Income tax expense (benefit) from continuing operations is comprised of the following components:

For the Year Ended December 31, 2012		Exelon		Generation		ComEd		PECO		BGE

Included in operations:
Federal
	Current	$	37	$	104	$	(40)	$	88	$	(97)
	Deferred		701		326		237		25		101
	Investment tax credit amortization		(11)		(6)		(2)		(2)		(1)
State
	Current		(25)		(12)		6		4		—
	Deferred		(75)		88		38		12		4

	Total	$	627	$	500	$	239	$	127	$	7

For the Year Ended December 31, 2011		Exelon		Generation		ComEd		PECO		BGE

Included in operations:
Federal
	Current	$	1	$	431	$	(329)	$	(71)	$	(71)
	Deferred		1,200		435		544		223		130
	Investment tax credit amortization		(12)		(7)		(3)		(2)		(1)
State
	Current		(3)		74		(123)		(37)		—
	Deferred		271		123		161		33		17

	Total	$	1,457	$	1,056	$	250	$	146	$	75

For the Year Ended December 31, 2010		Exelon		Generation		ComEd		PECO		BGE

Included in operations:
Federal
	Current	$	506	$	372	$	(203)	$	464	$	(201)
	Deferred		972		635		496		(276)		279
	Investment tax credit amortization		(12)		(7)		(3)		(2)		(1)
State
	Current		171		65		(22)		87		(2)
	Deferred		21		113		89		(121)		22

	Total	$	1,658	$	1,178	$	357	$	152	$	97

The effective income tax rate from continuing operations varies from the U.S. Federal statutory rate principally due to the following:

For the Year Ended December 31, 2012		Exelon (a)		Generation (a)		ComEd		PECO		BGE (b)

U.S. Federal statutory rate		35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
Increase (decrease) due to:
	State income taxes, net of Federal income tax benefit	(3.6)		4.7		4.6		2.0		24.3
	Qualified nuclear decommissioning trust fund income	5.4		9.1		—		—		—
	Tax exempt income	(0.2)		(0.4)		—		—		—
	Health care reform legislation	0.1		—		0.4		—		11.6
	Amortization of investment tax credit, net deferred taxes	(1.1)		(1.3)		(0.4)		(0.3)		(8.6)
	Production tax credits and other credits	(2.2)		(3.7)		—		—		—
	Plant basis differences	(2.4)		—		(0.3)		(11.5)		(9.0)
	Merger expenses (c)	2.4		—		—		—		24.2
	Fines and Penalties	2.6		4.4		—		—		—
	Other	(1.1)		(0.5)		(0.6)		(0.2)		(13.9)

Effective income tax rate		34.9	%	47.3	%	38.7	%	25.0	%	63.6	%

For the Year Ended December 31, 2011		Exelon		Generation		ComEd		PECO		BGE

U.S. Federal statutory rate		35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
Increase (decrease) due to:
	State income taxes, net of Federal income tax benefit	4.4		4.5		3.6		(0.5)		5.2
	Qualified nuclear decommissioning trust fund income	0.5		0.7		—		—		—
	Domestic production activities deduction	(0.3)		(0.4)		—		—		—
	Tax exempt income	(0.2)		(0.2)		—		—		—
	Health care reform legislation	(0.2)		—		(1.0)		—		(0.5)
	Amortization of investment tax credit	(0.3)		(0.3)		(0.4)		(0.3)		(0.5)
	Production tax credits	(0.9)		(1.2)		—		—		—
	Plant basis differences	(1.0)		—		(0.3)		(6.9)		(2.0)
	Other	(0.2)		(0.7)		0.6		—		(1.7)

