AMERICAN ELECTRIC POWER CO INCAEP

AMERICAN ELECTRIC POWER CO INC Income Taxes Disclosure

10-KFiled Feb 12, 202614 min read
INCOME TAXES
The disclosures in this note apply to all Registrants unless indicated otherwise.

Income Tax Expense (Benefit)

The details of the Registrants’ Income Tax Expense (Benefit) as reported are as follows:
Year Ended December 31, 2025AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(in millions)
Federal:
Current$(209)$27 $148 $42 $(3)$27 $(221)$(180)
Deferred298 70 (173)43 (14)42 149 89 
Total Federal89 97 (25)85 (17)69 (72)(91)
State and Local:
Current28 4 18 2 19 (2)— 3 
Deferred12 — 22 (1)(1)5 2 (7)
Total State and Local40 4 40 1 18 3 2 (4)
Income Tax Expense (Benefit)$129 $101 $15 $86 $1 $72 $(70)$(95)

Year Ended December 31, 2024AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(in millions)
Federal:
Current$(3)$22 $75 $80 $17 $42 $(119)$(112)
Deferred(58)77 89 (18)(119)(3)20 (86)
Total Federal(61)99 164 62 (102)39 (99)(198)
State and Local:
Current(5)3 6 13 7 3 — 2 
Deferred27 — 20 — — 10 (1)12 
Total State and Local22 3 26 13 7 13 (1)14 
Income Tax Expense (Benefit)$(39)$102 $190 $75 $(95)$52 $(100)$(184)

Year Ended December 31, 2023AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(in millions)
Federal:
Current$(117)$20 $94 $62 $94 $46 $(61)$(88)
Deferred116 63 52 (60)(57)3 3 60 
Total Federal(1)83 146 2 37 49 (58)(28)
State and Local:
Current69 3 9 6 21 — — 1 
Deferred(13)— (8)6 1 5 4 (6)
Total State and Local56 3 1 12 22 5 4 (5)
Income Tax Expense (Benefit)$55 $86 $147 $14 $59 $54 $(54)$(33)
The following are reconciliations for the Registrants between the federal income taxes computed by multiplying pretax income by the federal statutory tax rate and the income taxes reported:

Year Ended December 31,
AEP202520242023
(dollars in millions)
Net Income$3,696 $2,976 $2,213 
Income Tax Expense (Benefit)129 (39)55 
Pretax Income$3,825 $2,937 $2,268 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$803 21.0 %$617 21.0 %$476 21.0 %
State and Local Income Taxes, Net (a)31 0.8 %17 0.6 %44 1.9 %
Tax Credits:
Production Tax Credits(244)(6.4)%(214)(7.3)%(175)(7.7)%
Investment Tax Credits(3)(0.1)%(58)(2.0)%(50)(2.2)%
Other Credits(4)(0.1)%(9)(0.3)%(1)— %
Non-Taxable or Non-Deductible Items— — %(3)(0.1)%1 — %
Changes in Unrecognized Tax Benefits3 0.1 %7 0.2 %(5)(0.2)%
Other Adjustments:
Reversal of Origination Flow-Through18 0.5 %22 0.7 %24 1.1 %
Tax Reform Excess ADIT Reversal(62)(1.6)%(92)(3.1)%(151)(6.7)%
Remeasurement of Excess ADIT(383)(10.0)%(262)(8.9)%(46)(2.0)%
AFUDC Equity(41)(1.1)%(42)(1.4)%(38)(1.7)%
Other11 0.3 %(22)(0.7)%(24)(1.1)%
Income Tax Expense (Benefit)$129 $(39)$55 
Effective Income Tax Rate3.4 %(1.3)%2.4 %

(a)     In 2025, state taxes in West Virginia and local taxes in Ohio contributed to the majority of the tax effect. In 2024, local taxes in Ohio contributed to the majority of the tax effect. In 2023, state taxes in Indiana and West Virginia contributed to the majority of the tax effect.

Year Ended December 31,
AEP Texas202520242023
(dollars in millions)
Net Income$488 $420 $370 
Income Tax Expense 101 102 86 
Pretax Income$589 $522 $456 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$124 21.0 %$110 21.0 %$96 21.0 %
State and Local Income Taxes, Net (a)3 0.5 %2 0.4 %2 0.4 %
Tax Credits(1)(0.2)%(1)(0.2)%(1)(0.2)%
Other Adjustments:
Tax Reform Excess ADIT Reversal(11)(1.9)%(5)(1.0)%(6)(1.3)%
Remeasurement of Excess ADIT— — %6 1.1 %— — %
AFUDC Equity(10)(1.7)%(9)(1.7)%(5)(1.1)%
Other(4)(0.6)%(1)— %— — %
Income Tax Expense$101 $102 $86 
Effective Income Tax Rate17.1 %19.6 %18.8 %

