Duke Energy Corporation

INCOME TAXES

Tax Act

On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowers the corporate federal income tax rate from 35 percent to 21 percent and eliminates bonus depreciation for regulated utilities, effective January 1, 2018. The Tax Act also could be amended or subject to technical correction, which could change the financial impacts that were recorded at December 31, 2017, or are expected to be recorded in future periods. The FERC and state utility commissions will determine the regulatory treatment of the impacts of the Tax Act for the Subsidiary Registrants. The Duke Energy Registrants’ future results of operations, financial condition and cash flows could be adversely impacted by the Tax Act, subsequent amendments or corrections or the actions of the FERC, state utility commissions or credit rating agencies related to the Tax Act. Duke Energy is reviewing orders to address the rate treatment of the Tax Act by each state utility commission in which the Subsidiary Registrants operate. See Note 4 for additional information. Beginning in January 2018, the Subsidiary Registrants will defer the estimated ongoing impacts of the Tax Act that are expected to be returned to customers.

As a result of the Tax Act, Duke Energy revalued its existing deferred tax assets and deferred tax liabilities as of December 31, 2017, to account for the estimated future impact of lower corporate tax rates on these deferred tax amounts. For Duke Energy's regulated operations, where the reduction in the net accumulated deferred income tax (ADIT) liability is expected to be returned to customers in future rates, the net remeasurement has been deferred as a regulatory liability. The regulatory liability for income taxes includes the effect of the reduction of the net deferred tax liability including the tax gross-up of the excess accumulated deferred tax liabilities and the effect of the new tax rate on the previous regulatory asset for income taxes. Excess accumulated deferred income taxes are generally classified as either “protected” or “unprotected” under IRS rules. Protected excess ADIT, resulting from accumulated tax depreciation of public utility property, are required to utilize the average rate assumption method under the IRS normalization rules for determining the timing of the return to customers. The majority of the excess ADIT is related to protected amounts associated with public utility property. See Note 4 for additional information on the Tax Act's impact to the regulatory asset and liability accounts.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with SAB 118, a company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC Topic 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, a company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined.

Duke Energy recorded a provisional net tax benefit of $112 million related to the Tax Act in the period ending December 31, 2017. This net benefit primarily consists of a net benefit of $534 million due to the remeasurement of deferred tax accounts to reflect the corporate rate reduction impact to net deferred tax balances, a net expense for the establishment of a valuation allowance related to foreign tax credits of $406 million and a transition tax on previously untaxed earnings and profits on foreign subsidiaries of $10 million. The majority of Duke Energy’s operations are regulated and it is expected that the Subsidiary Registrants will ultimately pass on the savings associated with the amount representing the remeasurement of deferred tax balances related to regulated operations to customers. Duke Energy recorded a regulatory liability of $8,313 million, representing the revaluation of those deferred tax balances. The Subsidiary Registrants continue to respond to requests from regulators in various jurisdictions to determine the timing and magnitude of savings they will pass on to customers.

The net provisional charge from deferred tax remeasurement and assessment of valuation allowance is based on currently available information and interpretations which are continuing to evolve. Duke Energy continues to analyze additional information and guidance related to certain aspects of the Tax Act, such as limitations on the deductibility of interest and executive compensation, conformity or decoupling by state legislatures in response to the Tax Act, and the final determination of the net deferred tax liabilities subject to the remeasurement. The prospects of supplemental legislation or regulatory processes to address questions that arise because of the Tax Act, or evolving technical interpretations of the tax law, may also cause the final impact from the Tax Act to differ from the estimated amounts. Duke Energy continues to appropriately refine such amounts within the measurement period allowed by SAB 118, which will be completed no later than the fourth quarter of 2018.

Income Tax Expense

Components of Income Tax Expense



	Year Ended December 31, 2017
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana		Piedmont
Current income taxes
Federal	$	(247	)	$	221		$	(436	)	$	(95	)	$	(188	)	$	(37	)	$	128	$	(90	)
State	4			20			(5		)	2			(11		)	2			21		(3		)
Foreign	3			—			—			—			—			—			—		—
Total current income taxes	(240		)	241			(441		)	(93		)	(199		)	(35		)	149		(93		)
Deferred income taxes
Federal	1,344			381			664			378			194			99			138		147
State	102			35			44			10			51			(4		)	14		8
Total deferred income taxes^{(a) (b)}	1,446			416			708			388			245			95			152		155
Investment tax credit amortization	(10		)	(5		)	(3		)	(3		)	—			(1		)	—		—
Income tax expense from continuing operations	1,196			652			264			292			46			59			301		62
Tax benefit from discontinued operations	(6		)	—			—			—			—			—			—		—
Total income tax expense included in Consolidated Statements of Operations	$	1,190		$	652		$	264		$	292		$	46		$	59		$	301	$	62

(a)

Includes utilization of NOL (Net operating loss) carryforwards and tax credit carryforwards of $428 million at Duke Energy, $74 million at Progress Energy, $36 million at Duke Energy Florida, $17 million at Duke Energy Ohio, $42 million at Duke Energy Indiana and $79 million at Piedmont. In addition the total deferred income taxes Includes benefits of NOL carryforwards and tax credit carryforwards of $10 million at Duke Energy Carolinas and $1 million at Duke Energy Progress.


(b)	As a result of the Tax Act, Duke Energy's deferred tax assets and liabilities were revalued as of December 31, 2017. See the Statutory Rate Reconciliation section below for additional information on the Tax Act's impact on income tax expense.



	Year Ended December 31, 2016
				Duke						Duke			Duke		Duke			Duke
	Duke			Energy			Progress			Energy			Energy		Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida		Ohio			Indiana
Current income taxes
Federal	$	—		$	139		$	15		$	(59	)	$	76	$	(7	)	$	7
State	(15		)	25			(19		)	(25		)	22		(13		)	6
Foreign	2			—			—			—			—		—			—
Total current income taxes	(13		)	164			(4		)	(84		)	98		(20		)	13
Deferred income taxes
Federal	1,064			430			486			350			199		88			202
State	117			45			50			40			25		11			11
Total deferred income taxes^(a)	1,181			475			536			390			224		99			213
Investment tax credit amortization	(12		)	(5		)	(5		)	(5		)	—		(1		)	(1		)
Income tax expense from continuing operations	1,156			634			527			301			322		78			225
Tax (benefit) expense from discontinued operations	(30		)	—			1			—			—		(36		)	—
Total income tax expense included in Consolidated Statements of Operations	$	1,126		$	634		$	528		$	301		$	322	$	42		$	225


(a)	Includes benefits of NOL carryforwards and utilization of NOL and tax credit carryforwards of $648 million at Duke Energy, $4 million at Duke Energy Carolinas, $190 million at Progress Energy, $60 million at Duke Energy Progress, $49 million at Duke Energy Florida, $26 million at Duke Energy Ohio and $58 million at Duke Energy Indiana.



	Year Ended December 31, 2015
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana
Current income taxes
Federal	$	—		$	216		$	(193	)	$	(56	)	$	1		$	(18	)	$	(86	)
State	(12		)	14			1			(4		)	(7		)	(1		)	(12		)
Foreign	4			—			—			—			—			—			—
Total current income taxes	(8		)	230			(192		)	(60		)	(6		)	(19		)	(98		)
Deferred income taxes
Federal	1,097			345			694			334			290			96			245
State	181			57			27			27			58			5			17
Total deferred income taxes^(a)	1,278			402			721			361			348			101			262
Investment tax credit amortization	(14		)	(5		)	(7		)	(7		)	—			(1		)	(1		)
Income tax expense from continuing operations	1,256			627			522			294			342			81			163
Tax expense (benefit) from discontinued operations	89			—			(1		)	—			—			22			—
Total income tax expense included in Consolidated Statements of Operations	$	1,345		$	627		$	521		$	294		$	342		$	103		$	163


(a)	Includes utilization of NOL carryforwards and tax credit carryforwards of $264 million at Duke Energy, $15 million at Duke Energy Carolinas, $119 million at Progress Energy, $21 million at Duke Energy Progress, $84 million at Duke Energy Florida, $3 million at Duke Energy Ohio and $45 million at Duke Energy Indiana.



