INCOME TAXES

TAXES ON FOREIGN EARNINGS

As of December 31, 2015, Duke Energy's intention was to indefinitely reinvest foreign earnings of International Energy earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Energy business segment, excluding the investment in NMC. Accordingly, Duke Energy no longer intends to indefinitely reinvest the undistributed earnings of International Energy. The Company recorded U.S. income taxes of approximately $4 million and $16 million for the three and six months ended June 30, 2016, respectively, related to such earnings and will prospectively provide U.S. income taxes on future foreign earnings.

This change in the Company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allows Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historic unremitted foreign earnings by approximately $95 million for the six months ended June 30, 2016.

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				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Duke Energy	31.8	%	35.6	%	27.2	%	33.6	%
Duke Energy Carolinas	35.1	%	36.6	%	34.6	%	36.2	%
Progress Energy	36.0	%	39.2	%	36.3	%	37.1	%
Duke Energy Progress	35.5	%	40.6	%	35.4	%	36.0	%
Duke Energy Florida	37.6	%	38.7	%	37.7	%	38.6	%
Duke Energy Ohio	34.3	%	35.0	%	29.2	%	36.8	%
Duke Energy Indiana	36.1	%	36.4	%	33.1	%	36.5	%

The decrease in the effective tax rate for Duke Energy for the three and six months ended June 30, 2016, is driven by lower income taxes on foreign earnings due to a more efficient utilization of foreign tax credits, as described above, and favorable impacts of finalizing federal tax audits. Refer to "Taxes on Foreign Earnings" above for additional information.

The decrease in the effective tax rate for Duke Energy Carolinas for the three and six months ended June 30, 2016, is primarily due to a favorable state resolution related to prior-year tax returns and favorable impacts of finalizing tax audits.

The decrease in the effective tax rate for Progress Energy for the three months ended June 30, 2016, is primarily due to a change in tax levelization.

The decrease in the effective tax rate for Duke Energy Progress for the three months ended June 30, 2016, is primarily due to a change in tax levelization.

The decrease in the effective tax rate for Duke Energy Florida for the three months ended June 30, 2016, is primarily due to an increase in AFUDC equity.

The decrease in the effective tax rate for Duke Energy Ohio for the six months ended June 30, 2016, is primarily due to a favorable prior-period adjustment for depreciation and other property, plant and equipment.

The decrease in the effective tax rate for Duke Energy Indiana for the six months ended June 30, 2016, is primarily due to a favorable prior-period adjustment for depreciation and other property, plant and equipment.