(a)     State taxes in Texas contributed to the majority of the tax effect.
Year Ended December 31,
AEPTCo202520242023
(dollars in millions)
Net Income$1,184 $688 $614 
Income Tax Expense 15 190 147 
Pretax Income$1,199 $878 $761 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$252 21.0 %$185 21.0 %$160 21.0 %
State and Local Income Taxes, Net (a)31 2.6 %20 2.3 %1 0.1 %
Other Adjustments:
Remeasurement of Excess ADIT(256)(21.4)%— — %— — %
AFUDC Equity(16)(1.3)%(16)(1.8)%(15)(2.0)%
Other4 0.4 %1 0.2 %1 0.2 %
Income Tax Expense$15 $190 $147 
Effective Income Tax Rate1.3 %21.7 %19.3 %

(a)     In 2025 and 2024, state taxes in Indiana and West Virginia contributed to the majority of the tax effect. In 2023, state taxes in West Virginia contributed to the majority of the tax effect.

Year Ended December 31,
APCo202520242023
(dollars in millions)
Net Income$457 $422 $294 
Income Tax Expense86 75 14 
Pretax Income$543 $497 $308 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$114 21.0 %$104 21.0 %$65 21.0 %
State and Local Income Taxes, Net (a)1 0.2 %10 2.0 %10 3.2 %
Tax Credits(4)(0.7)%(1)(0.2)%— — %
Other Adjustments:
Reversal of Origination Flow-Through6 1.1 %5 1.0 %9 2.9 %
Tax Reform Excess ADIT Reversal(15)(2.8)%(30)(6.0)%(17)(5.5)%
Remeasurement of Excess ADIT(24)(4.4)%— — %(46)(14.9)%
Removal Costs(5)(0.9)%(11)(2.2)%(5)(1.6)%
AFUDC Equity(2)(0.4)%(2)(0.4)%(4)(1.3)%
Flow-Through of CAMT18 3.3 %— — %— — %
Other(3)(0.6)%— (0.1)%2 0.8 %
Income Tax Expense $86 $75 $14 
Effective Income Tax Rate15.8 %15.1 %4.6 %

(a)     In 2025, state taxes in Virginia and West Virginia contributed to the majority of the tax effect. In 2024 and 2023, state taxes in West Virginia contributed to the majority of the tax effect.
Year Ended December 31,
I&M202520242023
(dollars in millions)
Net Income$414 $391 $336 
Income Tax Expense (Benefit)1 (95)59 
Pretax Income$415 $296 $395 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$87 21.0 %$62 21.0 %$83 21.0 %
State and Local Income Taxes, Net (a)14 3.4 %6 2.0 %18 4.6 %
Tax Credits:
Production Tax Credits(53)(12.8)%(69)(23.3)%— — %
Other Credits(3)(0.7)%(2)(0.7)%(2)(0.5)%
Other Adjustments:
Reversal of Origination Flow-Through6 1.4 %5 1.7 %6 1.5 %
Tax Reform Excess ADIT Reversal(10)(2.4)%(16)(5.4)%(33)(8.4)%
Remeasurement of Excess ADIT(38)(9.2)%(73)(24.7)%— — %
Removal Costs— — %(6)(2.0)%(12)(3.0)%
Other(2)(0.5)%(2)(0.7)%(1)(0.3)%
Income Tax Expense (Benefit)$1 $(95)$59 
Effective Income Tax Rate0.2 %(32.1)%14.9 %

(a)     State Taxes in Indiana contributed to the majority of the tax effect.

Year Ended December 31,
OPCo202520242023
(dollars in millions)
Net Income$328 $306 $328 
Income Tax Expense 72 52 54 
Pretax Income$400 $358 $382 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$84 21.0 %$75 21.0 %$80 21.0 %
State and Local Income Taxes, Net (a)3 0.8 %11 3.1 %4 1.0 %
Other Adjustments:
Tax Reform Excess ADIT Reversal(12)(3.0)%(31)(8.7)%(29)(7.6)%
AFUDC Equity(4)(1.0)%(4)(1.1)%(3)(0.8)%
Other1 0.2 %1 0.3 %2 0.6 %
Income Tax Expense$72 $52 $54 
Effective Income Tax Rate18.0 %14.6 %14.2 %