	Piedmont
	Two Months Ended			Years Ended October 31,
(in millions)	December 31, 2016			2016		2015
Current income taxes
Federal	$	4		$	27	$	(1	)
State	(2		)	12		1
Total current income taxes	2			39		—
Deferred income taxes
Federal	24			79		78
State	6			6		12
Total deferred income taxes^(a)(b)	30			85		90
Total income tax expense from continuing operations included in Consolidated Statements of Operations	$	32		$	124	$	90


(a)	Includes benefits of NOL and tax carryforwards of $17 million and $91 million for the two months ended December 31, 2016, and the year ended October 31, 2016, respectively.


(b)	Includes benefits and utilization of NOL carryforwards of $46 million for the year ended October 31, 2015.

Duke Energy Income from Continuing Operations before Income Taxes



	Years Ended December 31,
(in millions)	2017		2016		2015
Domestic^(a)	$	4,207	$	3,689	$	3,831
Foreign	59		45		79
Income from continuing operations before income taxes	$	4,266	$	3,734	$	3,910


(a)	Includes a $16 million expense in 2017 related to the Tax Act impact on equity earnings included within Equity in earnings (losses) of unconsolidated affiliates on the Consolidated Statement of Operations.

Taxes on Foreign Earnings

In February 2016, Duke Energy announced it had initiated a process to divest the International Disposal Group and, accordingly, no longer intended to indefinitely reinvest post-2014 undistributed foreign earnings. This change in the company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allowed Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with the historical unremitted foreign earnings by approximately $95 million during the year ended December 31, 2016.

Due to the classification of the International Disposal Group as discontinued operations beginning in the fourth quarter of 2016, income tax amounts related to the International Disposal Group's foreign earnings are presented within (Loss) Income From Discontinued Operations, net of tax on the Consolidated Statements of Operations. In December 2016, Duke Energy closed on the sale of the International Disposal Group in two separate transactions to execute the divestiture. See Note 2 for additional information on the sale.

Statutory Rate Reconciliation

The following tables present a reconciliation of income tax expense at the U.S. federal statutory tax rate to the actual tax expense from continuing operations.



	Year Ended December 31, 2017
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Income tax expense, computed at the statutory rate of 35 percent	$	1,493		$	653		$	536		$	353		$	265		$	88		$	229		$	70
State income tax, net of federal income tax effect	69			36			25			8			26			(1		)	23			3
AFUDC equity income	(81		)	(37		)	(32		)	(17		)	(16		)	(4		)	(8		)	—
Renewable energy production tax credits	(132		)	—			—			—			—			—			—			—
Tax Act^(a)	(112		)	15			(246		)	(40		)	(226		)	(23		)	55			(12		)
Tax true-up	(52		)	(24		)	(19		)	(13		)	(7		)	(5		)	(6		)	—
Other items, net	11			9			—			1			4			4			8			1
Income tax expense from continuing operations	$	1,196		$	652		$	264		$	292		$	46		$	59		$	301		$	62
Effective tax rate	28.0		%	34.9		%	17.2		%	29.0		%	6.1		%	23.4		%	46.0		%	30.8		%


(a)	Amounts primarily include but are not limited to items that are excluded for ratemaking purposes related to abandoned or impaired assets, certain wholesale fixed rate contracts, remeasurement of nonregulated net deferred tax liabilities, Federal net operating losses, and valuation allowance on foreign tax credits.



	Year Ended December 31, 2016
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana
Income tax expense, computed at the statutory rate of 35 percent	$	1,307		$	630		$	548		$	315		$	306		$	95		$	212
State income tax, net of federal income tax effect	64			46			20			10			30			(2		)	11
AFUDC equity income	(70		)	(36		)	(26		)	(17		)	(9		)	(2		)	(6		)
Renewable energy production tax credits	(97		)	—			—			—			—			—			—
Audit adjustment	5			3			—			—			—			—			—
Tax true-up	(14		)	(14		)	(11		)	(3		)	(9		)	(16		)	2
Other items, net	(39		)	5			(4		)	(4		)	4			3			6
Income tax expense from continuing operations	$	1,156		$	634		$	527		$	301		$	322		$	78		$	225
Effective tax rate	31.0		%	35.2		%	33.7		%	33.4		%	36.9		%	28.9		%	37.1		%



