XML 31 R17.htm IDEA: XBRL DOCUMENT
v3.24.0.1

TAXES | 12 Months Ended
--- | ---
Dec. 31, 2023
Income Tax Disclosure [Abstract] |
TAXES | TAXES FirstEnergy records income taxes in accordance with the liability method of accounting. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts recognized for tax purposes. Investment tax credits, which were deferred when utilized, are being amortized over the recovery period of the related property. Deferred income tax liabilities related to temporary tax and accounting basis differences and tax credit carryforward items are recognized at the statutory income tax rates in effect when the liabilities are expected to be paid. Deferred tax assets are recognized based on income tax rates expected to be in effect when they are settled. FE and its subsidiaries are party to an intercompany income tax allocation agreement that provides for the allocation of consolidated tax liabilities. On August 16, 2022, President Biden signed into law the IRA of 2022, which, among other things, imposes a new 15% corporate AMT based on AFSI applicable to corporations with a three-year average AFSI over $1 billion. The AMT is effective for the 2023 tax year and, if applicable, corporations must pay the greater of the regular corporate income tax or the AMT. Although NOL carryforwards created through the regular corporate income tax system cannot be used to reduce the AMT, financial statement net operating losses can be used to reduce AFSI and the amount of AMT owed. The IRA of 2022 as enacted requires the U.S. Treasury to provide regulations and other guidance necessary to administer the AMT, including further defining allowable adjustments to determine AFSI, which directly impacts the amount of AMT to be paid. Based on interim guidance issued by the U.S. Treasury during 2022 and 2023, FirstEnergy continues to believe that it is more likely than not it will be subject to the AMT beginning in 2023. Accordingly, FirstEnergy made a first quarter estimated payment of AMT of approximately $49 million in April 2023. In June 2023, the U.S. Treasury issued additional guidance that eliminated the requirement of corporations to include AMT in quarterly estimated tax payments, pending further guidance on the application and administration of AMT. Therefore, as a result of guidance issued to date, the current forecast of AMT obligation, and the amount of AMT already paid in April 2023, FirstEnergy did not make any additional AMT payments for the 2023 tax year. Until final U.S. Treasury regulations are issued, the amount of AMT FirstEnergy pays could be significantly different than current estimates or it may not be a payer at all. The regulatory treatment of the impacts of this legislation may also be subject to regulation by FERC and/or applicable state regulatory authorities. Any adverse development in this legislation, including guidance from the U.S. Treasury and/or the IRS or unfavorable regulatory treatment, could negatively impact FirstEnergy’s cash flows, results of operations and financial condition. As discussed above, FirstEnergy expects to close on the sale of an additional 30% interest in FET in 2024, at which time FirstEnergy expects to realize an approximate $7.5 billion tax gain from the combined sale of 49.9% of the membership interests of FET for consideration received and recapture of negative tax basis in FET. As of December 31, 2023, FirstEnergy had approximately $8.1 billion of gross federal NOL carryforwards, as further discussed below, which will be used to offset a majority of the tax gain from the FET sale and expected taxable income in 2024, however due to certain limitations on utilization enacted in the Tax Act, a portion of the NOL will carry into 2025 and possibly beyond. As a result of the expected additional 30% sale in FET, FirstEnergy recognized a charge to income tax expense in the fourth quarter of 2022 of approximately $752 million, representing the deferred tax liability associated with the deferred tax gain on the initial 19.9% sale of FET that closed in May 2022, such deferred gain consisting of consideration received on the sale and the recapture of estimated negative tax basis in FET impacted by taxable income and loss among other factors. In the fourth quarter of 2023, FirstEnergy recognized a charge to income tax expense of approximately $58 million as a true-up of the deferred tax liability associated with the deferred tax gain. During the third quarter of 2023, FirstEnergy recognized a tax benefit of approximately $65 million, net of a reserve for uncertain tax positions, from the reduction of state income taxes and partial release of a valuation allowance for the expected utilization of state NOL based on an assessment of regulated business operations and a change in the composition of a state tax return filing group. In the fourth quarter of 2023, FirstEnergy recognized a tax