INCOME TAXES

3 Months Ended

Mar. 31, 2026

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 2026 and 2025, adjusted for tax expense associated with certain discrete items.

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

	Three Months Ended March 31, 2026
	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO			SWEPCo
U.S. Federal Statutory Rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%		21.0	%
Increase (decrease) due to:
State and Local Income Taxes, Net	1.1	%	0.6	%	2.5	%	(0.2)	%	3.8	%	1.0	%	3.2	%		(37.5)	%
Tax Reform Excess ADIT Reversal	(3.2)	%	(1.5)	%	0.2	%	(4.7)	%	(2.4)	%	(11.4)	%	1.7	%		(25.0)	%
Production and Investment Tax Credits	(10.6)	%	(0.1)	%	—	%	(3.5)	%	(7.9)	%	—	%	135.0	%	(a)	(562.5)	%	(b)
Reversal of Origination Flow-Through	0.8	%	0.1	%	0.2	%	2.0	%	1.4	%	0.6	%	(0.1)	%		—	%
AFUDC Equity	(1.6)	%	(1.6)	%	(1.8)	%	(0.9)	%	(0.7)	%	(1.8)	%	0.4	%		(12.5)	%
Flow-Through of CAMT	(2.5)	%	—	%	—	%	(8.5)	%	—	%	—	%	—	%		—	%
Other	(0.4)	%	(0.1)	%	0.1	%	0.1	%	(0.3)	%	(0.1)	%	(1.2)	%		4.0	%
Effective Income Tax Rate	4.6	%	18.4	%	22.2	%	5.3	%	14.9	%	9.3	%	160.0	%	(a)	(612.5)	%	(b)

(a)The effective tax rate of PSO reflects a tax benefit. The resulting positive rate is attributable to the recognition of tax benefits in a period of pretax book losses.

(b)The effective tax rate of SWEPCo reflects a tax benefit. The resulting negative rate is attributable to the recognition of tax benefits that are greater than the pretax book income.

	Three Months Ended March 31, 2025
	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
U.S. Federal Statutory Rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Increase (decrease) due to:
State and Local Income Taxes, Net	1.2	%	0.2	%	2.6	%	1.1	%	3.4	%	1.9	%	2.9	%	(1.4)	%
Tax Reform Excess ADIT Reversal	(2.6)	%	(3.7)	%	0.2	%	(2.5)	%	(3.6)	%	(4.1)	%	(3.6)	%	(3.1)	%
Production and Investment Tax Credits	(6.5)	%	(0.1)	%	—	%	—	%	(11.7)	%	—	%	(27.6)	%	(31.2)	%
Reversal of Origination Flow-Through	0.4	%	0.1	%	0.2	%	(0.7)	%	1.9	%	0.9	%	0.1	%	0.7	%
AFUDC Equity	(1.2)	%	(1.0)	%	(1.7)	%	(0.6)	%	(0.5)	%	(1.9)	%	(0.5)	%	(1.4)	%
Flow-Through of CAMT	0.4	%	—	%	—	%	1.6	%	—	%	—	%	—	%	—	%
Other	0.9	%	(0.1)	%	—	%	(0.1)	%	(0.1)	%	0.3	%	(0.1)	%	0.7	%
Effective Income Tax Rate	13.6	%	16.4	%	22.3	%	19.8	%	10.4	%	18.1	%	(7.8)	%	(14.7)	%

Income Taxes Paid

The following tables show the amount of income taxes paid or (received) on an interim basis, for each Registrant:

Three Months Ended March 31, 2026	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Income Taxes Paid/(Received)	$	—	$	(10)	$	2	$	(30)	$	22	$	(40)	$	31	$	31
Transfer Credits	(14)		—		—		(4)		—		—		(6)		(3)
Total Cash Paid/(Received)	$	(14)	$	(10)	$	2	$	(34)	$	22	$	(40)	$	25	$	28

Three Months Ended March 31, 2025	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Income Taxes Paid/(Received)	$	7	$	—	$	—	$	—	$	5	$	—	$	—	$	—
Transfer Credits	(17)		—		—		—		—		—		(9)		(9)
Total Cash Paid/(Received)	$	(10)	$	—	$	—	$	—	$	5	$	—	$	(9)	$	(9)

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 February 18, 2026, the Department of Treasury and the IRS issued additional interim guidance on the application of CAMT, Notice 2026-7. This guidance allows taxpayers to deduct certain tax-deductible repairs when determining adjusted financial statement income for CAMT purposes. This guidance is expected to result in a reduction to applicable Registrants’ prior and future CAMT liabilities. The Company continues to evaluate the impact of the 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.