INCOME TAXES

EFH Corp. files a US federal income tax return that includes the results of EFCH, EFIH, Oncor Holdings and TCEH. EFH Corp. is the corporate member of the EFH Corp. consolidated group, while each of EFIH, Oncor Holdings, EFCH and TCEH is classified as a disregarded entity for US federal income tax purposes. Pursuant to applicable US Treasury regulations and published guidance of the IRS, corporations that are members of a consolidated group have joint and several liability for the taxes of such group.

EFH Corp. and certain of its subsidiaries (including EFCH, EFIH, and TCEH, but not including Oncor Holdings and Oncor) are parties to a Federal and State Income Tax Allocation Agreement, which provides, among other things, that any corporate member or disregarded entity in the EFH Corp. group is required to make payments to EFH Corp. in an amount calculated to approximate the amount of tax liability such entity would have owed if it filed a separate corporate tax return.

The calculation of our effective tax rate is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Loss before income taxes	$	(1,935	)	$	(59	)	$	(3,887	)	$	(1,742	)
Income tax benefit	$	417		$	21		$	816		$	574
Effective tax rate	21.6		%	35.6		%	21.0		%	33.0		%

For the three months ended September 30, 2015, the effective tax rate of 21.6% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to the nondeductible goodwill impairment charge (see Note 3) and nondeductible legal and other professional services costs related to the Chapter 11 Cases. For the three months ended September 30, 2014, the effective tax rate of 35.6% related to our income tax benefit was higher than the US Federal statutory rate of 35% due primarily to an income tax benefit related to an adjustment of reserves for uncertain tax positions for the 2007 tax year, partially offset by nondeductible legal and other professional services costs related to the Chapter 11 Cases.

For the nine months ended September 30, 2015, the effective tax rate of 21.0% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to nondeductible goodwill impairment charges (see Note 3) and nondeductible legal and other professional services costs related to the Chapter 11 Cases, partially offset by the difference in the forecasted effective tax rate and the statutory rate applied to long-lived and intangible asset impairment charges (see Notes 3 and 5) and the tax benefit recognized due to the Texas margin tax rate reduction in the second quarter of 2015. For the nine months ended September 30, 2014, the effective tax rate of 33.0% related to our income tax benefit was lower than the US Federal statutory rate of 35% due primarily to nondeductible legal and other professional services costs related to the Chapter 11 Cases, partially offset by an income tax benefit recorded in the third quarter of 2014 related to an adjustment of reserves for uncertain tax positions for the 2007 tax year.

Liability for Uncertain Tax Positions

In June 2015, EFH Corp. signed a final agreed Revenue Agent Report (RAR) with the IRS and associated documentation for the 2008 and 2009 tax years. The Bankruptcy Court approved EFH Corp.'s signing of the RAR in July 2015. As a result of EFH Corp. receiving, agreeing to and signing the final RAR, we reduced the liability for uncertain tax positions by $22 million, resulting in an $18 million increase in noncurrent inter-company tax payable to EFH Corp., a $2 million reclassification to the accumulated deferred income tax liability and the recording of a $2 million income tax benefit.

In September 2014, EFH Corp. signed a final agreed RAR with the IRS and associated documentation for the 2007 tax year. The Bankruptcy Court approved EFH Corp.'s signing of the RAR in October 2014. As a result of EFH Corp. receiving, agreeing to and signing the final RAR, we recorded a $15 million income tax benefit.