v3.25.1
INCOME TAXES
 3 Months Ended
Mar. 31, 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 months ended March 31, 2025 and 2024:
FirstEnergyFor the Three Months Ended March 31,
20252024
(In millions)
Income before income taxes$540 $402 
Federal income tax expense at the 21% statutory rate$113 $84 
Increases (reductions) in tax expense resulting from:
State and municipal income taxes, net of federal tax benefit31 23 
AFUDC equity and other flow-through(9)(7)
Taxes related to the combined sale of 49.9% of the equity interests of FET
— 7 
Excess deferred tax amortization(13)(13)
Valuation allowances — 39 
Other, net4 2 
Total income taxes$126 $135 
Effective income tax rate23.3 %33.6 %
The following table reconciles the JCP&L effective income tax rate to the federal income tax statutory rate for the three months ended March 31, 2025 and 2024:
JCP&LFor the Three Months Ended March 31,
20252024
(In millions)
Income (loss) before income taxes (benefits)$65 $(12)
Federal income tax expense (benefit) at the 21% statutory rate$14 $(3)
Increases (reductions) in tax expense resulting from:
State income taxes, net of federal tax benefit5 (1)
AFUDC equity and other flow-through(2)— 
Excess deferred tax amortization(1)(1)
Other, net— 1 
Total income taxes (benefits)$16 $(4)
Effective income tax rate24.6 %33.3 %

The IRA of 2022, 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. The IRA of 2022 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. On September 12, 2024, the U.S. Treasury issued proposed regulations for the AMT for comments. FirstEnergy is assessing the proposed regulations but continues to believe that it is more likely than not that it will be subject to AMT, however, the completion of the U.S. Treasury’s rulemaking process and the future issuance of final regulations, as well as potential future federal tax legislation or presidential executive orders, could significantly change FirstEnergy’s AMT estimates or its conclusion as to whether it is an AMT payer at all. JCP&L is party to an intercompany income tax allocation agreement with FirstEnergy and, accordingly, may be allocated a share of any AMT paid by the FirstEnergy consolidated group. As further discussed below, FirstEnergy expects to pay regular federal corporate income tax for the 2024 tax year, due in large part to the gain realized from closing the FET Equity Interest Sale. The regulatory treatment of the IRA of 2022 may also be subject to regulation by FERC and/or applicable state regulatory authorities. Any adverse development in the IRA of 2022, 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, 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 Tax Act, approximately $1.6 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.