PPL CorpPPL
PPL Corp Income Taxes Disclosure
6. Income and Other Taxes
(PPL)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes and the tax effects of net operating loss and tax credit carryforwards. The provision for PPL's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles of the applicable jurisdiction. See Notes 1 and 7 for additional information.
Net deferred tax assets have been recognized based on management's estimates of future taxable income.
Significant components of PPL's deferred income tax assets and liabilities were as follows:
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets | |||||||||||
| Deferred investment tax credits | $ | 27 | $ | 28 | |||||||
| Regulatory liabilities | 186 | 133 | |||||||||
| Income taxes due to customers | 397 | 418 | |||||||||
| Accrued pension and postretirement costs | 99 | 112 | |||||||||
| State loss carryforwards | 181 | 224 | |||||||||
| Federal and state tax credit carryforwards | 35 | 24 | |||||||||
| Internal Revenue Code Section 197 intangibles | 67 | 72 | |||||||||
| Contributions in aid of construction | 206 | 163 | |||||||||
| Bad debt | 34 | 37 | |||||||||
| Other | 130 | 114 | |||||||||
| Valuation allowances | (184) | (224) | |||||||||
| Total deferred tax assets | 1,178 | 1,101 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Plant - net | 4,105 | 3,898 | |||||||||
| Regulatory assets | 432 | 432 | |||||||||
| Prepayments | 49 | 39 | |||||||||
| Goodwill | 52 | 38 | |||||||||
| Other | 37 | 38 | |||||||||
| Total deferred tax liabilities | 4,675 | 4,445 | |||||||||
| Net deferred tax liability | $ | 3,497 | $ | 3,344 | |||||||
State deferred taxes are determined by entity and by jurisdiction. As a result, $9 million and $12 million of net deferred tax assets are shown as "Other noncurrent assets" on the Balance Sheets for 2025 and 2024.
At December 31, 2025, PPL had the following loss and tax credit carryforwards, related deferred tax assets and valuation allowances recorded against the deferred tax assets:
| Gross | Deferred Tax Asset | Valuation Allowance | Expiration | ||||||||||||||||||||
| Loss and other carryforwards | |||||||||||||||||||||||
| State net operating losses | $ | 4,281 | $ | 181 | $ | (181) | 2026-2045 | ||||||||||||||||
| State charitable contributions | 1 | — | — | 2026-2030 | |||||||||||||||||||
| Foreign capital loss | 8 | 2 | (2) | Indefinite | |||||||||||||||||||
| Gross | Deferred Tax Asset | Valuation Allowance | Expiration | ||||||||||||||||||||
| Credit carryforwards | |||||||||||||||||||||||
| Federal investment tax credit | $ | 26 | $ | — | 2045 | ||||||||||||||||||
| Federal - other | 2 | — | 2045 | ||||||||||||||||||||
| State recycling credit | 6 | — | 2028 | ||||||||||||||||||||
| State - other | 2 | — | Indefinite | ||||||||||||||||||||
Valuation allowances have been established for the amount that, more likely than not, will not be realized. The changes in deferred tax valuation allowances were as follows:
| Additions | |||||||||||||||||||||||||||||
| Balance at Beginning of Period | Charged to Income | Charged to Other Accounts | Deductions | Balance at End of Period | |||||||||||||||||||||||||
| 2025 | $ | 224 | $ | 4 | $ | — | $ | 44 | (a) | $ | 184 | ||||||||||||||||||
| 2024 | 245 | 3 | 1 | 25 | (b) | 224 | |||||||||||||||||||||||
| 2023 | 213 | 54 | (c) | — | 22 | (d) | 245 | ||||||||||||||||||||||
(a)In 2025, PPL recorded a $41 million decrease in a valuation allowance on a 2005 state net operating loss carryforward that expired in 2025.
(b)In 2024, PPL recorded a $23 million decrease in a valuation allowance on a 2004 state net operating loss carryforward that expired in 2024.
(c)PPL has a Pennsylvania net operating loss fully offset by a valuation allowance. In 2023, PPL adjusted the net operating loss and related valuation allowance to be recorded at the current estimate of the applicable rate at which each portion of the net operating loss that will expire and be written off as the rate is reduced annually by one half a percentage point until the rate reaches to 4.99% in 2031.
(d)In 2023, PPL recorded a $22 million decrease in a valuation allowance on a 2003 state net operating loss carryforward that expired in 2023.
Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, income tax cash payments and refunds by federal and state jurisdictions, and details of "Taxes, other than income" were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Income Tax Expense (Benefit) | |||||||||||||||||
| Current - Federal (a) | $ | 46 | $ | 23 | $ | (175) | |||||||||||
| Current - State | 53 | 9 | 37 | ||||||||||||||
| Total Current Expense (Benefit) | 99 | 32 | (138) | ||||||||||||||
| Deferred - Federal (a) | 172 | 137 | 286 | ||||||||||||||
| Deferred - State | 27 | 64 | 48 | ||||||||||||||
| Total Deferred Expense (Benefit), excluding operating loss carryforwards | 199 | 201 | 334 | ||||||||||||||
| Amortization of investment tax credit | (3) | (3) | (3) | ||||||||||||||
| Tax expense (benefit) of operating loss carryforwards | |||||||||||||||||
| Deferred - Federal | 1 | 1 | 3 | ||||||||||||||
| Deferred - State | (5) | (3) | (12) | ||||||||||||||
| Total Tax Expense (Benefit) of Operating Loss Carryforwards | (4) | (2) | (9) | ||||||||||||||
| Total income tax expense (benefit) | $ | 291 | $ | 228 | $ | 184 | |||||||||||
| Total income tax expense (benefit) - Federal | $ | 216 | $ | 158 | $ | 111 | |||||||||||
| Total income tax expense (benefit) - State | 75 | 70 | 73 | ||||||||||||||
| Total income tax expense (benefit) | $ | 291 | $ | 228 | $ | 184 | |||||||||||
(a)In 2025, 2024, and 2023, PPL purchased approximately $153 million, $27 million and $300 million of renewable tax credits and recorded a current tax benefit and a deferred tax expense for utilization of approximately $138 million, $61 million and $250 million of the credits, respectively.
In the table above, the following income tax expense (benefit) are excluded from income taxes:
| 2025 | 2024 | 2023 | |||||||||||||||
| Other comprehensive income | $ | (6) | $ | (8) | $ | (14) | |||||||||||
| Valuation allowance recorded to other comprehensive income | — | — | (1) | ||||||||||||||
| Total | $ | (6) | $ | (8) | $ | (15) | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Reconciliation of Income Tax Expense (Benefit) | |||||||||||||||||||||||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate | $ | 309 | 21.0 | % | $ | 234 | 21.0 | % | $ | 194 | 21.0 | % | |||||||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||||||||||||||
| State income taxes, net of federal income tax benefit (a) | 75 | 5.0 | % | 67 | 6.1 | % | 69 | 7.5 | % | ||||||||||||||||||||||||||
| Tax credits (federal): | |||||||||||||||||||||||||||||||||||
| Investment tax credits | (17) | (1.1) | % | (5) | (0.5) | % | (19) | (2.1) | % | ||||||||||||||||||||||||||
| Other tax credits | (1) | (0.1) | % | (5) | (0.5) | % | (7) | (0.7) | % | ||||||||||||||||||||||||||
| Subtotal | (18) | (1.2) | % | (10) | (1.0) | % | (26) | (2.8) | % | ||||||||||||||||||||||||||
| Utility rate-making tax adjustments (federal and state): | |||||||||||||||||||||||||||||||||||
| Amortization of excess deferred taxes | (51) | (3.4) | % | (46) | (4.1) | % | (48) | (5.2) | % | ||||||||||||||||||||||||||
| AFUDC Equity | (20) | (1.3) | % | (10) | (0.9) | % | (6) | (0.7) | % | ||||||||||||||||||||||||||
| Flow-through rate-making (b) | (10) | (0.6) | % | (11) | (1.0) | % | (4) | (0.5) | % | ||||||||||||||||||||||||||
| Subtotal | (81) | (5.3) | % | (67) | (6.0) | % | (58) | (6.4) | % | ||||||||||||||||||||||||||
| Other | 6 | 0.3 | % | 4 | 0.3 | % | 5 | 0.6 | % | ||||||||||||||||||||||||||
| Total increase (decrease) | (18) | (1.2) | % | (6) | (0.6) | % | (10) | (1.1) | % | ||||||||||||||||||||||||||
| Total income tax expense | $ | 291 | 19.8 | % | $ | 228 | 20.4 | % | $ | 184 | 19.9 | % | |||||||||||||||||||||||
(a) Jurisdictions that make up the majority of state income taxes, net of federal effect, are Kentucky and Pennsylvania.
