Allegheny Power 2014 Annual Report Download - page 102
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87
FirstEnergy accounts for uncertainty in income taxes recognized in its financial statements. A recognition threshold and measurement
attribute is utilized for financial statement recognition and measurement of tax positions taken or expected to be taken on a company's
tax return. As of December 31, 2014 and 2013, FirstEnergy's total unrecognized income tax benefits were approximately $34 million
and $48 million, respectively. All $34 million of unrecognized income tax benefits as of December 31, 2014, would impact the
effective tax rate if ultimately recognized in future years. As of December 31, 2014, it is reasonably possible that approximately $10
million of unrecognized tax benefits may be resolved during 2015 as a result of the statute of limitations expiring, all of which would
affect FirstEnergy's effective tax rate.
The following table summarizes the changes in unrecognized tax positions for the years ended 2014, 2013 and 2012:
FirstEnergy FES
(In millions)
Balance, January 1, 2012 $ 117 $ 45
Current year increases 2 —
Current year decreases (7) —
Prior years increases 6 6
Prior years decreases (37) (13)
Decrease for settlements (38) (35)
Balance, December 31, 2012 $ 43 $ 3
Prior years increases 10 —
Prior years decreases (5) —
Balance, December 31, 2013 $ 48 $ 3
Current year increases 4 —
Prior years increases 5 —
Prior years decreases (23) —
Balance, December 31, 2014 $ 34 $ 3
FirstEnergy recognizes interest expense or income related to uncertain tax positions. That amount is computed by applying the
applicable statutory interest rate to the difference between the tax position recognized and the amount previously taken or expected
to be taken on the federal income tax return. FirstEnergy includes net interest and penalties in the provision for income taxes.
FirstEnergy's reversal of accrued interest associated with unrecognized tax benefits reduced FirstEnergy's effective tax rate in 2014
and 2012 by approximately $6 million and $4 million, respectively. There was no reversal of accrued interest for the year ended
December 31, 2013.
The following table summarizes the net interest expense (income) for the three years ended December 31, 2014 and the cumulative
net interest payable as of December 31, 2014 and 2013:
Net Interest Expense (Income)
For the Years Ended December 31, Net Interest Payable
As of December 31,
2014 2013 2012 2014 2013
(In millions) (In millions)
FirstEnergy $ (6) $ 1 $ (4) $ 2 $ 9
FES — — (4) — 1