For AEP’s various regulatory jurisdictions where the regulatory effects of Tax Reform proceedings have not been fully resolved, the table below summarizes the current status. See Note 4 - Rate Matters for additional information related to regulatory filings in these jurisdictions.



Registrant (Jurisdiction)	Change in Tax Rate	Excess ADIT Subject to Normalization Requirements	Excess ADIT Not Subject to Normalization Requirements
AEP Texas (Texas-Distribution)	Order Issued	Order Issued	Order Issued – Partial (a)
AEP Texas (Texas-Transmission)	Order Issued	Case Pending	Case Pending
I&M (Michigan)	Order Issued	Case Pending	Case Pending
SWEPCo (Louisiana)	Case Pending – Rates Implemented (b)	Case Pending – Rates Implemented (b)	Case Pending – Rates Implemented (b)
SWEPCo (Texas)	Order Issued	To be addressed in a later filing	To be addressed in a later filing

The Registrants’ interim ETR reflect the estimated annual ETR for 2019 and 2018, adjusted for tax expense associated with certain discrete items. The interim ETR differ from the federal statutory tax rate of 21% primarily due to increased amortization of Excess ADIT, tax credits and other book/tax differences which are accounted for on a flow-through basis.

The Registrants include the amortization of Excess ADIT not subject to normalization requirements in the annual estimated ETR when regulatory proceedings instruct the Registrants to provide the benefits of Tax Reform to customers over multiple interim periods. Certain regulatory proceedings instruct the Registrants to provide the benefits of Tax Reform to customers in a single period (e.g. by applying the Excess ADIT not subject to normalization requirements against an existing regulatory asset balance) and in these circumstances, the Registrants recognize the tax benefit discretely in the period recorded. The annual amount of Excess ADIT approved by the Registrant’s regulatory commissions may not impact the ETR ratably during each interim period due to the variability of pretax book income between interim periods and the application of an annual estimated ETR.



	Three Months Ended September 30,				Nine Months Ended September 30,
Company	2019		2018		2019		2018
AEP	5.2	%	(16.2	)%	1.7	%	5.6	%
AEP Texas	15.1	%	12.6	%	(25.3	)%	14.9	%
AEPTCo	21.9	%	18.4	%	20.7	%	20.7	%
APCo	(3.9	)%	(962.2	)%	(19.1	)%	(13.8	)%
I&M	(2.7	)%	15.9	%	(2.1	)%	10.4	%
OPCo	13.9	%	(46.4	)%	14.2	%	4.6	%
PSO	6.4	%	5.6	%	4.6	%	8.7	%
SWEPCo	(0.6	)%	9.8	%	—	%	11.4	%

The increase in the ETR was primarily due to $71 million of decreased amortization of Excess ADIT not subject to normalization requirements and $14 million of increased state tax expense which impacted the ETR by 19.1% and 1.3%, respectively.

The decrease in the ETR was primarily due to $59 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (38.9)%. Amortization of Excess ADIT not subject to normalization requirements for the nine months ended September 30, 2019 reflects Tax Reform elements of the Stipulation and Settlement agreement approved by the PUCT in August 2018 and the Texas Storm Cost Securitization financing order issued by the PUCT in June 2019.

The increase in the ETR was primarily due to $3 million of increased state tax expense and $2 million of decreased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by 1.3% and 1%, respectively.

The increase in the ETR was primarily due to $56 million of decreased amortization of Excess ADIT not subject to normalization requirements and $6 million of increased state tax expense which impacted the ETR by 947.3% and 34.8%, respectively. Amortization of Excess ADIT not subject to normalization requirements primarily decreased from the prior year due to the discrete impact of the West Virginia Tax Reform order which enabled APCo to utilize $73 million of Excess ADIT not subject to normalization requirements to offset certain regulatory asset balances in the third quarter of 2018.

The decrease in the ETR was primarily due to $9 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (4.6)%. Amortization of Excess ADIT not subject to normalization requirements for the nine months ended September 30, 2019 reflects the October 2018 and March 2019 Virginia SCC Tax Reform orders as well as the August 2018 and February 2019 WVPSC orders.