Effective income tax rate		36.8	%	37.4	%	37.5	%	27.3	%	35.5	%

For the Year Ended December 31, 2010		Exelon		Generation		ComEd		PECO		BGE

U.S. Federal statutory rate		35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
Increase (decrease) due to:
	State income taxes, net of Federal income tax benefit	3.0		3.7		6.3		(4.7)		5.5
	Qualified nuclear decommissioning trust fund income	1.7		2.3		—		—		—
	Domestic production activities deduction	(1.2)		(1.5)		—		—		—
	Tax exempt income	(0.1)		(0.2)		—		—		—
	Health care reform legislation	1.4		0.7		1.4		1.6		1.1
	Amortization of investment tax credit	(0.3)		(0.2)		(0.4)		(0.4)		(0.4)
	Plant basis differences	—		—		(0.1)		0.2		(1.0)
	Uncertain tax position remeasurement	—		(2.0)		9.0		—		—
	Other	(0.2)		(0.4)		0.2		0.2		(0.4)

Effective income tax rate		39.3	%	37.4	%	51.4	%	31.9	%	39.8	%

(a) Exelon activity for the twelve months ended December 31, 2012 includes the results of Constellation and BGE for March 12, 2012 - December 31, 2012. Generation activity for the twelve months ended December 31, 2012 includes the results of Constellation for March 12, 2012 - December 31, 2012.

(b) BGE activity represents the activity for the twelve months ended December 31, 2012, 2011 and 2010.

(c) Prior to the close of the merger, the Registrants recorded the applicable taxes on merger transaction costs assuming the merger would not be completed. Upon closing of the merger, the Registrants reversed such taxes for those merger transaction costs that were determined to be non tax-deductible upon successful completion of a merger.

The tax effects of temporary differences, which give rise to significant portions of the deferred tax assets (liabilities), as of December 31, 2012 and 2011 are presented below:

For the Year Ended December 31, 2012			Exelon		Generation		ComEd		PECO		BGE

	Plant basis differences		$	(10,689)	$	(3,545)	$	(3,537)	$	(2,437)	$	(1,553)
	Accrual based contracts			(389)		(389)		—		—		—
	Derivatives and other financial instruments			(392)		(479)		(4)		—		—
	Deferred pension and post-retirement obligation			1,225		(439)		(598)		(11)		(12)
	Nuclear decommissioning activities			(604)		(604)		—		—		—
	Deferred debt refinancing costs			(537)		163		(25)		(4)		(4)
	Tax loss carryforward			421		226		32		14		105
	Tax credit carryforward			226		226		—		—		—
	Investment in CENG			(405)		(419)		—		—		—
	Other, net			(25)		9		(33)		150		(186)

Deferred income tax liabilities (net)			$	(11,169)	$	(5,251)	$	(4,165)	$	(2,288)	$	(1,650)
Unamortized investment tax credits				(251)		(216)		(24)		(3)		(6)

Total deferred income tax liabilities (net) and
	unamortized investment tax credits		$	(11,420)	$	(5,467)	$	(4,189)	$	(2,291)	$	(1,656)

For the Year Ended December 31, 2011			Exelon		Generation		ComEd		PECO		BGE

	Plant basis differences		$	(7,803)	$	(2,670)	$	(3,264)	$	(2,238)	$	(1,220)
	Unrealized gains on derivative financial
		instruments		(468)		(737)		(4)		—		—
	Deferred pension and post-retirement obligation			665		(520)		(623)		(31)		(93)
	Nuclear decommissioning activities			(452)		(452)		—		—		—
	Deferred debt refinancing costs			(37)		—		(31)		(6)		(4)
	Other, net			41		338		16		135		(226)

Deferred income tax liabilities (net)			$	(8,054)	$	(4,041)	$	(3,906)	$	(2,140)	$	(1,543)
Unamortized investment tax credits				(200)		(169)		(26)		(5)		(8)

Total deferred income tax liabilities (net) and
	unamortized investment tax credits		$	(8,254)	$	(4,210)	$	(3,932)	$	(2,145)	$	(1,551)

The following table provides the Registrants' carryforwards and any corresponding valuation allowances as of December 31, 2012.