(b) Flow-through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.
Income tax cash payments (refunds) by federal and state jurisdictions:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Federal | $ | 66 | (a) | $ | (149) | (b) | $ | 252 | (c) | |||||||||||
| Pennsylvania | 20 | 21 | 24 | |||||||||||||||||
| Kentucky | 6 | 4 | 4 | |||||||||||||||||
| Other states | 1 | 1 | 1 | |||||||||||||||||
| Total | $ | 93 | $ | (123) | $ | 281 | ||||||||||||||
(a) Includes purchase price of transferable tax credits of $40 million.
(b) Includes refund for the carry-back of acquired transferable tax credits applied to the 2021 tax return of $200 million and purchase price of transferable tax credits of $20 million.
(c) Includes refund of $55 million and purchase price of transferable tax credits of $282 million.
| 2025 | 2024 | 2023 | |||||||||||||||
| Taxes, other than income | |||||||||||||||||
| State gross earnings and state gross receipts | $ | 214 | $ | 167 | $ | 195 | |||||||||||
| Property and other | 209 | 207 | 197 | ||||||||||||||
| Total | $ | 423 | $ | 374 | $ | 392 | |||||||||||
(PPL Electric)
The provision for PPL Electric's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the PAPUC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.
Significant components of PPL Electric's deferred income tax assets and liabilities were as follows:
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets | |||||||||||
| Accrued pension and postretirement costs | $ | 29 | $ | 36 | |||||||
| Contributions in aid of construction | 156 | 120 | |||||||||
| Regulatory liabilities | 57 | 40 | |||||||||
| Income taxes due to customers | 177 | 184 | |||||||||
| Other | 25 | 22 | |||||||||
| Total deferred tax assets | 444 | 402 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Electric utility plant - net | 2,028 | 1,934 | |||||||||
| Regulatory assets | 165 | 160 | |||||||||
| Prepayments | 30 | 30 | |||||||||
| Other | 2 | 4 | |||||||||
| Total deferred tax liabilities | 2,225 | 2,128 | |||||||||
| Net deferred tax liability | $ | 1,781 | $ | 1,726 | |||||||
PPL Electric expects to have adequate levels of taxable income to realize its recorded deferred income tax assets.
Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, income tax cash payments and refunds by federal and state jurisdictions, and details of "Taxes, other than income" were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Income Tax Expense | |||||||||||||||||
| Current - Federal | $ | 136 | $ | 44 | $ | 91 | |||||||||||
| Current - State | 44 | 4 | 31 | ||||||||||||||
| Total Current Expense | 180 | 48 | 122 | ||||||||||||||
| Deferred - Federal | 17 | 86 | 28 | ||||||||||||||
| Deferred - State | 7 | 42 | 18 | ||||||||||||||
| Total Deferred Expense, excluding operating loss carryforwards | 24 | 128 | 46 | ||||||||||||||
| Total income tax expense | $ | 204 | $ | 176 | $ | 168 | |||||||||||
| Total income tax expense - Federal | $ | 153 | $ | 130 | $ | 119 | |||||||||||
| Total income tax expense - State | 51 | 46 | 49 | ||||||||||||||
| Total income tax expense | $ | 204 | $ | 176 | $ | 168 | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Reconciliation of Income Tax Expense (Benefit) | |||||||||||||||||||||||||||||||||||
| Taxes at statutory tax rate | $ | 177 | 21.0 | % | $ | 158 | 21.0 | % | $ | 144 | 21.0 | % | |||||||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||||||||||||||
| State income taxes, net of federal income tax benefit (a) | 52 | 6.1 | % | 47 | 6.2 | % | 48 | 7.1 | % | ||||||||||||||||||||||||||
| Utility rate-making tax adjustments (federal and state): | |||||||||||||||||||||||||||||||||||
| Amortization of excess deferred federal income taxes | (10) | (1.2) | % | (10) | (1.3) | % | (11) | (1.6) | % | ||||||||||||||||||||||||||
| AFUDC Equity | (8) | (1.0) | % | (6) | (0.7) | % | (4) | (0.7) | % | ||||||||||||||||||||||||||
| Flow-through rate-making (b) | (10) | (1.2) | % | (11) | (1.5) | % | (4) | (0.7) | % | ||||||||||||||||||||||||||
| Subtotal | (28) | (3.4) | % | (27) | (3.5) | % | (19) | (3.0) | % | ||||||||||||||||||||||||||
| Other | 3 | 0.5 | % | (2) | (0.2) | % | (5) | (0.6) | % | ||||||||||||||||||||||||||
| Total increase (decrease) | 27 | 3.2 | % | 18 | 2.5 | % | 24 | 3.5 | % | ||||||||||||||||||||||||||
| Total income tax expense | $ | 204 | 24.2 | % | $ | 176 | 23.5 | % | $ | 168 | 24.5 | % | |||||||||||||||||||||||
(a) The jurisdiction that makes up the majority of state income taxes, net of federal effect, is Pennsylvania.
(b) Flow-through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.
Income tax cash payments by federal and state jurisdictions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 109 | $ | 62 | $ | 68 | |||||||||||
| Pennsylvania | 20 | 21 | 24 | ||||||||||||||
| Total | $ | 129 | $ | 83 | $ | 92 | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Taxes, other than income | |||||||||||||||||
| State gross receipts | $ | 144 | $ | 122 | $ | 136 | |||||||||||
| Property and other | 7 | 9 | 7 | ||||||||||||||
| Total | $ | 151 | $ | 131 | $ | 143 | |||||||||||
(LG&E)
The provision for LG&E's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.
Significant components of LG&E's deferred income tax assets and liabilities were as follows:
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets | |||||||||||
| Contributions in aid of construction | $ | 17 | $ | 18 | |||||||
| Regulatory liabilities | 18 | 18 | |||||||||
| Accrued pension and postretirement costs | — | 4 | |||||||||
| Deferred investment tax credits | 7 | 7 | |||||||||
| Income taxes due to customers | 104 | 110 | |||||||||
| State tax credit carryforwards | 5 | 6 | |||||||||
| Lease liabilities | 4 | 4 | |||||||||
| Other | 9 | 6 | |||||||||
| Valuation allowances | (5) | (6) | |||||||||
| Total deferred tax assets | 159 | 167 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Plant - net | 884 | 875 | |||||||||
| Regulatory assets | 87 | 88 | |||||||||
| Lease right-of-use assets | 4 | 4 | |||||||||
| Other | 3 | 3 | |||||||||
| Total deferred tax liabilities | 978 | 970 | |||||||||
| Net deferred tax liability | $ | 819 | $ | 803 | |||||||
At December 31, 2025, LG&E had $5 million of state credit carryforwards that expire in 2028 and a $5 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income.
Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, income tax cash payments and refunds by federal and state jurisdictions, and details of "Taxes, other than income" were:
| 2025 | 2024 | 2023 | |||||||||||||||
| Income Tax Expense (Benefit) | |||||||||||||||||
| Current - Federal | $ | 72 | $ | 60 | $ | 70 | |||||||||||
| Current - State | 14 | 11 | 13 | ||||||||||||||
| Total Current Expense (Benefit) | 86 | 71 | 83 | ||||||||||||||
| Deferred - Federal | (10) | 1 | (15) | ||||||||||||||
| Deferred - State | 3 | 6 | 2 | ||||||||||||||
| Total Deferred Expense (Benefit) | (7) | 7 | (13) | ||||||||||||||
| Amortization of investment tax credit - Federal | (1) | (1) | (1) | ||||||||||||||
| Total income tax expense (benefit) | $ | 78 | $ | 77 | $ | 69 | |||||||||||
| Total income tax expense (benefit) - Federal | $ | 61 | $ | 60 | $ | 54 | |||||||||||
| Total income tax expense (benefit) - State | 17 | 17 | 15 | ||||||||||||||
| Total income tax expense (benefit) | $ | 78 | $ | 77 | $ | 69 | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Reconciliation of Income Tax Expense (Benefit) | |||||||||||||||||||||||||||||||||||
| Taxes at statutory tax rate | $ | 81 | 21.0 | % | $ | 79 | 21.0 | % | $ | 70 | 21.0 | % | |||||||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||||||||||||||
| State income taxes, net of federal income tax benefit (a) | 15 | 3.8 | % | 14 | 3.7 | % | 13 | 3.8 | % | ||||||||||||||||||||||||||
| Utility rate-making tax adjustments (federal and state): | |||||||||||||||||||||||||||||||||||
| Amortization of excess deferred taxes | (14) | (3.5) | % | (13) | (3.4) | % | (13) | (3.9) | % | ||||||||||||||||||||||||||
| AFUDC Equity | (4) | (1.1) | % | (2) | (0.4) | % | (1) | (0.3) | % | ||||||||||||||||||||||||||
| Subtotal | (18) | (4.6) | % | (15) | (3.8) | % | (14) | (4.2) | % | ||||||||||||||||||||||||||
| Other | — | — | % | (1) | (0.3) | % | — | — | % | ||||||||||||||||||||||||||
| Total increase (decrease) | (3) | (0.8) | % | (2) | (0.4) | % | (1) | (0.4) | % | ||||||||||||||||||||||||||
| Total income tax expense | $ | 78 | 20.2 | % | $ | 77 | 20.6 | % | $ | 69 | 20.6 | % | |||||||||||||||||||||||
(a)The jurisdiction that makes up the majority of state income taxes, net of federal effect, is Kentucky.
Income tax cash payments by federal and state jurisdictions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 67 | $ | 62 | $ | 71 | |||||||||||
| Kentucky | 14 | 11 | 13 | ||||||||||||||
| Total | $ | 81 | $ | 73 | $ | 84 | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Taxes, other than income | |||||||||||||||||
| Property and other | $ | 51 | $ | 49 | $ | 48 | |||||||||||
| Total | $ | 51 | $ | 49 | $ | 48 | |||||||||||
(KU)
The provision for KU's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC, the VSCC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.
Significant components of KU's deferred income tax assets and liabilities were as follows:
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets | |||||||||||
| Contributions in aid of construction | $ | 17 | $ | 12 | |||||||
| Regulatory liabilities | 31 | 29 | |||||||||
| Deferred investment tax credits | 20 | 20 | |||||||||
| Income taxes due to customers | 117 | 124 | |||||||||
| State tax credit carryforwards | 3 | 4 | |||||||||
| Lease liabilities | 7 | 6 | |||||||||
| Other | 8 | 4 | |||||||||
| Valuation allowances | (1) | (2) | |||||||||
| Total deferred tax assets | 202 | 197 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Plant - net | 1,085 | 1,053 | |||||||||
| Regulatory assets | 56 | 55 | |||||||||
| Pension and postretirement costs | 8 | 6 | |||||||||
| Lease right-of-use assets | 7 | 6 | |||||||||
| Other | 2 | 1 | |||||||||
| Total deferred tax liabilities | 1,158 | 1,121 | |||||||||
| Net deferred tax liability | $ | 956 | $ | 924 | |||||||
At December 31, 2025, KU had $3 million of state credit carryforwards of which $1 million will expire in 2028 and $2 million that has an indefinite carryforward period. At December 31, 2025, KU had a $1 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income.
Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, income tax cash payments and refunds by federal and state jurisdictions, and details of "Taxes, other than income" were:
| 2025 | 2024 | 2023 | |||||||||||||||
| Income Tax Expense (Benefit) | |||||||||||||||||
| Current - Federal | $ | 83 | $ | 87 | $ | 73 | |||||||||||
| Current - State | 16 | 17 | 13 | ||||||||||||||
| Total Current Expense (Benefit) | 99 | 104 | 86 | ||||||||||||||
| Deferred - Federal | (4) | (15) | (11) | ||||||||||||||
| Deferred - State | 6 | 2 | 4 | ||||||||||||||
| Total Deferred Expense (Benefit) | 2 | (13) | (7) | ||||||||||||||
| Amortization of investment tax credit - Federal | (2) | (2) | (2) | ||||||||||||||
| Total income tax expense (benefit) | $ | 99 | $ | 89 | $ | 77 | |||||||||||
| Total income tax expense (benefit) - Federal | $ | 77 | $ | 70 | $ | 60 | |||||||||||
| Total income tax expense (benefit) - State | 22 | 19 | 17 | ||||||||||||||
| Total income tax expense (benefit) | $ | 99 | $ | 89 | $ | 77 | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Reconciliation of Income Tax Expense (Benefit) | |||||||||||||||||||||||||||||||||||
| Taxes at statutory tax rate | $ | 104 | 21.0 | % | $ | 93 | 21.0 | % | $ | 82 | 21.0 | % | |||||||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||||||||||||||
| State income taxes, net of federal income tax benefit (a) | 19 | 3.8 | % | 16 | 3.7 | % | 15 | 3.8 | % | ||||||||||||||||||||||||||
| Utility rate-making tax adjustment (federal and state): | |||||||||||||||||||||||||||||||||||
| Amortization of excess deferred federal and state income taxes | (18) | (3.6) | % | (17) | (3.7) | % | (17) | (4.3) | % | ||||||||||||||||||||||||||
| AFUDC Equity | (5) | (1.0) | % | (2) | (0.6) | % | — | — | % | ||||||||||||||||||||||||||
| Subtotal | (23) | (4.6) | % | (19) | (4.3) | % | (17) | (4.3) | % | ||||||||||||||||||||||||||
| Other | (1) | (0.3) | % | (1) | (0.4) | % | (3) | (0.7) | % | ||||||||||||||||||||||||||
| Total decrease | (5) | (1.1) | % | (4) | (1.0) | % | (5) | (1.2) | % | ||||||||||||||||||||||||||
| Total income tax expense | $ | 99 | 19.9 | % | $ | 89 | 20.0 | % | $ | 77 | 19.8 | % | |||||||||||||||||||||||
(a)The jurisdiction that makes up the majority of state income taxes, net of federal effect, is Kentucky.
Income tax cash payments by federal and state jurisdictions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 78 | $ | 85 | $ | 65 | |||||||||||
| Kentucky | 15 | 16 | 12 | ||||||||||||||
| Other | 1 | 1 | 1 | ||||||||||||||
| Total | $ | 94 | $ | 102 | $ | 78 | |||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Taxes, other than income | |||||||||||||||||
| Property and other | $ | 51 | $ | 49 | $ | 45 | |||||||||||
| Total | $ | 51 | $ | 49 | $ | 45 | |||||||||||
(All Registrants)
Unrecognized Tax Benefits
PPL or its subsidiaries file tax returns in four major tax jurisdictions. The income tax provisions for PPL Electric, LG&E and KU are calculated in accordance with an intercompany tax sharing agreement, which provides that taxable income be calculated as if each subsidiary filed a separate consolidated return. PPL Electric or its subsidiaries indirectly or directly file tax returns in three major tax jurisdictions, and LG&E and KU indirectly or directly file tax returns in two major tax jurisdictions. With few exceptions, at December 31, 2025, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows.
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| U.S. (federal) | 2020 and prior | 2020 and prior | 2020 and prior | 2020 and prior | |||||||||||||||||||
| Pennsylvania (state) | 2021 and prior | 2021 and prior | n/a | n/a | |||||||||||||||||||
| Kentucky (state) | 2020 and prior | 2020 and prior | 2020 and prior | 2020 and prior | |||||||||||||||||||
Other
One Big Beautiful Bill Act (All Registrants)
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act. The Registrants are continuing to review the law to assess any material impacts to the financial statements.
Additionally, on July 7, 2025, President Trump issued an Executive Order directing the Treasury to take action to strictly enforce the termination of clean electricity tax credits under IRC Sections 45Y and 48E for wind and solar. On August 15, 2025, the IRS issued Notice 2025-42, primarily tightening the rules regarding when a solar project is considered to have commenced construction. In addition, the One Big Beautiful Bill Act included new rules addressing Foreign Entities of Concern (FEOC). These rules are supply‑chain, foreign entity ownership and debt issuance restrictions that may limit eligibility for certain U.S. clean energy tax credits such as those provided for in IRC Sections 45Y and 48E.
On February 12, 2026, the Treasury and the IRS issued Notice 2026-15, which provides interim guidance on the FEOC restrictions on certain clean electricity tax credits. Additionally, the IRS is expected to issue further guidance on the tax provisions of the One Big Beautiful Bill Act. The Registrants do not currently anticipate these rules or guidance to result in limitations on its clean energy projects and associated tax credits but will continue to monitor closely.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2022 | Feb 17, 2023 | |
| 2019 | Feb 14, 2020 | |
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.