The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:


	MGE Energy								MGE
Three Months Ended September 30,	2024				2023				2024				2023
Statutory federal income tax rate		21.0		%		21.0		%		21.0		%		21.0		%
State income taxes, net of federal benefit		6.2				6.2				6.2				6.2
Amortized investment tax credits		(2.0	)			(0.6	)			(2.2	)			(0.6	)
Credit for electricity from renewable energy		(10.7	)			(4.9	)			(11.6	)			(5.2	)
AFUDC equity, net		(0.6	)			(0.9	)			(0.6	)			(1.0	)
Amortization of utility excess deferred tax - tax reform(a)		(5.7	)			(1.4	)			(6.2	)			(1.5	)
Other, net, individually insignificant		—				(0.5	)			(0.1	)			(0.5	)
Effective income tax rate		8.2		%		18.9		%		6.5		%		18.4		%

	MGE Energy								MGE
Nine Months Ended September 30,	2024				2023				2024				2023
Statutory federal income tax rate		21.0		%		21.0		%		21.0		%		21.0		%
State income taxes, net of federal benefit		6.2				6.3				6.2				6.3
Amortized investment tax credits		(2.2	)			(0.7	)			(2.4	)			(0.7	)
Credit for electricity from renewable energy		(10.8	)			(5.4	)			(11.7	)			(5.7	)
AFUDC equity, net		(0.6	)			(0.6	)			(0.7	)			(0.7	)
Amortization of utility excess deferred tax - tax reform(a)		(6.1	)			(1.6	)			(6.7	)			(1.7	)
Other, net, individually insignificant		(0.1	)			(0.2	)			(0.1	)			(0.3	)
Effective income tax rate		7.4		%		18.8		%		5.6		%		18.2		%

(a)

Included are impacts of the Tax Cut and Jobs Act of 2017 for the regulated utility for excess deferred taxes recognized using a normalization method of accounting in recognition of IRS rules that restrict the rate at which the excess deferred taxes may be returned to utility customers. For both the three months ended September 30, 2024 and 2023, MGE recognized $0.9 million. For the nine months ended September 30, 2024 and 2023, MGE recognized $2.6 million and $2.7 million, respectively. For the three and nine months ended September 30, 2024, MGE recognized $1.0 million and $3.1 million, respectively, of deferred taxes not restricted by IRS normalization rules, compared to a net collection from customers of $0.3 million and $1.0 million for the three and nine months ended September 30, 2023.

The Inflation Reduction Act of 2022 allows the transfer of certain tax credits to third parties in exchange for cash. In September 2024, MGE sold transfer eligible tax credits generated in 2023 to a third party for $7.1 million. MGE elects to account for the transferred tax credits under the scope of ASC 740. The sale of tax credits is presented in the operating activities section of the consolidated statements of cash flows consistent with the presentation of cash taxes paid. MGE also plans to sell eligible credits generated in 2024. MGE includes any expected proceeds from the transfer of tax credits in the evaluation of realizability of deferred tax assets related to tax credits and records a valuation allowance for the difference

between the tax value of the credits and the expected proceeds. The PSCW approved the deferral by MGE of any differential between tax credit transfer proceeds and the tax value of credits reflected in rates to its next rate case filing.