benefit of approximately $37 million from the remeasurement of valuation allowance previously recorded on business interest expense carryforwards, net of carryforward adjustments, based on the expectation that FirstEnergy will be able to utilize these tax benefits on realized and future earnings and distributions from FirstEnergy’s interests in FET and FEV. The business interest expense could not be deducted previously due to certain limitations imposed on interest expense from non-utility operations under section 163(j) of the Tax Act, however, the Tax Act provides that the nondeductible interest can be carried forward indefinitely and deducted against income from non-utility operations. During 2022, FirstEnergy recognized an approximate $38 million tax benefit from remeasurement of the prior valuation allowance on interest expense carryforwards. On March 29, 2023, the West Virginia Governor signed into law House Bill 3286, which provides corporate taxpayers a reduction to pre-apportionment federal taxable income with the amount necessary to offset the increase in the net deferred tax liability (or decrease in the net deferred tax asset) caused by West Virginia’s apportionment law change enacted in 2021. Beginning with the 2033 tax year, qualifying taxpayers can subtract one-tenth of the amount each year for ten years. Taxpayers intending to claim this subtraction will have to file a statement with the West Virginia tax commissioner by July 1, 2024, specifying the total amount of subtraction to be claimed. Accordingly, FirstEnergy recorded a state deferred tax asset of approximately $9 million in the first quarter of 2023, which was fully reserved. In conjunction with the assessment of regulated business operations discussed above, FirstEnergy removed the $9 million reserve and reduced the state deferred tax asset to approximately $4 million, and recorded a corresponding $4 million regulatory liability associated with the amount expected to be refunded to customers in future rates. The following table provides the composite of income taxes on income from continuing operations for the years ended 2023, 2022 and 2021:
INCOME TAXES ON INCOME FROM CONTINUING OPERATIONS |  | For the Years Ended December 31,
| 2023 |  | 2022 |  | 2021
|  | (In millions)
Currently payable - |  |  |  |  |  |
Federal(1) |  | $ | 14 |  |  | $ | — |  |  | $ | 2 |
State |  | 1 |  |  | 11 |  |  | 21 |
|  | 15 |  |  | 11 |  |  | 23 |
Deferred, net - |  |  |  |  |  |
Federal(2) |  | 279 |  |  | 946 |  |  | 174 |
State |  | (24) |  |  | 47 |  |  | 127 |
|  | 255 |  |  | 993 |  |  | 301 |
Investment tax credit amortization |  | (3) |  |  | (4) |  |  | (4) |
Total income taxes on income from continuing operations |  | $ | 267 |  |  | $ | 1,000 |  |  | $ | 320 |
(1) Excludes $2 million of federal tax benefit associated with discontinued operations for the year ended December 31, 2021. (2) Excludes $21 million of federal tax expense and $46 million of federal tax benefits associated with discontinued operations for the years ended December 31, 2023 and 2021, respectively. FirstEnergy tax rates are affected by 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. The following table provides a reconciliation of federal income tax expense at the federal statutory rate to the total income taxes on income from continuing operations for the years ended December 31, 2023, 2022 and 2021:
| For the Years Ended December 31,
| 2023 |  | 2022 |  | 2021
| (In millions)
Income from continuing operations, before income taxes | $ | 1,464 |  |  | $ | 1,439 |  |  | $ | 1,559 |
Federal income tax expense at the 21% statutory rate | $ | 307 |  |  | $ | 302 |  |  | $ | 327 |
Increases (reductions) in taxes resulting from- |  |  |  |  |
State and municipal income taxes, net of federal tax benefit | 80 |  |  | 56 |  |  | 122 |
AFUDC equity and other flow-through | (30) |  |  | (26) |  |  | (29) |
Amortization of investment tax credits | (3) |  |  | (4) |  |  | (4) |
Deferred gain on 19.9% FET minority interest sale | 58 |  |  | 752 |  |  | — |
Federal tax credits claimed | (3) |  |  | (3) |  |  | (34) |
Nondeductible DPA monetary penalty | — |  |  | — |  |  | 52 |
Excess deferred tax amortization due to the Tax Act | (46) |  |  | (51) |  |  | (54) |
Uncertain tax positions | 41 |  |  | 2 |  |  | (82) |
Valuation allowances | (146) |  |  | (47) |  |  | 17 |
Other, net | 9 |  |  | 19 |  |  | 5 |
Total income taxes on income from continuing operations | $ | 267 |  |  | $ | 1,000 |  |  | $ | 320 |
Effective income tax rate (continuing operations) | 18.2 | % |  | 69.5 | % |  | 20.5 | %
Accumulated deferred income taxes as of December 31, 2023 and 2022, are as follows:
|  | As of December 31,
|  | 2023 |  | 2022
|  | (In millions)
Property basis differences |  | $ | 5,787 |  |  | $ | 5,528 |
Pension and OPEB |  | (331) |  |  | (496) |
Regulatory asset/liability |  | 647 |  |  | 432 |