	Year Ended December 31, 2015
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana
Income tax expense, computed at the statutory rate of 35 percent	$	1,369		$	598		$	555		$	302		$	330		$	81		$	168
State income tax, net of federal income tax effect	109			46			18			15			33			2			2
AFUDC equity income	(58		)	(34		)	(19		)	(17		)	(3		)	(1		)	(4		)
Renewable energy production tax credits	(72		)	—			(1		)	—			—			—			—
Audit adjustment	(22		)	—			(23		)	1			(24		)	—			—
Tax true-up	2			2			(3		)	(4		)	2			(5		)	(9		)
Other items, net	(72		)	15			(5		)	(3		)	4			4			6
Income tax expense from continuing operations	$	1,256		$	627		$	522		$	294		$	342		$	81		$	163
Effective tax rate	32.1		%	36.7		%	32.9		%	34.2		%	36.3		%	35.2		%	34.0		%



	Piedmont
	Two Months Ended			Years Ended October 31,
(in millions)	December 31, 2016			2016			2015
Income tax expense, computed at the statutory rate of 35 percent	$	30		$	111		$	79
State income tax, net of federal income tax effect	1			11			9
Other items, net	1			2			2
Income tax expense from continuing operations	$	32		$	124		$	90
Effective tax rate	37.2		%	39.1		%	39.7		%

Valuation allowances have been established for certain state NOL carryforwards and state income tax credits that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in the State income tax, net of federal income tax effect in the above tables.

DEFERRED TAXES

Net Deferred Income Tax Liability Components



	December 31, 2017
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Deferred credits and other liabilities	$	143		$	33		$	78		$	23		$	49		$	11		$	6		$	(5	)
Capital lease obligations	49			14			—			—			—			—			2			—
Pension, post-retirement and other employee benefits	295			(17		)	111			44			60			14			18			(4		)
Progress Energy merger purchase accounting adjustments^(a)	536			—			—			—			—			—			—			—
Tax credits and NOL carryforwards	4,527			234			402			156			143			25			216			70
Regulatory liabilities and deferred credits	—			222			—			—			—			65			—			61
Investments and other assets	—			—			—			—			—			—			1			18
Other	73			10			1			4			—			—			—			—
Valuation allowance	(519		)	—			(14		)	—			—			—			—			—
Total deferred income tax assets	5,104			496			578			227			252			115			243			140
Investments and other assets	(1,419		)	(849		)	(470		)	(289		)	(187		)	—			(14		)	—
Accelerated depreciation rates	(9,216		)	(3,060		)	(2,803		)	(1,583		)	(1,257		)	(896		)	(966		)	(697		)
Regulatory assets and deferred debits, net	(1,090		)	—			(807		)	(238		)	(569		)	—			(188		)	—
Other	—			—			—			—			—			—			—			(7		)
Total deferred income tax liabilities	(11,725		)	(3,909		)	(4,080		)	(2,110		)	(2,013		)	(896		)	(1,168		)	(704		)
Net deferred income tax liabilities	$	(6,621	)	$	(3,413	)	$	(3,502	)	$	(1,883	)	$	(1,761	)	$	(781	)	$	(925	)	$	(564	)


(a)	Primarily related to capital lease obligations and debt fair value adjustments.

As noted above, as a result of the Tax Act, Duke Energy revalued its existing deferred tax assets and liabilities as of December 31, 2017, to account for the estimated future impact of lower corporate tax rates on these deferred amounts. The following table shows the decrease reflected in the net deferred income tax liabilities balance above:



(in millions)	December 31, 2017
Duke Energy	$	8,982
Duke Energy Carolinas	3,454
Progress Energy	3,282
Duke Energy Progress	1,882
Duke Energy Florida	1,420
Duke Energy Ohio	771
Duke Energy Indiana	1,053
Piedmont	521

The following table presents the expiration of tax credits and NOL carryforwards.



	December 31, 2017
(in millions)	Amount		Expiration Year
Investment tax credits	$	1,406	2024	—	2037
Alternative minimum tax credits	1,147		Refundable by 2021
Federal NOL carryforwards	393		2022	—	2036
State NOL carryforwards and credits^(a)	296		2018	—	2037
Foreign NOL carryforwards^(b)	13		2027	—	2036
Foreign Tax Credits^(c)	1,272		2024	—	2027
Total tax credits and NOL carryforwards	4,527


(a)	A valuation allowance of $90 million has been recorded on the state NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.


(b)	A valuation allowance of $13 million has been recorded on the foreign NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table.


(c)	A valuation allowance of $416 million has been recorded on the foreign tax credits, as presented in the Net Deferred Income Tax Liability Components table.



