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Income Taxes
3 Months Ended
Mar. 31, 2014
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES

FirstEnergy’s and FES’s interim effective tax rates reflect the estimated annual effective tax rates for 2014 and 2013, adjusted for tax expense associated with certain discrete items.

FirstEnergy accounts for uncertainty in income taxes recognized in its financial statements. Significant judgment is required in determining FirstEnergy's income taxes and in evaluating tax positions taken or expected to be taken on its tax returns. There were no material changes to FirstEnergy's unrecognized income tax benefits during the first three months of 2014 or 2013.

As of March 31, 2014, it is reasonably possible that approximately $35 million of unrecognized income tax benefits, including interest, may be resolved within the next twelve months as a result of the statute of limitations expiring, all of which would affect FirstEnergy's effective tax rate.

FirstEnergy recognizes interest expense or income related to uncertain tax positions. 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 tax return. FirstEnergy includes net interest and penalties in the provision for income taxes. During the first three months of 2014 and 2013, there were no material changes to the amount of accrued interest. The net amount of interest accrued as of March 31, 2014 and December 31, 2013 was approximately $9 million.

FirstEnergy’s effective tax rate from continuing operations for the three months ended March 31, 2014 and 2013 was 28.2% and 37.2%, respectively. The decrease in the effective tax rate is primarily due to an increase in AFUDC equity flow through, changes in state apportionment factors and the elimination of certain future tax liabilities associated with basis differences.

FES’s effective tax rate from continuing operations for the three months ended March 31, 2014 and 2013 was 35.2% and 24.8%, respectively. The increase in the effective tax rate is primarily related to the impact of permanent tax adjustments on estimated annual pretax earnings from continuing operations.

In April 2014, the Internal Revenue Service completed its examination of FE's 2011 and 2012 federal income tax returns and issued Revenue Agent Reports for these years.