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INCOME TAXES
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The disclosures in this note apply to both Registrants, unless indicated otherwise.

The Registrants’ interim effective income tax rates reflect the estimated annual effective income tax rates for 2025 and 2024. These tax rates are affected by estimated annual permanent items, such as AFUDC equity and other flow-through items, as well as certain discrete items.
The following table reconciles the FirstEnergy effective income tax rate to the federal income tax statutory rate for the three and nine months ended September 30, 2025 and 2024:
FirstEnergyFor the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
(In millions)
Income before income taxes$610 $560 $1,556 $1,125 
Federal income tax expense at the 21% statutory rate$128 $118 $327 $236 
Increases (reductions) in tax expense resulting from:
State and municipal income taxes, net of federal tax benefit34 33 90 76 
AFUDC equity and other flow-through(15)(6)(34)(19)
Deductions associated with certain equity method investments— (14)— (14)
Tax related to FE’s equity interest earnings from FET4 4 12 13 
Excess deferred tax amortization(8)(13)(33)(40)
Nondeductible SEC and OAG settlements— — — 27 
Remeasurement of excess deferred income taxes(70)(21)(70)(21)
Valuation allowances — (3)— 33 
Other, net5 (4)— 3 
Total income taxes$78 $94 $292 $294 
Effective income tax rate12.8 %16.8 %18.8 %26.1 %

The following table reconciles the JCP&L effective income tax rate to the federal income tax statutory rate for the three and nine months ended September 30, 2025 and 2024:
JCP&LFor the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
(In millions)
Income before income taxes$160 $150 $313 $216 
Federal income tax expense at the 21% statutory rate$34 $32 $66 $45 
Increases (reductions) in tax expense resulting from:
State income taxes, net of federal tax benefit11 11 22 15 
AFUDC equity and other flow-through(2)— (5)— 
Excess deferred tax amortization(1)(1)(3)(4)
Other, net(1)(1)(1)2 
Total income taxes$41 $41 $79 $58 
Effective income tax rate25.6 %27.3 %25.2 %26.9 %

As a result of several IRS private letter rulings issued during 2024 to another taxpayer, FERC recently issued orders to a non-affiliate that concluded that certain NOL carryforward deferred tax assets, as computed on a separate return basis, should be included in rate base for ratemaking purposes. FirstEnergy determined in the third quarter of 2025 that these rulings and orders also would apply to certain of its subsidiaries, resulting in a benefit from a reduction in regulatory liabilities, reflected in the table above as the remeasurement of excess deferred income taxes, and an increase in accumulated deferred income tax assets for ratemaking purposes, which will increase overall rate base. FirstEnergy is in the process of making the appropriate updates in its annual formula rates for the impacted subsidiaries.

On July 4, 2025, President Trump signed into law the OBBBA, which, among other things, makes permanent certain corporate tax incentives that were set to expire in the TCJA, and terminates tax credits for most wind and solar projects placed in service after 2027. Because many of the provisions of the TCJA will be continued under the OBBBA, and as FirstEnergy is not materially impacted by tax incentives associated with wind and solar projects, FirstEnergy does not expect to be materially impacted by the OBBBA.

On September 30, 2025, the IRS issued additional guidance on the corporate AMT. FirstEnergy is assessing this additional guidance and while it continues to believe, more likely than not, it will be subject to corporate AMT, the additional guidance provides certain adjustments to regulated utilities in calculating corporate AMT, which may reduce FirstEnergy’s AMT estimates. Additionally, the future issuance of the U.S. Treasury’s revised proposed AMT regulations and, ultimately, the final AMT
regulations, as well as additional future federal tax legislation or presidential executive orders, could significantly change FirstEnergy’s AMT estimates or its conclusions as to whether it is an AMT payer. JCP&L is party to an intercompany income tax allocation agreement with FirstEnergy and, accordingly, may be allocated a share of any corporate AMT paid by the FirstEnergy consolidated tax group. Any adverse developments concerning corporate AMT liability, including guidance from the U.S. Treasury and/or the IRS or unfavorable regulatory treatment by FERC and/or applicable state regulatory authorities, could negatively impact FirstEnergy’s cash flows, results of operations and financial condition.

On March 25, 2024, FirstEnergy closed on the FET Equity Interest Sale realizing an approximate $7 billion tax gain from the combined sale of 49.9% of the equity 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 available to offset a majority of the tax gain and taxable income in 2024. Due to certain limitations on NOL utilization enacted in the TCJA, approximately $1.7 billion NOL is carrying forward into 2025 and possibly beyond. In the first quarter of 2024, FirstEnergy recognized a net tax charge of approximately $46 million, comprised of updates to estimated deferred tax liability for the deferred gain from the 19.9% FET equity interest sale in May 2022, deferred tax liability related to its ongoing investment in FET, and valuation allowance associated with the expected utilization of certain state NOL carryforwards impacted by the sale and the PA Consolidation, and recognized a reduction to OPIC of approximately $803 million for federal and state income tax associated with the tax gain from closing on the FET Equity Interest Sale.