The decrease in the ETR was primarily due to $10 million of increased amortization of Excess ADIT, $3 million of increased favorable book/tax differences accounted for on a flow-through basis, $2 million of decreased state income tax expense and $1 million of increased parent company loss benefit which impacted the ETR by (11.3)%, (3.2)%, (1.8)% and (1.6)% respectively.

The decrease in the ETR was primarily due to $16 million of increased amortization of Excess ADIT not subject to normalization requirements and $12 million of increased favorable book/tax differences accounted for on a flow-through basis which impacted the ETR by (6.9)% and (4.8)%, respectively. Amortization of Excess ADIT not subject to normalization requirements for the nine months ended September 30, 2019 reflects the Tax Reform elements of the 2017 Indiana Base Rate Case approved by the IURC in May 2018.

The increase in the ETR was primarily due to $35 million of decreased amortization of Excess ADIT not subject to normalization requirements and $1 million of decreased parent company loss benefit which impacted the ETR by 60% and 2%, respectively. Amortization of Excess ADIT not subject to amortization requirements decreased from the prior year primarily due to the discrete impact of the Ohio Tax Reform order which enabled OPCo to utilize $38 million of Excess ADIT not subject to rate normalization requirements to offset certain regulatory asset balances in the third quarter of 2018.

The increase in the ETR was primarily due to $24 million of decreased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by 10.8%. Amortization of Excess ADIT not subject to amortization requirements decreased from the prior year primarily due to the discrete impact of the Ohio Tax Reform order which enabled OPCo to utilize $38 million of Excess ADIT not subject to rate normalization requirements to offset certain regulatory asset balances in the third quarter of 2018.

The decrease in the ETR was primarily due to $15 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (6.8)%. Amortization of Excess ADIT not subject to normalization requirements for the nine months ended September 30, 2019 reflects the August 2018 OCC Tax Reform order as well as Tax Reform elements of the 2018 Oklahoma Base Rate Case approved by the OCC in March 2019.

The decrease in the ETR was primarily due to $11 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (9.7)%. Amortization of Excess ADIT not subject to normalization requirements for the nine months ended September 30, 2019 reflects Tax Reform elements incorporated in the Louisiana 2018 Formula Rate Filing as well as the Arkansas Tax Reform order issued by the APSC in September 2018.

The decrease in the ETR was primarily due to $15 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (10.4)%. Amortization of Excess ADIT not subject to normalization requirements for the nine months ended September 30, 2019 reflects Tax Reform elements incorporated in the Louisiana 2018 Formula Rate Filing as well as the Arkansas Tax Reform order issued by the APSC in September 2018.

AEP and subsidiaries are no longer subject to U.S. federal examination by the IRS for all years through 2013. During the IRS examination of years 2011 through 2014, the statute of limitations for these years was extended to coincide with the examination of 2015. During the third quarter of 2019, AEP and subsidiaries elected to amend the 2014 and 2015 federal returns. Due to the amendment of these federal returns, the 2014 and 2015 years will remain open for possible IRS examination for only the items that were amended on the 2014 and 2015 federal returns. The IRS examination of 2016 began in October 2018 and concluded in March 2019.

In April 2018, the Kentucky legislature enacted House Bill (H.B.) 487. H.B. 487 adopts mandatory unitary combined reporting for state corporate income tax purposes applicable for taxable years beginning on or after January 1, 2019. H.B. 487 also adopts the 80% federal net operating loss (NOL) limitation under Internal Revenue Code Sec. 172(a) for NOLs generated after January 1, 2018 and the federal unlimited carryforward period for unused NOLs generated after January 1, 2018. In addition, H.B. 366 was also enacted in April 2018, which among other things, replaces the graduated corporate tax rate structure with a flat 5% tax rate for business income and adopts a single-sales factor apportionment formula for apportioning a corporation’s business income to Kentucky. In the second quarter of 2018, AEP recorded an $18 million benefit to Income Tax Expense (Benefit) as a result of remeasuring Kentucky deferred taxes under a unitary filing group. The enacted legislation did not materially impact AEPTCo’s, I&M’s or OPCo’s net income.