(a)     Local taxes in Ohio municipalities contributed to the majority of the tax effect.
Year Ended December 31,
PSO202520242023
(dollars in millions)
Net Income$252 $249 $209 
Income Tax Expense (Benefit)(70)(100)(54)
Pretax Income$182 $149 $155 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$38 21.0 %$31 21.0 %$33 21.0 %
State and Local Income Taxes, Net (a)2 1.1 %(1)(0.7)%3 1.9 %
Tax Credits:
Production Tax Credits(88)(48.4)%(74)(49.7)%(64)(41.3)%
Other Credits(1)(0.5)%(2)(1.3)%(1)(0.6)%
Other Adjustments:
Tax Reform Excess ADIT Reversal(5)(2.7)%(6)(4.0)%(23)(14.8)%
Remeasurement of Excess ADIT(14)(7.7)%(49)(32.9)%— — %
Other(2)(1.3)%1 1.1 %(2)(0.7)%
Income Tax Expense (Benefit)$(70)$(100)$(54)
Effective Income Tax Rate(38.5)%(66.5)%(34.5)%

(a)     State taxes in Oklahoma contributed to the majority of the tax effect.

Year Ended December 31,
SWEPCo202520242023
(dollars in millions)
Net Income$391 $326 $224 
Income Tax Expense (Benefit)(95)(184)(33)
Pretax Income$296 $142 $191 
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$62 21.0 %$30 21.0 %$40 21.0 %
State and Local Income Taxes, Net (a)(3)(1.0)%11 7.7 %(4)(2.1)%
Tax Credits
Production Tax Credits(98)(33.1)%(71)(50.0)%(67)(35.1)%
Non-Taxable or Non-Deductible Items— — %(1)(0.7)%— — %
Other Adjustments:
Tax Reform Excess ADIT Reversal(6)(2.0)%(4)(2.8)%(13)(6.8)%
Remeasurement of Excess ADIT(46)(15.5)%(147)(103.5)%— — %
Disallowance Cost— — %— — %12 6.3 %
Other(4)(1.5)%(2)(1.3)%(1)(0.6)%
Income Tax Expense (Benefit)$(95)$(184)$(33)
Effective Income Tax Rate(32.1)%(129.6)%(17.3)%

(a)     State taxes in Louisiana contributed to the majority of the tax effect.
Income Taxes Paid

The following tables show the amount of income taxes paid or (received) on an annual basis, disaggregated by federal and state jurisdictions, for each Registrant:
Year Ended December 31, 2025AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(dollars in millions)
Federal$70 $46 $191 $88 $23 $62 $(158)$(91)
State and Local:
IN$16 $— $11 $— $14 $— $— $— 
MI— — — — 4 — — — 
TX5 4 — — — — — 1 
WV8 — 11 17 1 — — — 
All Other4 — 1 — 1 — — — 
Total To/(From) Tax Authority$103 $50 $214 $105 $43 $62 $(158)$(90)
Transfer Credits(187)— — — — — (90)(97)
Total Cash Paid/(Received)$(84)$50 $214 $105 $43 $62 $(248)$(187)


Year Ended December 31, 2024AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(dollars in millions)
Federal$100 $11 $43 $48 $17 $19 $(15)$(15)
State and Local:
IN$7 $— $— $— $7 $— $— $— 
WV9 — — — — — — — 
All Other17 — — — — — — — 
Total To/(From) Tax Authority$133 $11 $43 $48 $24 $19 $(15)$(15)
Transfer Credits(202)— — — — — (96)(89)
Total Cash Paid/(Received)$(69)$11 $43 $48 $24 $19 $(111)$(104)



Year Ended December 31, 2023AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(dollars in millions)
Federal$38 $12 $87 $47 $93 $39 $(11)$(41)
State and Local:
IN$16 $— $— $— $16 $— $— $— 
OH10 — 1 — — — — — 
TX4 — — — — — — — 
All Other10 — — — — — — — 
Total To/(From) Tax Authority$78 $12 $88 $47 $109 $39 $(11)$(41)
Transfer Credits(102)— — — — — (35)(41)
Total Cash Paid/(Received)$(24)$12 $88 $47 $109 $39 $(46)$(82)
Net Deferred Tax Liability