	December 31, 2016
				Duke						Duke			Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Ohio			Indiana			Piedmont
Deferred credits and other liabilities	$	382		$	66		$	126		$	40		$	93		$	21		$	4		$	71
Capital lease obligations	60			8			—			—			—			—			1			—
Pension, post-retirement and other employee benefits	561			16			199			91			96			22			37			10
Progress Energy merger purchase accounting adjustments^(a)	918			—			—			—			—			—			—			—
Tax credits and NOL carryforwards	4,682			192			1,165			222			232			49			278			192
Investments and other assets	—			—			—			—			—			3			—			—
Other	205			16			35			8			—			5			9			45
Valuation allowance	(96		)	—			(12		)	—			—			—			—			(1		)
Total deferred income tax assets	6,712			298			1,513			361			421			100			329			317
Investments and other assets	(1,892		)	(1,149		)	(597		)	(313		)	(297		)	—			(21		)	(21		)
Accelerated depreciation rates	(14,872		)	(4,664		)	(4,490		)	(2,479		)	(2,038		)	(1,404		)	(1,938		)	(1,080		)
Regulatory assets and deferred debits, net	(4,103		)	(1,029		)	(1,672		)	(892		)	(780		)	(139		)	(270		)	(147		)
Total deferred income tax liabilities	(20,867		)	(6,842		)	(6,759		)	(3,684		)	(3,115		)	(1,543		)	(2,229		)	(1,248		)
Net deferred income tax liabilities	$	(14,155	)	$	(6,544	)	$	(5,246	)	$	(3,323	)	$	(2,694	)	$	(1,443	)	$	(1,900	)	$	(931	)


(a)	Primarily related to capital lease obligations and debt fair value adjustments.

On August 6, 2015, pursuant to N.C. Gen. Stat. 105-130.3C, the North Carolina Department of Revenue announced the North Carolina corporate income tax rate would be reduced from a statutory rate of 5.0 percent to 4.0 percent beginning January 1, 2016. Duke Energy and Piedmont recorded net reductions of approximately $95 million and $18 million to their North Carolina deferred tax liabilities in the third quarter of 2015. The significant majority of these deferred tax liability reductions were offset by recording a regulatory liability pending NCUC determination of the disposition of amounts related to Duke Energy Carolinas, Duke Energy Progress and Piedmont. The impact did not have a significant impact on the financial position, results of operation, or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy or Duke Energy Progress.

On August 4, 2016, pursuant to N.C. Gen. Stat. 105-130.3C, the North Carolina Department of Revenue announced the North Carolina corporate income tax rate would be reduced from a statutory rate of 4.0 percent to 3.0 percent beginning January 1, 2017. Duke Energy and Piedmont recorded net reductions of approximately $80 million and $16 million to their North Carolina deferred tax liabilities in the third quarter of 2016. The significant majority of this deferred tax liability reduction was offset by recording a regulatory liability pending NCUC determination of the disposition of amounts related to Duke Energy Carolinas, Duke Energy Progress and Piedmont. The impact did not have a significant impact on the financial position, results of operation, or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy or Duke Energy Progress.

On June 28, 2017, the North Carolina General Assembly amended N.C. Gen. Stat. 105-130.3, reducing the North Carolina corporate income tax rate from a statutory rate of 3.0 percent to 2.5 percent beginning January 1, 2019. Duke Energy recorded a net reduction of approximately $55 million to their North Carolina deferred tax liabilities in the second quarter of 2017. The significant majority of this deferred tax liability reduction was offset by recording a regulatory liability pending NCUC determination of the disposition of amounts related to Duke Energy Carolinas, Duke Energy Progress and Piedmont. The impact did not have a significant impact on the financial position, results of operation or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy or Duke Energy Progress.

UNRECOGNIZED TAX BENEFITS

The following tables present changes to unrecognized tax benefits.



	Year Ended December 31, 2017
				Duke				Duke		Duke		Duke			Duke
	Duke			Energy		Progress		Energy		Energy		Energy			Energy
(in millions)	Energy			Carolinas		Energy		Progress		Florida		Ohio			Indiana		Piedmont
Unrecognized tax benefits – January 1	$	17		$	1	$	2	$	2	$	4	$	4		$	—	$	—
Unrecognized tax benefits increases (decreases)
Gross increases – tax positions in prior periods	12			4		3		3		1		1			1		3
Gross decreases – tax positions in prior periods	(4		)	—		—		—		—		(4		)	—		—
Total changes	8			4		3		3		1		(3		)	1		3
Unrecognized tax benefits – December 31	$	25		$	5	$	5	$	5	$	5	$	1		$	1	$	3



	Year Ended December 31, 2016
				Duke						Duke			Duke		Duke		Duke
	Duke			Energy			Progress			Energy			Energy		Energy		Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida		Ohio		Indiana
Unrecognized tax benefits – January 1	$	88		$	72		$	1		$	3		$	—	$	—	$	1
Unrecognized tax benefits increases (decreases)
Gross increases – tax positions in prior periods	—			—			—			—			4		4		—
Gross decreases – tax positions in prior periods	(4		)	(4		)	(1		)	(1		)	—		—		—
Decreases due to settlements	(68		)	(67		)	—			—			—		—		(1		)
Reduction due to lapse of statute of limitations	1			—			2			—			—		—		—
Total changes	(71		)	(71		)	1			(1		)	4		4		(1		)
Unrecognized tax benefits – December 31	$	17		$	1		$	2		$	2		$	4	$	4	$	—



	Year Ended December 31, 2015
				Duke						Duke			Duke			Duke
	Duke			Energy			Progress			Energy			Energy			Energy
(in millions)	Energy			Carolinas			Energy			Progress			Florida			Indiana
Unrecognized tax benefits – January 1	$	213		$	160		$	32		$	23		$	8		$	1
Unrecognized tax benefits increases (decreases)
Gross increases – tax positions in prior periods	—			—			1			1			—			—
Gross decreases – tax positions in prior periods	(48		)	(45		)	—			—			—			—
Decreases due to settlements	(45		)	(43		)	—			—			—			—
Reduction due to lapse of statute of limitations	(32		)	—			(32		)	(21		)	(8		)	—
Total changes	(125		)	(88		)	(31		)	(20		)	(8		)	—
Unrecognized tax benefits – December 31	$	88		$	72		$	1		$	3		$	—		$	1

The following table includes additional information regarding the Duke Energy Registrants' unrecognized tax benefits at December 31, 2017. During the first quarter of 2018, Duke Energy recognized an approximate $8 million reduction and Duke Energy Carolinas recognized an approximate $1 million reduction in unrecognized tax benefits. No additional material reductions are expected in the next 12 months.



	December 31, 2017
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Amount that if recognized, would affect the effective tax rate or regulatory liability^(a)	$	15	$	4	$	7	$	5	$	1	$	1	$	1	$	3
Amount that if recognized, would be recorded as a component of discontinued operations	7		—		—		—		—		2		—		—


(a)	Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana and Piedmont are unable to estimate the specific amounts that would affect the effective tax rate versus the regulatory liability.

OTHER TAX MATTERS

The following tables include interest recognized in the Consolidated Statements of Operations and the Consolidated Balance Sheets.



	Year Ended December 31, 2017
			Duke				Duke		Duke
	Duke		Energy		Progress		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida
Net interest income recognized related to income taxes	$	—	$	—	$	1	$	—	$	1
Net interest expense recognized related to income taxes	—		2		—		—		—
Interest payable related to income taxes	5		25		1		1		—



	Year Ended December 31, 2016
			Duke				Duke		Duke
	Duke		Energy		Progress		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida
Net interest income recognized related to income taxes	$	—	$	—	$	1	$	—	$	2
Net interest expense recognized related to income taxes	—		7		—		—		—
Interest payable related to income taxes	4		23		1		1		—



	Year Ended December 31, 2015
			Duke				Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Indiana
Net interest income recognized related to income taxes	$	12	$	—	$	2	$	2	$	1	$	1
Net interest expense recognized related to income taxes	—		1		—		—		—		—
Interest receivable related to income taxes	3		—		—		—		—		3
Interest payable related to income taxes	—		14		—		1		—		—

Piedmont recognized $1 million in net interest income recognized related to income taxes in the Consolidated Statements of Operations for the year ended October 31, 2016.

Duke Energy and its subsidiaries are no longer subject to U.S. federal examination for years before 2015. With few exceptions, Duke Energy and its subsidiaries are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 2015.