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Income Taxes | 9 Months Ended
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Sep. 30, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES FirstEnergy’s interim effective tax rates reflect the estimated annual effective tax rates for 2021 and 2020. These tax rates are affected by estimated annual permanent items, such as AFUDC equity and other flow-through items, as well as discrete items that may occur in any given period but are not consistent from period to period. FirstEnergy’s effective tax rate on continuing operations for the three months ended September 30, 2021 and 2020, was 17.5% and 20.1%, respectively. The change in effective tax rate was primarily due to a $29 million decrease in the reserve for unrecognized tax benefits primarily related to positions on nondeductible interest under Section 163(j) that were effectively settled with the IRS in closing out audits of the 2018 and 2019 consolidated federal income tax returns. FirstEnergy’s effective tax rate on continuing operations for the nine months ended September 30, 2021 and 2020, was 25.1% and 13.4%, respectively. In addition to the items mentioned above, the change in effective tax rate was primarily due to: •The non-deductibility of the DPA penalty and $9 million of tax expense recorded in the second quarter of 2021 related to the remeasurement of West Virginia deferred income taxes resulting from a state tax law change (as discussed further below). •The absence of a $10 million benefit from accelerated amortization of certain investment tax credits recorded in the second quarter of 2020. •The absence of a $52 million benefit for reduction in valuation allowances in the first quarter of 2020 from the recognition of deferred gains on prior intercompany generation asset transfers triggered by the FES Debtors’ emergence from bankruptcy and deconsolidation from FirstEnergy’s consolidated federal income tax group. See Note 3, “Discontinued Operations,” for other tax matters relating to the FES Bankruptcy that were recognized in discontinued operations. During the three months ended September 30, 2021, FirstEnergy recorded a net $25 million decrease to the reserve for uncertain tax positions primarily due to the effectively settled positions discussed previously, partially offset by a $4 million increase in the reserve related to certain federal tax credits claimed on FirstEnergy’s 2020 federal income tax return. During the nine months ended September 30, 2021, FirstEnergy recorded a net $21 million decrease in its reserve for uncertain tax positions. The decrease primarily resulted from the effectively settled positions discussed previously and remeasurement for West Virginia deferred taxes (as discussed further below), partially offset by an increase of $15 million for benefits related to certain federal tax credits. As of September 30, 2021, it is reasonably possible that within the next twelve months FirstEnergy could record a net decrease of approximately $26 million to its reserve for uncertain tax positions due to the expiration of the statute of limitations or resolution with taxing authorities, of which approximately $24 million would impact FirstEnergy’s effective tax rate. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021. While the Act is primarily an economic stimulus package, it also, among other changes, expanded the scope of Section 162(m) of the Internal Revenue Code that limits deductions on certain executive officer compensation. FirstEnergy does not currently expect these changes to have a material impact. On April 9, 2021, West Virginia enacted legislation changing the state’s corporate income tax apportionment rules, including adopting a single sales factor formula and market-based sourcing for sales of services and intangibles, effective for taxable years beginning on or after January 1, 2022. Enactment of this law triggered a remeasurement of state deferred income taxes for entities included in FirstEnergy’s West Virginia combined unitary return, resulting in a net impact of approximately $9 million in additional tax expense in the second quarter of 2021. In August 2021, the IRS completed its examination of FirstEnergy’s 2018 and 2019 federal income tax returns and issued Full Acceptance Letters with no adjustments to FirstEnergy’s taxable income in either year. Tax year 2020 is currently under review by the IRS.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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