Issuers of corporate stock must report corporate actions that affect stock basis, including but not limited to mergers, stock splits, stock dividends, recapitalizations and common stock distributions paid in excess of "earnings and profits", as defined by the U.S. Internal Revenue Code. The extent to which distributions made by FirstEnergy Corp. (“FE”) to its shareholders are taxable as a dividend for U.S. federal income tax purposes is reported to shareholders on Form 1099-DIV.
Additionally, nondividend distributions characterized as “return of capital” require FE to post on its website Form 8937 reflecting the impact on shareholders’ tax basis for each distribution made. By posting this information, FE intends to satisfy the requirements of public disclosure pursuant to Treasury Regulation § 1.6045B-1(a)(3) and (b)(4). Whether any portion of a distribution is a return of capital depends on FE’s estimate of earnings and profits for the full year. The information contained in the Form 8937 is based on reasonable assumptions and estimates at the time the Form is posted. Such estimates and assumptions can change throughout the year and, if they do, FE will file a corrected Form 8937 pursuant to the applicable Treasury Regulations.
Provided the FET Minority Equity Interest Sale (as defined and described below) closes as anticipated, FE expects to realize an over $7 billion tax gain in 2024. This tax gain is estimated to create sufficient earnings and profits to cause distributions made during 2024 to be characterized as ordinary dividends for federal income tax purposes. FE will update this estimate after payment of the March 1, 2024, distribution, which was declared by the Board of Directors of FE on December 20, 2023. For more information on the FET Minority Equity Interest Sale, see FE’s disclosures in its filings with the Securities and Exchange Commission, which can be found here.
On February 2, 2023, FE, along with FirstEnergy Transmission, LLC, a majority-owned subsidiary of FE that primarily owns controlling equity interests of certain of FirstEnergy’s transmission assets (“FET”), entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with North American Transmission Company II L.P. (“Investor”), FE’s existing joint venture partner in FET and a controlled investment vehicle entity of Brookfield Infrastructure Partners, an experienced investor in U.S. infrastructure, Brookfield Super-Core Infrastructure Partners L.P., Brookfield Super-Core Infrastructure Partners (NUS) L.P. and Brookfield Super-Core Infrastructure Partners (ER) SCSp, as guarantors of Investor’s obligations and liabilities thereunder, and, for the limited purposes described therein, North American Transmission FinCo L.P., pursuant to which FE agreed to sell to Investor at the closing, and Investor agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion (the “FET Minority Equity Interest Sale”). As a result of the consummation of the transactions, Investor’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1% ownership interests of FET. The transaction is subject to customary closing conditions, including approval from the Pennsylvania Public Utility Commission. The FET Minority Equity Interest Sale is expected to close by early 2024.
2023 Distributions
As of December 1, 2023, FE estimates that approximately 100% of distributions made during 2023 will be treated as return of capital for federal income tax purposes. See the Forms below for additional information. Final tax reporting for 2023 distributions will occur on Form 1099-DIV, which will be issued in January 2024.
2022 Distributions
As of December 31, 2022, FE estimates that approximately 100% of distributions made during 2022 will be treated as return of capital for federal income tax purposes. See the Forms below for additional information. Final tax reporting for 2022 distributions will occur on Form 1099-DIV, which will be issued in January 2023.
2021 Distributions
As of December 31, 2021, FE estimates that 100% of distributions made during 2021 will be treated as return of capital for federal income tax purposes. See the Forms below for additional information. Final tax reporting for 2021 distributions will occur on Form 1099-DIV, which will be issued in January 2022.
2020 Distributions
For U.S. federal income tax purposes only, 100% of the March 1, 2020, June 1, 2020, September 1, 2020, and December 1, 2020 distributions by FE to its shareholders are classified under the U.S. Internal Revenue Code as a nontaxable return of capital and reduction of a shareholder’s tax basis, to the extent of a shareholder’s tax basis in each of its FE common shares, with any remaining amount being taxed as gain.
You should consult your tax advisor regarding the applicable tax consequences to you in
connection with any of these distributions under the laws of the United States (federal, state
and local), and any other applicable non-U.S. jurisdiction.
2019 Distributions
For U.S. federal income tax purposes only, the March 1, 2019 and June 1, 2019 distributions by FE to its
shareholders are classified under the U.S. Internal Revenue Code as taxable dividends.
For U.S. federal income tax purposes only, approximately 45% of the September 1, 2019 distribution by FE
to its shareholders is classified under the U.S. Internal Revenue Code as a nontaxable return of capital
and reduction of a shareholder’s tax basis, to the extent of a shareholder’s tax basis in each of its FE
common shares, with any remaining amount being taxed as gain.
For U.S. federal income tax purposes only, 100% of the December 1, 2019 distribution by FE to its
shareholders is classified under the U.S. Internal Revenue Code as a nontaxable return of capital
and reduction of a shareholder’s tax basis, to the extent of a shareholder’s tax basis in each of
its FE common shares, with any remaining amount being taxed as gain.