The following tables show elements of the net deferred tax liability and significant temporary differences for each Registrant:
Year Ended December 31, 2025AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(dollars in millions)
Deferred Tax Assets$2,786 $131 $170 $411 $1,160 $171 $287 $328 
Deferred Tax Liabilities(13,737)(1,561)(1,651)(2,541)(2,379)(1,439)(1,400)(1,786)
Net Deferred Tax Liabilities $(10,951)$(1,430)$(1,481)$(2,130)$(1,219)$(1,268)$(1,113)$(1,458)
Property Related Temporary Differences$(9,456)$(1,442)$(1,526)$(1,881)$(49)$(1,333)$(1,195)$(1,477)
Amounts Due to Customers for Future Income Taxes641 105 44 109 57 92 74 74 
Securitized Assets(211)(28)— (19)— — — (50)
Regulatory Assets(902)(73)(4)(308)(46)(48)(60)(119)
Accrued Nuclear Decommissioning(1,180)— — — (1,180)— — — 
Net Operating Loss Carryforward155 — — — — — 44 45 
Valuation Allowance(49)— — — — — — (3)
Tax Credit Carryforward148 10 — 33 — 43 33 — 
Operating Lease Liability166 12 1 23 14 11 32 50 
Investment in Partnership(306)— — — — (1)— (1)
All Other, Net43 (14)4 (87)(15)(32)(41)23 
Net Deferred Tax Liabilities $(10,951)$(1,430)$(1,481)$(2,130)$(1,219)$(1,268)$(1,113)$(1,458)

Year Ended December 31, 2024AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
(dollars in millions)
Deferred Tax Assets$2,652 $139 $173 $379 $1,072 $187 $267 $293 
Deferred Tax Liabilities(12,624)(1,462)(1,452)(2,413)(2,248)(1,388)(1,198)(1,564)
Net Deferred Tax Liabilities $(9,972)$(1,323)$(1,279)$(2,034)$(1,176)$(1,201)$(931)$(1,271)
Property Related Temporary Differences$(8,940)$(1,364)$(1,417)$(1,785)$(190)$(1,291)$(1,010)$(1,353)
Amounts Due to Customers for Future Income Taxes780 109 121 119 73 96 81 90 
Securitized Assets(133)(27)— (26)— — — (81)
Regulatory Assets(966)(63)— (302)(49)(45)(53)(87)
Accrued Nuclear Decommissioning(1,052)— — — (1,052)— — — 
Net Operating Loss Carryforward110 — 2 — — 3 28 36 
Valuation Allowance(35)— — — — — — — 
Tax Credit Carryforward198 4 — — 40 39 27 32 
Operating Lease Liability145 12 — 16 14 13 27 36 
Investment in Partnership(302)— — — — (1)— (2)
All Other, Net223 6 15 (56)(12)(15)(31)58 
Net Deferred Tax Liabilities $(9,972)$(1,323)$(1,279)$(2,034)$(1,176)$(1,201)$(931)$(1,271)
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.

Net Income Tax Operating Loss Carryforward

As of December 31, 2025, AEP, PSO and SWEPCo have state income tax net operating loss deferred tax assets as indicated in the table below:
Future State
IncomeYears of
CompanyState/MunicipalityTax BenefitExpiration
AEPArkansas$15 2031-2035
AEPIllinois5 2039-2041
AEPKentucky11 2030-2037
AEPLouisiana41 Indefinite
AEP Michigan1 2029-2032
AEPOhio Municipal62 2026-2030
AEPOklahoma54 2037
AEPTennessee4 2032-2040
PSOOklahoma55 2037
SWEPCoArkansas15 2031-2035
SWEPCoLouisiana41 Indefinite

Tax Credit Carryforward

As of December 31, 2025, AEP and the Registrants have federal tax credit carryforwards as indicated in the table below. The federal tax credit carryforwards are entirely CAMT credits which have an indefinite carryforward period. AEP and the Registrants anticipate future federal taxable income will be sufficient to realize the tax benefits of the CAMT credits.

As of December 31, 2025, AEP and PSO have state tax credit carryforwards as indicated in the table below, which have an indefinite carryforward period.
Total FederalTotal State
Tax CreditTax Credit
CompanyCarryforwardCarryforward
(dollars in millions)
AEP$108 $41 
AEP Texas10 — 
APCo28 — 
OPCo43 — 
PSO— 41 
Valuation Allowance

AEP assesses the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate tax character will be generated to realize the benefits of existing deferred tax assets. When the evaluation of the evidence indicates that it is more-likely-than-not that AEP will not be able to realize the benefits of existing deferred tax assets, a valuation allowance is recorded to reduce existing deferred tax assets to the net realizable amount. Objective evidence evaluated includes whether AEP has a history of recognizing income, future reversals of existing temporary differences and tax planning strategies.

Valuation allowance activity for the years ended December 31, 2025, 2024 and 2023 were not material.

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, Notice 2025-49. This guidance is not expected to have a material impact on the Registrants.

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.

Historical Timeline

Fiscal YearFiled
2025Feb 12, 2026Showing above
2024Feb 13, 2025
2023Feb 26, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 25, 2021
2019Feb 20, 2020
2018Feb 21, 2019
2017Feb 23, 2018
2016Feb 28, 2017
2015Feb 24, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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