		Exelon			Generation			ComEd		PECO			BGE

Federal
Federal net operating loss	$	635	(a)	$	303		$	91	$	0		$	154
Federal capital loss carryforward		178	(b)		178			0		0			0
Federal general business credits carryforward		226	(c)		226			0		0			0

State
State net operating loss		3,365	(d)		1,649	(f)		0		209	(h)		950	(i)
State capital loss carryforward		127	(e)		119	(g)		0		0			0
Deferred taxes on state tax attributes (net)		187			99			0		14			51
Valuation allowance on state tax attributes		36			35			0		0			1

The following table provides a reconciliation of the Registrants' unrecognized tax benefits as of December 31, 2012, 2011 and 2010:

	Exelon		Generation		ComEd		PECO		BGE

Unrecognized tax benefits at January 1, 2012	$	807	$	683	$	70	$	48	$	11
Merger Balance Transfer		195		183		—		—		—
Increases based on tax positions related to 2012		34		3		—		—		—
Change to positions that only affect timing		(88)		(69)		(3)		(4)		(11)
Increases based on tax positions prior to 2012		91		91		—		—		—
Decreases based on tax positions prior to 2012		(6)		(6)		—		—		—
Decreases related to settlements with taxing authorities		(2)		(2)		—		—		—
Decreases from expiration of statute of limitations		(7)		(7)		—		—		—

Unrecognized tax benefits at December 31, 2012	$	1,024	$	876	$	67	$	44	$	—

	Exelon		Generation		ComEd		PECO		BGE

Unrecognized tax benefits at January 1, 2011	$	787	$	664	$	72	$	44	$	73
Increases based on tax positions related to 2011		5		1		—		4		—
Change to positions that only affect timing		21		24		(2)		—		(62)
Decreases based on tax positions prior to 2011		(3)		(3)		—		—		—
Decrease from expiration of statute of limitations		(3)		(3)		—		—		—

Unrecognized tax benefits at December 31, 2011	$	807	$	683	$	70	$	48	$	11

	Exelon		Generation		ComEd		PECO		BGE

Unrecognized tax benefits at January 1, 2010	$	1,498	$	633	$	471	$	372	$	112
Increases based on tax positions related to 2010		1		—		—		—		—
Decreases based on tax positions related to 2010		(2)		(2)		—		—		—
Change to positions that only affect timing		(262)		55		(3)		(328)		(39)
Increases based on tax positions prior to 2010		8		8		—		—		—
Decreases based on tax positions prior to 2010		(3)		(3)		—		—		—
Decreases related to settlements with taxing authorities		(452)		(26)		(396)		—		—
Decrease from expiration of statute of limitations		(1)		(1)		—		—		—

Unrecognized tax benefits at December 31, 2010	$	787	$	664	$	72	$	44	$	73

Included in Exelon's unrecognized tax benefits balance at December 31, 2012 and 2011 are approximately $730 million and $804 million, respectively, of tax positions for which the ultimate tax benefit is highly certain, but for which there is uncertainty about the timing of such benefits. The disallowance of such positions would not materially affect the annual effective tax rate but would accelerate the payment of cash to, or defer the receipt of the cash tax benefit from, the taxing authority to an earlier or later period respectively.

Unrecognized tax benefits that if recognized would affect the effective tax rate

Exelon and Generation have $294 million and $263 million, respectively, of unrecognized tax benefits at December 31, 2012 that, if recognized, would decrease the effective tax rate. Exelon and Generation had $3 million and $3 million, respectively, of unrecognized tax benefits at December 31, 2011 that, if recognized, would decrease the effective tax rate.

The following table represents the net interest receivable (payable), including interest related to uncertain tax positions reflected in the Registrants' Consolidated Balance Sheets. Prior to the merger legacy Constellation recorded interest related to uncertain tax positions as a tax and not interest.

The following table sets forth the net interest expense, including interest related to uncertain tax positions, recognized in interest expense (income) in other income and deductions in the Registrants' Consolidated Statements of Operations. The Registrants have not accrued any penalties with respect to uncertain tax positions. Prior to the merger legacy Constellation recorded interest related to uncertain tax positions as a tax and not interest.

Reasonably possible that total amount of unrecognized tax benefits could significantly increase or decrease within 12 months after the reporting date

AmerGen filed income tax refund claims taking the position that nuclear decommissioning liabilities assumed as part of its acquisition of nuclear power plants are taken into account in determining the tax basis in the assets it acquired. The additional basis results primarily in reduced capital gains or increased capital losses on the sale of assets in nonqualified decommissioning funds and increased tax depreciation and amortization deductions. The IRS disagrees with this position and has disallowed the claims. In November 2008, Generation received a final determination from the Appeals division of the IRS (IRS Appeals) disallowing AmerGen's refund claims. On February 20, 2009, Generation filed a complaint in the United States Court of Federal Claims to contest this determination. In August 2009, the DOJ filed its answer denying the allegations made by Generation in its complaint. While the discovery phase of the litigation has been completed, no trial date has yet been assigned but could occur sometime in 2013.

During 2012, the parties agreed to take advantage of the court's Alternative Dispute Resolution (ADR) program in an effort to resolve the dispute. The court's ADR program provides a confidential and non-binding mediation process that tries to facilitate settlements. The parties participated in mediation discussions late in 2012 and these discussions are currently ongoing. Due to the possibility of quicker resolution through the ADR program, Generation believes that it is reasonably possible that the total amount of unrecognized tax benefits may significantly decrease in the next twelve months.

Generation has approximately $100 million of unrecognized tax benefits related to various state income tax return positions for which it is reasonably possible the unrecognized tax benefits could significantly change within 12 months due to the expiration of statutes of limitation or settlements with the state taxing authorities. Furthermore, Generation has approximately $55 million of unrecognized tax benefits related to state income tax refund claims that are currently being litigated. It is reasonably possible the unrecognized tax benefits of $55 million would decrease within 12 months.

See Other Tax Matters – Involuntary Conversion, Like Kind Exchange and Competitive Transition Charges section below for information regarding the amount of unrecognized tax benefits associated with this matter that could change significantly within the next 12 months.

Description of tax years that remain subject to examination by major jurisdiction

Taxpayer		Open Years

Exelon (and predecessors) and subsidiaries consolidated Federal income
tax returns		1999-2011
Constellation and subsidiaries consolidated Federal income tax returns		2005-March 2012
Exelon and subsidiaries Illinois unitary income tax returns		2007-2011
Constellation combined New York corporate income tax returns		2008-March 2012
Various separate company Pennsylvania corporate net income tax returns		2008-March 2012
Various separate company Maryland corporate net income tax returns		2005-March 2012

1999 Sale of Fossil Generating Assets (Exelon and ComEd). Exelon, through its ComEd subsidiary, took two positions on its 1999 income tax return to defer approximately $2.8 billion of tax gain on the sale of ComEd's fossil generating assets. Exelon deferred approximately $1.6 billion of the gain under the involuntary conversion provisions of the IRC. Exelon believed that it was economically compelled to dispose of ComEd's fossil generating plants as a result of the Illinois Act and that the proceeds from the sale of the fossil plants were properly reinvested in qualifying replacement property such that the gain could be deferred over the lives of the replacement property under the involuntary conversion provisions. The remaining approximately $1.2 billion of the gain was deferred by reinvesting the proceeds from the sale in qualifying replacement property under the like-kind exchange provisions of the IRC. The like-kind exchange replacement property purchased by Exelon included interests in three municipal-owned electric generation facilities which were properly leased back to the municipalities. The IRS disagreed with both positions and asserted that the entire gain of approximately $2.8 billion was taxable in 1999.

Competitive Transition Charges (Exelon, ComEd, and PECO). Exelon contended that the Illinois Act and the Competition Act resulted in the taking of certain of ComEd's and PECO's assets used in their respective businesses of providing electricity services in their defined service areas. Exelon filed refund claims with the IRS taking the position that CTCs collected during ComEd's and PECO's transition periods represent compensation for that taking and, accordingly, were excludible from taxable income as proceeds from an involuntary conversion. The tax basis of property acquired with the funds provided by the CTCs would be reduced such that the benefits of the position are temporary in nature. The IRS disallowed the refund claims for the 1999-2001 tax years.

Status of Involuntary Conversion and CTC Positions. In the second quarter of 2010, the IRS offered to settle the disagreement over the involuntary conversion and CTC positions. Exelon concluded, based on that offer, that it had sufficient new information that a remeasurement of the involuntary conversion and CTC positions was required in accordance with applicable accounting standards. As a result of the required remeasurement, Exelon recorded $65 million (after-tax) of interest expense, of which $36 million (after-tax) and $22 million (after-tax) were recorded at ComEd and PECO, respectively. ComEd also recorded a current tax expense of $70 million offset with a tax benefit recorded at Generation of $70 million. In the third quarter of 2010, Exelon and the IRS reached a nonbinding, preliminary agreement to settle Exelon's involuntary conversion on terms consistent with the settlement offer received in the second quarter. As a result of the preliminary agreement, Exelon and ComEd eliminated any liability for unrecognized tax benefits and established a current tax payable to the IRS. In November 2012, the IRS and Exelon finalized and executed definitive agreements to resolve Exelon's involuntary conversion and CTC positions. Exelon paid $302 million in late 2010 in advance of the final settlement and the assessment.

Status of Like-Kind Exchange Position. Exelon has been unable to reach agreement with the IRS regarding the dispute over the like kind exchange position.

The IRS has asserted that the Exelon purchase and leaseback transaction is substantially similar to a leasing transaction, known as a SILO, which the IRS does not respect as the acquisition of an ownership interest in property. A SILO is a “listed transaction” that the IRS has identified as a potentially abusive tax shelter under guidance issued in 2005. Accordingly, the IRS has asserted that the sale of the fossil plants followed by the purchase and leaseback of the municipal owned generation facilities does not qualify as a like-kind exchange and the gain on the sale is fully subject to tax. The IRS has also asserted a penalty of approximately $86 million for a substantial understatement of tax.

Exelon disagrees with the IRS and continues to believe that its like-kind exchange transaction is not the same as or substantially similar to a SILO. Exelon expects to initiate litigation in 2013 to contest the IRS's disallowance of the like-kind exchange position. Although Exelon has been and remains willing to settle the disagreement on terms commensurate with the hazards of litigation, as of December 31, 2012, Exelon does not believe a settlement is possible. Because Exelon believed, as of December 31, 2012, that it was more-likely-than-not that Exelon would prevail in litigation, Exelon and ComEd had no liability for unrecognized tax benefits with respect to the like kind exchange position.

On January 9, 2013, the U.S. Court of Appeals for the Federal Circuit reversed the U.S. Court of Federal Claims and reached a decision for the government in Consolidated Edison v. United States. The Court disallowed Consolidated Edison's deductions stemming from its participation in a LILO transaction that the IRS also has characterized as a tax shelter.

In accordance with applicable accounting standards, Exelon is required to assess whether it is more-likely-than-not that it will prevail in litigation. Exelon continues to believe that its transaction is not a SILO and that it has a strong case on the merits. However, in light of the Consolidated Edison decision and Exelon's current determination that settlement is unlikely, Exelon has concluded that subsequent to December 31, 2012, it no longer meets the more-likely-than-not standard. As a result, Exelon expects to record in the first quarter of 2013 a non-cash charge to earnings of approximately $270 million, which represents the full amount of interest expense (after-tax) and incremental state tax expense in the event that Exelon is unsuccessful in litigation. Of this amount, approximately $185 million will be recorded at ComEd and the balance at Exelon. Exelon and ComEd will continue to accrue interest on the uncertain tax position, and the charges arising from future interest accruals are not expected to be material to the annual operating earnings of Exelon or ComEd. Further, Exelon intends to hold ComEd harmless from any unfavorable impacts of the after-tax interest amounts on ComEd's equity. As a result of this hold harmless agreement, ComEd will record on its consolidated balance sheet non-cash equity contributions from Exelon in the amount of the net after-tax interest charges attributable to ComEd in connection with the like-kind exchange position. The IRS also continues to assert an $86 million penalty for a substantial understatement of tax with respect to the like-kind exchange position. Exelon continues to believe that it is unlikely that the penalty assertion will ultimately be sustained and therefore no liability for the penalty has been recorded.

This determination for accounting purposes does not alter Exelon's intent to aggressively litigate the issue through appeals, if necessary, which could take three to five years. Exelon currently expects to initiate the litigation in the United States Tax Court, whose decisions are not controlled by the Federal Circuit's decision in Consolidated Edison.

As of March 31, 2013, in the event of a fully successful IRS challenge to Exelon's like-kind exchange position, the potential tax and after-tax interest, exclusive of penalties, that could become currently payable may be as much as $860 million, of which approximately $320 million would be attributable to ComEd after consideration of Exelon's agreement to hold ComEd harmless, and the balance at Exelon. Litigation could take several years such that the estimated cash and interest impacts would likely change by a material amount.

In 2009, Exelon received approval from the IRS to change its method of accounting for repair costs associated with Generation's power plants. Although the IRS granted Exelon approval to change its method of accounting, the approval did not affirm the methodology used to calculate the deduction. In the second quarter of 2010, Exelon was informed that the IRS intended to issue broad industry guidance with respect to electric generation power plants. In anticipation of the issuance of this guidance, the IRS provided notice to Exelon in the third quarter of 2012 that it intended to apply the principles of Large Business & Industry Directive No. 4-0312-004, thereby deferring auditing Generation's repair deductions until after issuance of the industry guidance and after Exelon has had an opportunity to change its accounting method to conform to that new guidance. As a result, in the third quarter of 2012, Exelon reduced its unrecognized tax benefits by approximately $107 million with an offsetting increase to its deferred tax liabilities and no net impact on results of operations.

The IRS is expected to issue industry guidance during 2013. Exelon and Generation will then determine the financial statement impacts of the generation repair costs accounting method change.

The Taxpayer Accountability and Budget Stabilization Act, (SB 2505), enacted into law in Illinois on January 13, 2011, increases the corporate tax rate in Illinois from 7.3% to 9.5% for tax years 2011 – 2014, provides for a reduction in the rate from 9.5% to 7.75% for tax years 2015 – 2024 and further reduces the rate from 7.75% to 7.3% for tax years 2025 and thereafter. Pursuant to the rate change, Exelon reevaluated its deferred state income taxes during the first quarter of 2011. Illinois' corporate income tax rate changes resulted in a charge to state deferred taxes (net of Federal taxes) during the first quarter of 2011 of $7 million, $11 million and $4 million for Exelon, Generation and ComEd, respectively. Exelon's and ComEd's charge is net of a regulatory asset of $15 million.

In 2011, the income tax rate change increased Exelon's Illinois income tax provision (net of Federal taxes) by approximately $7 million, of which $12 million and $5 million of additional tax relates to Exelon Corporate and Generation, respectively, and a $10 million benefit for ComEd. The 2011 tax benefit at ComEd reflects the impact of a 2011 tax net operating loss generated primarily by the bonus depreciation deduction allowed under the Tax Relief Act of 2010 and the electric transmission and distribution property repairs deduction discussed below.

Exelon and Generation periodically review events that may significantly impact how income is apportioned among the states and, therefore, the calculation of Exelon's and Generation's deferred state income taxes. In 2010, the Registrants performed a review of the long-term state tax rates and noted no significant events that would materially impact state apportionment. As such, there was no update to the long-term state apportionment rates in 2010. In 2011 as a result of the 2011 Illinois State Tax Rate Legislation discussed above, Exelon and Generation re-evaluated their long-term state tax apportionment for Illinois and all other states where they have state income tax obligations. The effect of revising the long-term state tax apportionment resulted in the recording of a deferred state tax expense during the first quarter of 2011 of $22 million and $11 million (net of Federal taxes) for Exelon and Generation, respectively. The long-term state tax apportionment also was revised in the fourth quarter of 2011 pursuant to long-term state tax apportionment policy, resulting in recording an additional deferred state tax expense of $1 million and a deferred state tax benefit of $8 million (net of Federal taxes) for Exelon and Generation, respectively.

