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90
INCOMETAXES(BENEFITS)(1) 2015 2014 2013
(Inmillions)
FirstEnergy
Currentlypayable(receivable)
Federal $ 1
$ (132)
$ (118)
State 30
(72)
70
31
(204)
(48)
Deferred,net
Federal 277
214
305
State 15
(42)
(54)
292
172
251
Investmenttaxcreditamortization (8)
(10)
(8)
Totalprovisionforincometaxes(benefits) $ 315
$ (42)
$ 195
FES
Currentlypayable(receivable)
Federal $ (56) $ (222) $ (300)
State 2
(13)
(3)
(54)
(235)
(303)
Deferred,net
Federal 103
25
317
State 18
(14)
(4)
121
11
313
Investmenttaxcreditamortization (2)
(4)
(4)
Totalprovisionforincometaxes(benefits) $ 65
$ (228)
$ 6
(1)Provision for IncomeTaxes (Benefits) on Income from Continuing Operations. Currently payable (receivable) in 2014
excludes $106 million and $12 million of federal and state taxes, respectively, associated with discontinued operations.
Deferred,netin2014excludes$44millionand$5millionoffederalandstatetaxbenefits,respectively,associatedwith
discontinuedoperations.
91
FirstEnergyandFEStaxratesareaffectedbypermanentitems,suchasAFUDCequityandotherflowthroughitemsaswellas
discreteitemsthatmayoccurinanygivenperiod,butarenotconsistentfromperiodtoperiod.Thefollowingtablesprovidea
reconciliationoffederalincometaxexpenseatthefederalstatutoryratetothetotalincometaxesoncontinuingoperationsforthe
threeyearsendedDecember31:
2015
2014
2013
(Inmillions)
FirstEnergy
IncomefromContinuingOperationsbeforeincometaxes
$
893
$
171
$
570
Federalincometaxexpenseatstatutoryrate(35%)
$
313
$
60
$
199
Increases(reductions)intaxesresultingfrom
Stateincometaxes,netoffederaltaxbenefit
34
12
10
AFUDCequityandotherflowthrough
(16
)
(13
)
(7
)
Amortizationofinvestmenttaxcredits
(8
)
(10
)
(8
)
Changeinaccountingmethod
(8
)
(27
)
—
ESOPdividend
(6
)
(6
)
(9
)
Taxbasisbalancesheetadjustments
—
(25
)
—
Uncertaintaxpositions
1
(35
)
(2
)
Other,net
5
2
12
Totalincometaxes(benefits)
$
315
$
(42
)
$
195
Effectiveincometaxrate
35.3
%
(24.6
)%
34.2
%
FES
Income(loss)fromContinuingOperationsbeforeincometaxes(benefits)
$
147
$
(588
)
$
52
Federalincometaxexpense(benefit)atstatutoryrate(35%)
$
51
$
(206
)
$
18
Increases(reductions)intaxesresultingfrom
Stateincometaxes,netoffederaltaxbenefit
16
(14
)
(5
)
Amortizationofinvestmenttaxcredits
(2
)
(4
)
(4
)
ESOPdividend
(1
)
(1
)
(2
)
Uncertaintaxpositions
5
—
—
Other,net
(4
)
(3
)
(1
)
Totalincometaxes(benefits)
$
65
$
(228
)
$
6
Effectiveincometaxrate
44.2
%
38.8
%
11.5
%
In2015,FirstEnergy’seffectivetaxratewas35.3%comparedto(24.6)%in2014.Theincreaseintheeffectivetaxrateyearoveryear
resultedfromlowertaxbenefitsin2015ascomparedto2014,primarilyrelatedtoIRSapprovedchangesinaccountingmethods,
reducedtaxbenefitsonuncertaintaxpositions,partiallyoffsetbylowervaluationallowancesrequiredonstateandmunicipalnet
operatinglosscarryforwardsthatFirstEnergybelievesarenolongerrealizable.Additionally,during2014,incometaxbenefitsof$25
millionwererecordedthatrelatedtopriorperiods.Theoutofperiodadjustmentprimarilyrelatedtothecorrectionofamounts
includedintheFirstEnergy’staxbasisbalancesheet.Managementdeterminedthatthisadjustmentwasnotmaterialto2014orany
priorperiod.Theincreaseintheeffectiveratewasalsoimpactedbyhigherincomefromcontinuingoperations.
In2015,FES’effectivetaxrateonincomefromcontinuingoperationswas44.2%comparedto38.8%onalossfromcontinuing
operationsin2014.Theincreaseintheeffectivetaxrateisprimarilyduetoanincreaseinreservesassociatedwithuncertaintax
positionsin2015andtheabsenceoftaxbenefitsrecognizedin2014associatedwithchangesinstateapportionmentfactors,partially
offsetbylowervaluationallowancesrecordedonstateandmunicipalNOLcarryforwardsthatFirstEnergybelievesarenolonger
realizable.