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 tables provide a reconciliation of federal income tax expense (benefit) at the federal statutory rate to the total income taxes (benefits) for the years ended December 31, 2022, 2021 and 2020: For the Years Ended December 31, 2022 2021 2020 (In millions) Income from Continuing Operations, before income taxes $ 1,439 $ 1,559 $ 1,129 Federal income tax expense at statutory rate (21%) $ 302 $ 327 $ 237 Increases (reductions) in taxes resulting fromState and municipal income taxes, net of federal tax benefit 56 122 75 AFUDC equity and other flow-through (26) (29) (38) Amortization of investment tax credits (4) (4) (14) Deferred gain on 19.9% FET minority interest sale 752 — — Federal tax credits claimed (3) (34) — Nondeductible DPA monetary penalty — 52 — Excess deferred tax amortization due to the Tax Act (51) (54) (56) TMI-2 reversal of tax regulatory liabilities — — (40) Uncertain tax positions 2 (82) (1) Valuation allowances (47) 17 (49) Other, net 19 5 12 Total income taxes $ 1,000 $ 320 $ 126 Effective income tax rate 69.5 % 20.5 % 11.2 % Accumulated deferred income taxes as of December 31, 2022 and 2021, are as follows: As of December 31, 2022 2021 (In millions) Property basis differences $ 5,528 $ 5,670 Pension and OPEB (496) (570) AROs (22) (21) Regulatory asset/liability 432 322 Deferred compensation (149) (155) Deferred gain on 19.9% FET minority interest sale 752 — Loss carryforwards and tax credits (2,073) (2,040) Valuation reserve 440 484 All other (210) (253) Net deferred income tax liability $ 4,202 $ 3,437 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, 2022, FirstEnergy's loss carryforwards primarily consisted of $7.1 billion ($1.5 billion, net of tax) of federal NOL carryforwards, $5 billion ($1 billion, net of tax) which have no expiration and the remainder that will begin to expire in 2031, and federal general business tax credits of $51 million that begin to expire in 2030. As discussed above, FirstEnergy expects to utilize all the federal NOL carryforwards by the end of 2024 to mostly offset taxable income and the tax gain recognized from the combined sale of the 49.9% equity interest in FET. 99
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