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, and in October 2016 Duke Energy entered sales agreements to complete the divestiture. Accordingly, Duke Energy no longer intends to indefinitely reinvest the undistributed earnings of International Energy. See Note 2 for additional information on the sale.

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 nine months ended September 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				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Duke Energy	32.9	%	30.9	%	30.0	%	32.5	%
Duke Energy Carolinas	34.3	%	36.5	%	34.4	%	36.3	%
Progress Energy	32.8	%	25.0	%	34.7	%	31.8	%
Duke Energy Progress	31.4	%	34.4	%	33.5	%	35.3	%
Duke Energy Florida	36.0	%	30.1	%	37.0	%	35.2	%
Duke Energy Ohio	36.8	%	39.3	%	32.5	%	37.6	%
Duke Energy Indiana	35.2	%	37.0	%	34.0	%	36.6	%

The increase in the effective tax rate for Duke Energy for the three months ended September 30, 2016, is primarily due to audit adjustments and the tax benefit related to a manufacturing deduction in 2015 which is now limited due to taxable income. The decrease in the effective tax rate for Duke Energy for the nine months ended September 30, 2016, is primarily due to lower income taxes on foreign earnings due to a more efficient utilization of foreign tax credits. Refer to "Taxes on Foreign Earnings" above for additional information.

The decrease in the effective tax rate for Duke Energy Carolinas for the three months ended September 30, 2016, is primarily due to favorable tax return true-ups and a favorable change to the manufacturing deduction. The decrease in the effective tax rate for Duke Energy Carolinas for the nine months ended September 30, 2016, is primarily due to a favorable state resolution related to prior year tax returns and favorable tax return true-ups.

The increase in the effective tax rate for Progress Energy for the three and nine months ended September 30, 2016, is primarily due to state tax benefits from legal entity restructuring in 2015 and the release of tax reserves in 2015 due to expired statutes.

The decrease in the effective tax rate for Duke Energy Progress for the three and nine months ended September 30, 2016, is primarily due to the impact of tax return true-ups.

The increase in the effective tax rate for Duke Energy Florida for the three and nine months ended September 30, 2016, is primarily due to a release of tax reserves in 2015 due to expired tax statutes.

The decrease in the effective tax rate for Duke Energy Ohio for the three months ended September 30, 2016, is primarily due to an increase in AFUDC equity. The decrease in the effective tax rate for the nine months ended September 30, 2016, is primarily due to a favorable adjustment related to prior period depreciation and other property, plant and equipment.

The decrease in the effective tax rate for Duke Energy Indiana for the three months ended September 30, 2016, is primarily due to income tax levelization. The decrease in the effective tax rate for Duke Energy Indiana for the nine months ended September 30, 2016, is primarily due to a favorable adjustment related to prior period depreciation and other property, plant and equipment.