As a result of the merger with Constellation, Exelon and Generation reevaluated their long-term state tax apportionment in the first quarter of 2012 for all states where they have state income tax obligations, which include Illinois, Maryland and Pennsylvania, as well as other states. The total effect of revising the long-term state tax apportionment resulted in the recording of a deferred state tax asset of $72 million (net of Federal taxes) for Exelon. Of this, a benefit in the amount of $116 million and $14 million (net of Federal taxes) was recorded for Exelon and Generation, respectively, for the three months ended March 31, 2012. Further, Exelon and Generation recorded deferred state tax liabilities of $44 million and $14 million (net of Federal taxes), respectively, as part of purchase accounting during the three months ended March 31, 2012. The long-term state tax apportionment also was updated in the fourth quarter of 2012, resulting in the recording of a deferred state tax benefit of $3 million (net of Federal taxes) for Exelon, and a deferred state tax expense of $7 million (net of Federal taxes) for Generation. There was no change to the long-term state tax apportionment for BGE, ComEd and PECO.

Accounting for Electric Transmission and Distribution Property Repairs (Exelon, Generation, ComEd, PECO and BGE)

On August 19, 2011, the IRS issued Revenue Procedure 2011-43 providing a safe harbor method of tax accounting for repair costs associated with electric transmission and distribution property. ComEd and PECO adopted the safe harbor in the Revenue Procedure for the 2011 and 2010 tax years, respectively. For the year ended December 31, 2011, the adoption of the safe harbor resulted in a $35 million reduction to income tax expense at PECO, while Generation incurred additional income tax expense in the amount of $28 million due to a decrease in its manufacturer's deduction, which are reflected in the effective income tax rate reconciliation above in the plant basis differences and domestic production activities deduction lines, respectively. For Exelon, the adoption had a minimal effect on consolidated earnings. In addition, the adoption of the safe harbor resulted in a cash tax benefit at Exelon, ComEd and PECO in the amount of approximately $300 million, $250 million, $95 million respectively, partially offset by a cash tax detriment at Generation in the amount of $28 million related to a decreased domestic production activities deduction.

BGE adopted the safe harbor for the short period 2012 pre-merger tax year. For the year ended December 31, 2012, the adoption of the safe harbor resulted in a cash tax benefit at BGE in the amount of $27 million.

See Note 3 – Regulatory Matters for discussion of the regulatory treatment prescribed in the 2010 electric distribution rate case settlement for PECO's cash tax benefit resulting from the application of the method change to years prior to 2010.

In September 2012, PECO filed an application with the IRS to change its method of accounting for gas distribution repairs for the 2011 tax year. The change to the newly adopted method for the 2011 tax year and 2012 resulted in a tax benefit of $26 million at Exelon, of which $29 million in tax benefit is recorded at PECO, partially offset by an expense recorded at Generation to reflect a reduction in its domestic production activities deduction. BGE changed its method of accounting for gas distribution repairs for the 2008 tax year. The IRS is expected to issue industry guidance during 2013. Exelon, PECO and BGE will then determine the financial statement impacts of the gas distribution repair costs accounting method changes.

Generation, ComEd and PECO are all party to an agreement with Exelon and other subsidiaries of Exelon that provides for the allocation of consolidated tax liabilities and benefits (Tax Sharing Agreement). The Tax Sharing Agreement provides that each party is allocated an amount of tax similar to that which would be owed had the party been separately subject to tax. In addition, any net benefit attributable to Exelon is reallocated to the other Registrants. That allocation is treated as a contribution to the capital of the party receiving the benefit. During 2012, Generation and PECO recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of $48 million and $9 million, respectively. During 2012, ComEd did not record an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement as a result of ComEd's 2012 tax net operating loss generated primarily by the bonus depreciation deduction allowed under the Tax Relief Act of 2010. During 2011, Generation and PECO recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of $30 million and $18 million, respectively. During 2011, ComEd did not record an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement as a result of ComEd's 2011 tax net operating loss generated primarily by the bonus depreciation deduction allowed under the Tax Relief Act of 2010 and the electric transmission and distribution property repairs deduction discussed above. During 2010, Generation, ComEd and PECO recorded an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement of $60 million, $2 million and $43 million, respectively.

ComEd received a non-cash contribution to equity from Exelon in 2012 and 2011 of $11 million and $11 million, respectively, related to tax benefits associated with capital projects constructed by ComEd on behalf of Exelon and Generation.