XML 57 R17.htm IDEA: XBRL DOCUMENT
v3.24.2

Income Taxes | 6 Months Ended
--- | ---
Jun. 30, 2024
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 2024 and 2023, adjusted for tax expense associated with certain discrete items. In the first quarter of 2024, I&M, PSO, and SWEPCo recorded tax benefits of $61 million, $49 million, and $114 million, respectively, related to the reduction of a regulatory liability associated with the IRS PLRs received, driving a reduction to the interim ETR resulting in AEP’s year to date tax rate of (11.2)% as shown below. The ETR for each of the Registrants are included in the following tables:
|  | Three Months Ended June 30, 2024
|  | 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 |  | 0.9 | % |  | 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-Through |  | 1.1 | % |  | 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 Rate |  | 1.9 | % |  | 22.8 | % |  | 21.4 | % |  | 17.9 | % |  | (32.3) | % |  | (16.5) | % |  | (57.1) | % |  | 38.9 | %
|  | Three Months Ended June 30, 2023
|  | 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 |  | 2.1 | % |  | 0.6 | % |  | 2.6 | % |  | 3.2 | % |  | 0.7 | % |  | 0.8 | % |  | 2.0 | % |  | (1.6) | %
Tax Reform Excess ADIT Reversal |  | (6.2) | % |  | (1.3) | % |  | 0.1 | % |  | (4.5) | % |  | (6.1) | % |  | (8.5) | % |  | (17.2) | % |  | (4.2) | %
Production and Investment Tax Credits |  | (9.9) | % |  | (0.2) | % |  | — | % |  | (0.1) | % |  | 0.1 | % |  | — | % |  | (55.1) | % |  | (29.2) | %
Reversal of Origination Flow-Through |  | (1.0) | % |  | 0.1 | % |  | 0.2 | % |  | (5.1) | % |  | (4.4) | % |  | 1.2 | % |  | 0.3 | % |  | (0.8) | %
Other |  | (0.8) | % |  | (0.6) | % |  | (2.1) | % |  | (1.9) | % |  | — | % |  | (0.6) | % |  | (1.4) | % |  | 0.7 | %
Effective Income Tax Rate |  | 5.2 | % |  | 19.6 | % |  | 21.8 | % |  | 12.6 | % |  | 11.3 | % |  | 13.9 | % |  | (50.4) | % |  | (14.1) | %
|  | Six Months Ended June 30, 2024
|  | 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 |  | 1.8 | % |  | 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 | %
|  | Six Months Ended June 30, 2023
|  | 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 |  | 2.0 | % |  | 0.5 | % |  | 2.6 | % |  | 2.6 | % |  | 2.4 | % |  | 0.9 | % |  | 2.0 | % |  | (1.2) | %
Tax Reform Excess ADIT Reversal |  | (6.2) | % |  | (1.4) | % |  | 0.2 | % |  | (4.5) | % |  | (7.2) | % |  | (7.6) | % |  | (17.1) | % |  | (4.0) | %
Production and Investment Tax Credits |  | (9.8) | % |  | (0.2) | % |  | — | % |  | (0.1) | % |  | (0.6) | % |  | — | % |  | (55.2) | % |  | (28.2) | %
Other |  | (2.9) | % |  | (0.7) | % |  | (1.6) | % |  | 0.6 | % |  | (2.1) | % |  | 0.1 | % |  | (1.0) | % |  | (0.5) | %
Effective Income Tax Rate |  | 4.1 | % |  | 19.2 | % |  | 22.2 | % |  | 19.6 | % |  | 13.5 | % |  | 14.4 | % |  | (50.3) | % |  | (12.9) | %
Federal and State Income Tax Audit Status The statute of limitations (SOL) for the IRS to examine AEP and subsidiaries originally filed federal return has expired for tax years 2016 and earlier. In July 2024, AEP received notification that the Joint Committee on Taxation’s review of AEP’s refund claim and associated IRS audit was final, resulting in no change and a refund of approximately $50 million. The refund is expected to be received in the second half of 2024. Following the completion of this audit, IRS exam is closed through AEP's 2020 filed tax return. There are currently no other tax years under IRS audit. AEP and subsidiaries file income tax returns in various state and local jurisdictions. These taxing authorities routinely examine the tax returns, and AEP and subsidiaries are currently under examination in several state and local jurisdictions. Generally, the SOL have expired for tax years prior to 2017. In addition, management is monitoring and continues to evaluate the potential impact of federal legislation and corresponding state conformity. Federal Legislation In August 2022, President Biden signed H.R. 5376 into law, commonly known as the Inflation Reduction Act of 2022, or IRA. Most notably this budget reconciliation legislation created a 15% minimum tax on adjusted financial statement income (CAMT), extended and increased the value of PTCs and ITCs, added a nuclear and clean hydrogen PTC, an energy storage ITC and allowed the sale or transfer of tax credits to third-parties for cash. As further significant guidance from Treasury and the IRS is expected on the tax provisions in the IRA, AEP will continue to monitor any issued guidance and evaluate the impact on future net income, cash flows and financial condition. AEP and subsidiaries are applicable corporations for purposes of the CAMT in 2024. CAMT cash taxes are expected to be partially offset by regulatory recovery, the utilization of tax credits and additionally the cash inflow generated by the sale of tax credits. The sale of tax credits are presented in the operating section of the statements of cash flows consistent with the presentation of cash taxes paid. AEP presents the loss on sale of tax credits through income tax expense. In April 2024, the IRS issued final regulations related to the transfer of tax credits. In 2023, AEP, on behalf of PSO, SWEPCo and AEP Energy Supply, LLC, entered into transferability agreements with nonaffiliated parties to sell 2023 generated PTCs resulting in cash proceeds of approximately $174 million with $102 million received in 2023, $62 million received in the first quarter of 2024 and the remaining $10 million was received in the second quarter of 2024. In July 2024, AEP, on behalf of PSO and SWEPCo, entered into another transferability agreement with a nonaffiliated party to sell 2024 generated PTCs which will result in approximately $100 million of cash proceeds, of which approximately $90 million is expected by the end of 2024 and the remainder in 2025. AEP expects to continue to explore the ability to efficiently monetize its tax credits through third-party transferability agreements. I&M’s Cook Plant qualifies for the transferable Nuclear PTC, which is available for tax years beginning in 2024 through 2032. The Nuclear PTC is calculated based on electricity generated and sold to third-parties and is subject to a “reduction amount” as the facility’s gross receipts increase above a certain threshold. Due to lack of guidance and uncertainty surrounding the computation of gross receipts, AEP and I&M are unable to estimate the amount of the Nuclear PTCs earned as of June 30, 2024 and have not included any Nuclear PTCs in the annualized effective tax rate for the second quarter of 2024.

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration