XML 105 R64.htm IDEA: XBRL DOCUMENT v3.25.3
INCOME TAXES
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The disclosures in this note apply to all Registrants unless indicated otherwise.

Effective Tax Rates (ETR)

The Registrants’ interim ETR reflect the estimated annual ETR for 2025 and 2024, adjusted for tax expense associated with certain discrete items. AEP recognized tax benefits in 2024 and 2025 driven by a remeasurement of Excess ADIT which significantly impacted several Registrants’ interim ETR. In the first quarter of 2024, AEP recognized a $224 million tax benefit related to the reduction of a regulatory liability associated with the NOLC PLRs received from the IRS, primarily impacting I&M, PSO and SWEPCo. In the second quarter of 2025, AEP recognized a $383 million tax benefit related to the remeasurement of Excess ADIT associated with the FERC order related to the treatment of NOLCs in transmission formula rates, primarily impacting AEPTCo. The tax benefits in each year are the primary drivers of variances in the Registrants’ interim ETR for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2025.

The ETR for each of the Registrants are included in the following tables:

Three Months Ended September 30, 2025
AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
U.S. Federal Statutory Rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) due to:
State and Local Income Taxes, Net1.2 %0.6 %2.5 %(1.2)%2.8 %1.0 %3.0 %(3.9)%
Tax Reform Excess ADIT Reversal
(2.5)%(2.3)%0.2 %(3.5)%(5.5)%(2.7)%(4.8)%(3.2)%
Production and Investment Tax Credits(7.9)%(0.1)%— %0.1 %(26.6)%— %(50.6)%(27.5)%
Reversal of Origination Flow-Through1.3 %0.1 %0.3 %6.7 %2.2 %0.6 %0.2 %0.7 %
AFUDC Equity(1.6)%(1.8)%(2.5)%(0.5)%(1.1)%(1.8)%(1.2)%(1.1)%
Flow-Through of CAMT0.6 %— %— %6.2 %— %— %— %— %
Other
0.1 %0.1 %— %(0.7)%(0.8)%(0.3)%0.1 %— %
Effective Income Tax Rate12.2 %17.6 %21.5 %28.1 %(8.0)%17.8 %(32.3)%(14.0)%

Three Months Ended September 30, 2024
AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
U.S. Federal Statutory Rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) due to:
State and Local Income Taxes, Net0.6 %0.3 %2.5 %1.4 %0.7 %1.1 %— %(2.6)%
Tax Reform Excess ADIT Reversal(2.8)%(1.0)%0.2 %(2.3)%(7.9)%(7.3)%(5.0)%(3.2)%
Production and Investment Tax Credits(9.9)%— %— %(0.1)%(45.6)%— %(61.9)%(23.4)%
Reversal of Origination Flow-Through0.1 %0.1 %0.3 %(1.1)%0.3 %0.7 %0.3 %0.6 %
AFUDC Equity(1.5)%(2.3)%(1.9)%(1.5)%(1.2)%(1.2)%(1.3)%(0.5)%
Discrete Tax Adjustments(3.7)%— %— %— %— %— %— %— %
Other
— %0.2 %(0.2)%(0.4)%— %0.6 %1.5 %— %
Effective Income Tax Rate3.8 %18.3 %21.9 %17.0 %(32.7)%14.9 %(45.4)%(8.1)%
Nine Months Ended September 30, 2025
AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
U.S. Federal Statutory Rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) due to:
State and Local Income Taxes, Net1.0 %0.6 %2.5 %0.4 %2.4 %1.2 %3.0 %(3.3)%
Tax Reform Excess ADIT Reversal
(1.8)%(2.6)%0.4 %(2.7)%(2.5)%(3.0)%(4.1)%(2.0)%
Remeasurement of Excess ADIT(12.4)%— %(25.5)%(5.9)%(12.8)%— %(8.8)%(17.2)%
Production and Investment Tax Credits(7.1)%(0.1)%— %— %(20.9)%— %(50.9)%(31.0)%
Reversal of Origination Flow-Through0.6 %0.1 %0.2 %0.5 %2.0 %0.6 %0.2 %0.7 %
AFUDC Equity(1.2)%(1.4)%(1.5)%(0.7)%(0.9)%(1.7)%(1.1)%(1.3)%
Flow-Through of CAMT0.2 %— %— %1.7 %— %— %— %— %
Other
0.1 %— %0.1 %— %(0.3)%— %— %0.2 %
Effective Income Tax Rate0.4 %17.6 %(2.8)%14.3 %(12.0)%18.1 %(40.7)%(32.9)%

Nine Months Ended September 30, 2024
AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
U.S. Federal Statutory Rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) due to:
State and Local Income Taxes, Net1.2 %0.4 %2.5 %2.1 %1.5 %0.9 %— %(2.6)%
Tax Reform Excess ADIT Reversal(3.1)%(1.1)%0.2 %(7.1)%(5.7)%(8.7)%(4.3)%(4.2)%
Remeasurement of Excess ADIT(11.9)%1.5 %— %— %(27.5)%— %(40.5)%(181.8)%
Production and Investment Tax Credits(8.3)%(0.1)%— %(0.1)%(23.4)%— %(61.7)%(79.1)%
Reversal of Origination Flow-Through0.2 %0.1 %0.3 %(0.8)%0.3 %0.8 %0.3 %2.1 %
AFUDC Equity(1.6)%(1.7)%(2.0)%(1.1)%(1.1)%(1.3)%(1.3)%(2.3)%
Discrete Tax Adjustments(2.1)%— %— %— %— %— %1.2 %1.1 %
Other
0.2 %— %(0.1)%(0.1)%— %0.4 %— %(0.5)%
Effective Income Tax Rate(4.4)%20.1 %21.9 %13.9 %(34.9)%13.1 %(85.3)%(246.3)%

Federal and State Income Tax Audit Status

AEP is not currently under IRS audit and the statute of limitations (SOL) for the IRS to examine AEP and subsidiaries originally filed federal return has expired for tax years prior to 2022. In July 2025, AEP received notification that its 2023 federal income tax return was selected for IRS examination. However, this examination has yet to begin.

AEP and subsidiaries file income tax returns in various state and local jurisdictions. AEP and subsidiaries are not currently under any state and local income tax examinations. Generally, the SOL have expired for tax years prior to 2022. In addition, management is monitoring and continues to evaluate the potential impact of federal legislation and corresponding state conformity.

Federal Legislation

On July 4, 2025, President Trump signed H.R. 1 into law, commonly known as the One Big Beautiful Bill Act (OBBBA). This budget reconciliation legislation modifies and accelerates the phase out of technology neutral PTCs and ITCs available for wind and solar projects, adds new restrictions to guard against certain foreign ownership or influence with respect to otherwise credit-eligible projects and makes 100% bonus depreciation permanent for certain non-regulated entities. With the exception of bonus depreciation, this legislation is prospective and has no material impact on the current period financial statements.
On August 15, 2025, the Department of Treasury and the IRS issued new and revised wind and solar tax credit guidance, Notice 2025-42, which modified the definition of “begin construction” for tax purposes by eliminating the previously available 5% cost safe harbor standard for projects that begin construction after September 1, 2025. This guidance is not expected to have a material impact on the Registrants.

On September 30, 2025, the Department of Treasury and the IRS issued interim guidance regarding the application of CAMT. The Registrants are subject to CAMT and will continue to evaluate the impact of that interim guidance.

Additional significant guidance from the Department of Treasury and the IRS is expected on the tax provisions in recently enacted legislation. AEP will continue to monitor any issued guidance and evaluate the impact on AEP’s future net income, cash flows and financial condition.