Deferred compensation |  | (153) |  |  | (149) |
Deferred gain on 19.9% FET minority interest sale |  | 810 |  |  | 752 |
Loss carryforwards and tax credits |  | (2,192) |  |  | (2,073) |
Valuation reserve |  | 226 |  |  | 440 |
Other |  | (264) |  |  | (232) |
Net accumulated deferred income tax liability |  | $ | 4,530 |  |  | $ | 4,202 |
FirstEnergy has recorded as deferred income tax assets the effect of federal 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, 2023, FirstEnergy's loss carryforwards primarily consisted of $8.1 billion ($1.7 billion, net of tax) of federal NOL carryforwards, $5.9 billion ($1.2 billion, net of tax) of which have no expiration and the remainder that will begin to expire in 2031. As discussed above, FirstEnergy expects to utilize the majority of its federal NOL carryforwards by the end of 2024. However, due to certain limitations on utilization enacted in the Tax Act, a portion of the NOL will carry into 2025 and possibly beyond. In addition, FirstEnergy's tax credit carryforwards primarily consisted of AMT credits of $57 million, which have no expiration, and federal general business tax credits of $12 million that begin to expire in 2039. The table below summarizes pre-tax NOL carryforwards and their respective anticipated expirations for state and local income tax purposes of approximately $13.5 billion ($436 million, net of tax) for FirstEnergy, of which approximately $6.1 billion ($233 million, net of tax) 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 |  | State |  | Local
|  | (In millions)
2024-2028 |  | $ | 2,403 |  |  | $ | 5,269 |
2029-2033 |  | 1,415 |  |  | — |
2034-2038 |  | 1,079 |  |  | — |
2039-2043 |  | 823 |  |  | — |
Indefinite |  | 2,469 |  |  | — |
|  | $ | 8,189 |  |  | $ | 5,269 |
The following table summarizes the changes in valuation allowances on federal, state, and local deferred tax assets related to business interest expense carryforwards and employee compensation deduction limitations under section 162(m), in addition to state and local NOLs discussed above for the years ended December 31, 2023, 2022 and 2021:
(In millions) |  | 2023 |  | 2022 |  | 2021
Beginning of year balance |  | $ | 440 |  |  | $ | 484 |  |  | $ | 496 |
Charged to income |  | (214) |  |  | (44) |  |  | (12) |
Charged to other accounts |  | — |  |  | — |  |  | — |
Write-offs |  | — |  |  | — |  |  | — |
End of year balance |  | $ | 226 |  |  | $ | 440 |  |  | $ | 484 |
FirstEnergy accounts for uncertainty in income taxes recognized in its financial statements. A recognition threshold and measurement attribute are utilized for financial statement recognition and measurement of tax positions taken or expected to be taken on the tax return. If ultimately recognized in future years, all of the unrecognized income tax benefits would impact the effective tax rate. The following table summarizes the changes (gross) in uncertain tax positions for the years ended December 31, 2023, 2022 and 2021:
|  | (In millions)
Balance, January 1, 2021 |  | $ | 139 |
Current year increases |  | 15 |
Prior year decreases |  | (8) |
Effectively settled with taxing authorities |  | (97) |
Decrease for lapse in statute |  | (2) |
Balance, December 31, 2021 |  | $ | 47 |
Prior year increases |  | 2 |
Decrease for lapse in statute |  | (7) |
Balance, December 31, 2022 |  | $ | 42 |
Prior years increases |  | 88 |
Effectively settled with taxing authorities |  | (24) |
Decrease for lapse in statute |  | (1) |
Balance, December 31, 2023 |  | $ | 105 |
As of December 31, 2023, none of the unrecognized tax benefits are expected to be resolved during 2024 as a result of settlements with taxing authorities or the statute of limitations expiring. FirstEnergy recognizes interest expense or income and penalties related to uncertain tax positions in income taxes 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 tax return. FirstEnergy includes interest expense or income and penalties in the provision for income taxes. Due to uncertain tax positions that were effectively settled with tax authorities during 2023, approximately $9 million in net interest was reversed. There was no material interest expense or income, or penalties, related to uncertain tax positions in 2022 and 2021. General Taxes General tax expense for the years ended December 31, 2023, 2022 and 2021, recognized in continuing operations is summarized as follows:
|  | For the Years Ended December 31,
|  | 2023 |  | 2022 |  | 2021
|  | (In millions)
kWh excise |  | $ | 185 |  |  | $ | 191 |  |  | $ | 189 |
State gross receipts |  | 235 |  |  | 219 |  |  | 190 |
Real and personal property |  | 615 |  |  | 596 |  |  | 571 |
Social security and unemployment |  | 113 |  |  | 105 |  |  | 103 |
Other |  | 16 |  |  | 18 |  |  | 20 |
Total general taxes |  | $ | 1,164 |  |  | $ | 1,129 |  |  | $ | 1,073 |

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration