v3.26.1
INCOME TAXES
 6 Months Ended
Jun. 30, 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 June 30, 2026
AEPAEP TexasAEPTCoAPCoI&MOPCoPSO SWEPCo
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, Net3.5 %0.6 %2.4 %(0.5)%3.8 %1.0 %3.0 %(7.7)%
Tax Reform Excess ADIT Reversal(3.2)%(1.5)%0.2 %(5.4)%(2.6)%(11.3)%(6.7)%(4.1)%
Production and Investment Tax Credits(13.0)%(0.1)%— %(13.8)%(13.7)%— %(156.3)%(110.8)%
Reversal of Origination Flow-Through0.8 %0.1 %0.2 %2.3 %1.5 %0.6 %0.3 %1.1 %
AFUDC Equity(1.6)%(1.6)%(1.9)%(1.0)%(0.8)%(1.8)%(1.4)%(2.7)%
Other(1.0)%0.2 %(0.1)%(0.6)%(0.7)%0.4 %(5.4)%(1.6)%
Effective Income Tax Rate6.5 %18.7 %21.8 %2.0 %8.5 %9.9 %(145.5)%(104.8)%


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)%
Six Months Ended June 30, 2026
AEPAEP TexasAEPTCoAPCoI&MOPCoPSO SWEPCo
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, Net2.2 %0.6 %2.4 %(0.2)%3.8 %1.0 %4.6 %(12.8)%
Tax Reform Excess ADIT Reversal(3.2)%(1.5)%0.2 %(4.9)%(2.5)%(11.3)%68.6 %(6.8)%
Production and Investment Tax Credits(11.7)%(0.1)%— %(5.6)%(10.1)%— %2,286.2 %(a)(186.0)%
Reversal of Origination Flow-Through0.8 %0.1 %0.2 %2.0 %1.4 %0.6 %(2.9)%1.8 %
AFUDC Equity(1.6)%(1.6)%(1.9)%(0.9)%(0.7)%(1.8)%14.2 %(4.4)%
Flow-Through of CAMT(1.4)%— %— %(6.8)%— %— %— %— %
Other(0.6)%— %0.1 %0.1 %(0.4)%0.1 %8.3 %1.2 %
Effective Income Tax Rate5.5 %18.5 %22.0 %4.7 %12.5 %9.6 %2,400.0 %(a)(186.0)%

(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.

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)%
Other0.1 %(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)%

Income Taxes Paid

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

Six Months Ended June 30, 2026AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(in millions)
Income Taxes Paid/(Received)$18 $(9)$85 $(46)$106 $(40)$(31)$(28)
Transfer Credits(64)— — (4)(50)— (6)(3)
Total Cash Paid/(Received)$(46)$(9)$85 $(50)$56 $(40)$(37)$(31)
Six Months Ended June 30, 2025AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(in millions)
Income Taxes Paid/(Received)$59 $(8)$(21)$(19)$3 $1 $(4)$(28)
Transfer Credits(17)— — — — — (9)(9)
Total Cash Paid/(Received)$42 $(8)$(21)$(19)$3 $1 $(13)$(37)
Federal and State Income Tax Audit Status

The statute of limitations (SOL) for the IRS to examine AEP and subsidiaries’ originally filed federal income tax returns has expired for tax years prior to 2022. In July 2026, AEP received notification that its 2023 federal income tax return would no longer be audited and only remains open for potential items identified in subsequent year exams. In the second quarter of 2026, AEP received notification that its 2024 federal income tax return was selected for IRS examination. That examination began in July 2026.

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, influence or assistance 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 not expected to have a material impact on the Registrants.

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. Notice 2025-42 was vacated in Oregon Environmental Council v. IRS, No. CV-25-4400 (D.D.C. June 6, 2026), which restored the availability of the 5% safe harbor. There is, however, uncertainty as to whether a court would overturn the ruling on appeal. Neither the ruling nor any related subsequent decision is 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.

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.