilities			(9,017)			(4,954)			(4,684)			(2,569)			(2,041)			(1,922)			(1,106)
	Net deferred income tax liabilities		$	(7,304)		$	(4,509)		$	(1,795)		$	(1,761)		$	(1,187)		$	(1,820)		$	(914)

Classification of Deferred Tax Assets (Liabilities) in the Consolidated Balance Sheets

			December 31, 2012
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Current deferred tax assets, included in Other within Current Assets			$	732		$	90		$	359		$	144		$	152		$	21		$	1
Non-current deferred tax assets, included in Other within Investments and Other Assets				85			―			20			―			―			―			―
Current deferred tax liabilities, included in Other within Current Liabilities				(6)			―			―			―			―			―			―
Non-current deferred tax liabilities, included in Other within Deferred Credits and Other Liabilities				(10,490)			(5,181)			(2,558)			(2,162)			(1,518)			(1,853)			(853)
	Net deferred income tax liabilities		$	(9,679)		$	(5,091)		$	(2,179)		$	(2,018)		$	(1,366)		$	(1,832)		$	(852)

			December 31, 2011
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Current deferred tax assets, included in Other within Current Assets			$	210		$	46		$	371		$	142		$	138		$	33		$	13
Non-current deferred tax assets, included in Other within Investments and Other Assets				67			―			27			―			―			―			―
Non-current deferred tax liabilities, included in Other within Deferred Credits and Other Liabilities				(7,581)			(4,555)			(2,193)			(1,903)			(1,325)			(1,853)			(927)
	Net deferred income tax liabilities		$	(7,304)		$	(4,509)		$	(1,795)		$	(1,761)		$	(1,187)		$	(1,820)		$	(914)

Deferred income taxes and foreign withholding taxes have not been provided on undistributed earnings of Duke Energy's foreign subsidiaries when such amounts are deemed to be indefinitely reinvested. The cumulative undistributed earnings as of December 31, 2012 on which Duke Energy has not provided deferred income taxes and foreign withholding taxes is $2 billion. The amount of unrecognized deferred tax liability related to these undistributed earnings is estimated at between $275 million and $350 million.

Changes to Unrecognized Tax Benefits

			Year Ended December 31, 2012
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Unrecognized tax benefits — January 1			$	385		$	260		$	173		$	73		$	80		$	32		$	24
Acquisitions				128			―			―			―			―			―			―
Unrecognized tax benefits increases (decreases)
	Gross increases — tax positions in prior periods			29			12			23			10			12			2			6
	Gross decreases — tax positions in prior periods			(4)			―			(72)			(19)			(52)			―			―
	Gross increases — current period tax positions			28			15			8			4			4			4			4
	Gross decreases — current period tax positions			(9)			(5)			(1)			(1)			―			(2)			(2)
	Settlements			(13)			(11)			―			―			―			―			―
	Statute			(4)			―			―			―			―			―			―
	Total changes			155			11			(42)			(6)			(36)			4			8
Unrecognized tax benefits — December 31			$	540		$	271		$	131		$	67		$	44		$	36		$	32

			Year Ended December 31, 2011
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Unrecognized tax benefits — January 1			$	342		$	217		$	176		$	74		$	99		$	29		$	21
Unrecognized tax benefits increases (decreases)
	Gross increases — tax positions in prior periods			49			42			88			19			66			4			3
	Gross decreases — tax positions in prior periods			(18)			(8)			(24)			(14)			(21)			(5)			(3)
	Gross increases — current period tax positions			16			9			9			8			1			4			3
	Gross decreases — current period tax positions			―			―			(8)			(4)			(4)			―			―
	Settlements			(4)			―			(68)			(10)			(61)			―			―
	Total changes			43			43			(3)			(1)			(19)			3			3
Unrecognized tax benefits — December 31			$	385		$	260		$	173		$	73		$	80		$	32		$	24

			Year Ended December 31, 2010
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Unrecognized tax benefits — January 1			$	664		$	517		$	160		$	59		$	98		$	32		$	28
Unrecognized tax benefits increases (decreases)
	Gross increases — tax positions in prior periods			36			14			10			8			2			15			7
	Gross decreases — tax positions in prior periods			(43)			(7)			(4)			(2)			(1)			(21)			(13)
	Gross increases — current period tax positions			5			3			14			10			3			1			1
	Gross decreases — current period tax positions			―			―			(4)			(1)			(3)			―			―
	Settlements			(320)			(310)			―			―			―			2			(2)
	Total changes			(322)			(300)			16			15			1			(3)			(7)
Unrecognized tax benefits — December 31			$	342		$	217		$	176		$	74		$	99		$	29		$	21

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

		December 31, 2012
(in millions)		Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Amount that if recognized, would affect the effective tax rate or regulatory liability^(b)			$	131		$	113		$	8		$	1		$	1		$	―		$	1
Amount that if recognized, would be recorded as a component of discontinued operations				11			―			3			―			―			―			―

(a)	It is reasonably possible that Duke Energy and Duke Energy Carolinas will reflect an approximate $65 million reduction in unrecognized tax benefits within the next 12 months due to expected settlements. All other Duke Energy Registrants do not anticipate a material increase or decrease in unrecognized tax benefits within the next 12 months.
(b)	Duke Energy, Duke Energy Carolinas, Progress Energy, Progress Energy Carolinas and Progress Energy Florida are unable to estimate the specific amounts that would affect the effective tax rate or regulatory liability.

The following tables include interest and penalties recognized in the Consolidated Statements of Operations and the Consolidated Balance Sheets:

As of and For the Year Ended December 31, 2012

(in millions)

Duke Energy

Duke Energy Carolinas

Progress Energy

Progress Energy Carolinas

Progress Energy Florida

Duke Energy Ohio

Duke Energy Indiana

Net interest income recognized related to income taxes

―

Net interest expense recognized related to income taxes

―

Interest receivable related to income taxes

―

Interest payable related to income taxes

―

	As of and For the Year Ended December 31, 2011
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Net interest income recognized related to income taxes		$	12		$	5		$	24		$	6		$	22		$	―		$	―
Net interest expense recognized related to income taxes			―			―			―			―			―			1			1
Interest receivable related to income taxes			8			5			―			―			―			―			―
Interest payable related to income taxes			―			―			21			8			7			3			3

	Year Ended December 31, 2010
(in millions)	Duke Energy			Duke Energy Carolinas			Progress Energy			Progress Energy Carolinas			Progress Energy Florida			Duke Energy Ohio			Duke Energy Indiana
Net interest income recognized related to income taxes		$	26		$	18		$	―		$	―		$	―		$	4		$	5
Net interest expense recognized related to income taxes			―			―			9			4			5			―			―

Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana are no longer subject to U.S. federal examination for years before 2004. The years 2004 and 2005 are in Appeals, waiting for approval from the Joint Committee. The 2006-2007 years are also in Appeals, waiting for the prior cycle to close. The IRS is currently auditing the federal income tax returns for years 2008 through 2011.

Progress Energy, Progress Energy Carolinas and Progress Energy Florida are no longer subject to U.S. federal examination for years before 2007. The IRS has examined years 2007 through 2009 and examination has been completed.

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 2004.