Allegheny Power 2015 Annual Report Download - page 108



92
AccumulateddeferredincometaxesasofDecember31,2015and2014areasfollows:

2015
2014
(Inmillions)
FirstEnergy
Propertybasisdifferences
$
9,920
$
9,354
Deferredsaleandleasebackgain
(360
)
(381
)
PensionandOPEB
(1,541
)
(1,433
)
Nucleardecommissioningactivities
480
458
Assetretirementobligations
(731
)
(641
)
Regulatoryasset/liability
763
768
LosscarryforwardsandAMTcredits
(1,965
)
(1,932
)
Losscarryforwardvaluationreserve
192
174
Allother
15
172
Netdeferredincometaxliability
$
6,773
$
6,539
FES
Propertybasisdifferences
$
1,901
$
1,749
Deferredsaleandleasebackgain
(342
)
(356
)
PensionandOPEB
(393
)
(373
)
Leasemarketvaluationliability
95
75
Nucleardecommissioningactivities
483
489
Assetretirementobligations
(509
)
(486
)
LosscarryforwardsandAMTcredits
(687
)
(631
)
Losscarryforwardvaluationreserve
46
32
Allother
6
(15
)
Netdeferredincometaxliability
$
600
$
484

FirstEnergyhastaxreturnsthatareunderreviewattheauditorappealslevelbytheIRSandstatetaxingauthorities.FirstEnergy's
taxreturnsforallstatejurisdictionsareopenfrom20112014.InJanuary2015,theIRScompleteditsexaminationofthe2013federal
incometaxreturnandissued aRevenueAgent Reportandtherewereno materialimpactsto FirstEnergy'seffectivetaxrate
associatedwiththisexamination.Taxyear2014iscurrentlyunderreviewbytheIRS.

FirstEnergyhasrecordedasdeferredincometaxassetstheeffectofNOLsandtaxcreditsthatwillmorelikelythannotberealized
throughfutureoperationsandthroughthereversalofexistingtemporarydifferences.AsofDecember31,2015,thedeferredincome
taxassets,before any valuation allowances,for losscarryforwards andAMT creditsconsisted of$1.5 billionofFederal NOL
carryforwards,netoftax,thatwillbegintoexpirein2030,FederalAMTcreditsof$26million,netoftax,thathaveanindefinite
carryforwardperiod,and$398million,netoftax,ofstateandlocalNOLcarryforwardsthatwillbegintoexpirein2016.

ThetablebelowsummarizespretaxNOLcarryforwardsforstateandlocalincometaxpurposesofapproximately$10billionfor
FirstEnergy,ofwhichapproximately$6billionisexpectedtobeutilizedbasedoncurrentestimatesandassumptions.Theultimate
utilizationoftheseNOLsmaybeimpactedbystatutorylimitationsontheuseofNOLsimposedbystateandlocaltaxjurisdictions,
changesinstatutorytaxrates,andchangesinbusinesswhich,amongotherthings,impactbothfutureprofitabilityandthemannerin
whichfuturetaxableincomeisapportionedtovariousstateandlocaltaxjurisdictions.
ExpirationPeriod
FirstEnergy
FES
(Inmillions)
State
Local
State
Local
20162020
$
403
$
2,983
$
95
$
1,820
20212025 1,323

—
68

—
20262030 2,205

—
259

—
20312035
3,245
—
1,128
—
$
7,176
$
2,983
$
1,550
$
1,820

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


93
company'staxreturn.AsofDecember31,2015and2014,FirstEnergy'stotalunrecognizedincometaxbenefitswereapproximately
$34 million. If ultimately recognized in future years, approximately $29 million of unrecognized income tax benefits as of
December31,2015,wouldimpacttheeffectivetaxrate.AsofDecember31,2015,itisreasonablypossiblethatapproximately$9
million of unrecognized tax benefits may be resolved during 2016 as a result of the statute of limitations expiring, of which
approximately$7millionwouldaffectFirstEnergy'seffectivetaxrate.
Thefollowingtablesummarizesthechangesinunrecognizedtaxpositionsfortheyearsended2015,2014and2013:
FirstEnergyFES
(Inmillions)
Balance,January1,2013$ 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 $ 3
Currentyearincreases 3 —
Prioryearsincreases 7 5
Prioryearsdecreases(10) —
Balance,December31,2015$ 34 $ 8

FirstEnergyrecognizesinterestexpenseorincomeandpenaltiesrelatedtouncertaintaxpositionsinincometaxes.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'sreversalofaccruedinterestassociatedwith
unrecognizedtaxbenefitsreducedFirstEnergy'seffectivetaxratein2015and2014byapproximately$1millionand$6million,
respectively.Therewasanincreaseof$1million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,2015andthecumulative
netinterestpayableasofDecember31,2015and2014(FESdidnothavenetinterestexpense(income)oranetinterestpayablefor
theperiodspresented):

NetInterestExpense(Income)
FortheYearsEndedDecember31,
NetInterestPayable
AsofDecember31,
20152014201320152014
(Inmillions)(Inmillions)
FirstEnergy $ (1) $ (6) $ 1 $ 1 $ 2
