v3.25.2
INCOME TAXES
 6 Months Ended
Jun. 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. In the second quarter of 2025, AEPTCo, APCo, I&M, PSO and SWEPCo recorded tax benefits of $256 million, $24 million, $38 million, $14 million and $46 million, respectively, contributing to a total AEP Consolidated benefit of $383 million, related to the remeasurement of Excess ADIT associated with the FERC order related to the treatment of NOLCs in transmission formula rates, driving a reduction to the interim ETR resulting in AEP’s tax rate of (24.2)% for three months ended June 30, 2025 and (6.4)% for six months ended June 30, 2025 as shown below.

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

Three Months Ended June 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, Net0.6 %0.9 %2.5 %0.8 %1.1 %1.0 %3.2 %(2.8)%
Tax Reform Excess ADIT Reversal
(0.4)%(2.1)%0.6 %(2.0)%2.8 %(2.7)%(2.7)%2.5 %
Remeasurement of Excess ADIT(37.0)%— %(54.3)%(26.0)%(40.8)%— %(41.4)%(79.4)%
Production and Investment Tax Credits(6.7)%(0.1)%— %(0.1)%(18.7)%— %(69.3)%(40.7)%
Reversal of Origination Flow-Through— %0.1 %0.2 %(4.1)%1.8 %0.6 %0.3 %0.9 %
AFUDC Equity(1.0)%(1.2)%(0.8)%(0.9)%(0.8)%(1.5)%(1.4)%(1.5)%
Flow-Through of CAMT(0.3)%— %— %(3.4)%— %— %— %— %
Other
(0.4)%0.1 %— %— %— %(0.1)%0.2 %(0.9)%
Effective Income Tax Rate(24.2)%18.7 %(30.8)%(14.7)%(33.6)%18.3 %(90.1)%(100.9)%

Three Months Ended June 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, Net0.9 %0.5 %2.3 %3.0 %(3.7)%(1.2)%(2.9)%(0.1)%
Tax Reform Excess ADIT Reversal(6.0)%(1.2)%0.2 %(2.9)%(15.2)%(34.9)%(3.4)%2.0 %
Remeasurement of Excess ADIT(1.7)%3.9 %— %— %(46.2)%— %— %— %
Production and Investment Tax Credits(11.0)%(0.2)%— %(0.1)%1.8 %— %(70.6)%15.9 %
Reversal of Origination Flow-Through1.1 %0.1 %0.3 %(1.0)%12.0 %2.7 %0.3 %(0.4)%
Other
(2.4)%(1.3)%(2.4)%(2.1)%(2.0)%(4.1)%(1.5)%0.5 %
Effective Income Tax Rate1.9 %22.8 %21.4 %17.9 %(32.3)%(16.5)%(57.1)%38.9 %
Six Months Ended June 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, Net0.9 %0.6 %2.5 %1.0 %2.0 %1.3 %3.0 %(2.2)%
Tax Reform Excess ADIT Reversal
(1.4)%(2.8)%0.4 %(2.4)%0.2 %(3.2)%(3.1)%0.1 %
Remeasurement of Excess ADIT(19.5)%— %(34.4)%(8.1)%(24.1)%— %(23.5)%(45.7)%
Production and Investment Tax Credits(6.6)%(0.1)%— %(0.1)%(15.8)%— %(51.3)%(36.6)%
Reversal of Origination Flow-Through0.2 %0.1 %0.2 %(1.8)%1.8 %0.7 %0.2 %0.8 %
AFUDC Equity(1.1)%(1.1)%(1.1)%(0.7)%(0.7)%(1.6)%(1.0)%(1.4)%
Other
0.1 %(0.1)%— %0.1 %— %— %0.1 %(0.2)%
Effective Income Tax Rate(6.4)%17.6 %(11.4)%9.0 %(15.6)%18.2 %(54.6)%(64.2)%

Six Months Ended June 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, Net1.8 %0.4 %2.5 %2.6 %2.3 %0.6 %— %(2.4)%
Tax Reform Excess ADIT Reversal(6.0)%(1.2)%0.2 %(10.0)%(3.4)%(10.6)%(2.8)%(1.5)%
Remeasurement of Excess ADIT(19.0)%2.4 %— %— %(55.8)%— %(116.8)%303.0 %
Production and Investment Tax Credits(7.0)%(0.2)%— %(0.1)%(0.5)%— %(61.3)%69.3 %
Other
(2.0)%(1.1)%(1.8)%(1.4)%(0.7)%(0.4)%(0.4)%(1.2)%
Effective Income Tax Rate(11.2)%21.3 %21.9 %12.1 %(37.1)%10.6 %(160.3)%388.2 %

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 2021. In July 2025, AEP received notification that its 2023 federal income tax return was selected for IRS examination.

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 2021. 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). Most notably for AEP, this budget reconciliation legislation modifies and accelerates the phase out of wind and solar PTCs and ITCs, 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 our non-regulated entities. With the exception of bonus depreciation, this legislation is prospective and has no material impact on the current period financial statements. Following enactment of the legislation, on July 7, 2025, the President issued an Executive Order directing the Department of Treasury to issue new and revised wind and solar tax credit guidance within 45 days, which could impose further practical limits on the development of wind and solar projects. In addition to this potential near term guidance, additional significant guidance from the Department of Treasury and the IRS is expected on the tax provisions included in the OBBBA. AEP will continue to monitor any issued guidance and evaluate the impact on future net income, cash flows and financial condition.