
Year Ended December 31, 2021	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Federal:
Current	$	(27.8)	$	(1.2)	$	69.8	$	5.0	$	26.9	$	6.8	$	(109.6)	$	(16.7)
Deferred	182.6		40.5		54.1		14.9		(35.5)		25.2		105.6		26.2

Total Federal	154.8		39.3		123.9		19.9		(8.6)		32.0		(4.0)		9.5

State and Local:
Current	6.0		3.0		5.8		2.2		(0.6)		(3.1)		—		0.4
Deferred (a)	(45.3)		0.8		14.4		—		(1.4)		5.5		8.1		(10.5)

Total State and Local	(39.3)		3.8		20.2		2.2		(2.0)		2.4		8.1		(10.1)

Income Tax Expense (Benefit)	$	115.5	$	43.1	$	144.1	$	22.1	$	(10.6)	$	34.4	$	4.1	$	(0.6)

(a)Benefit at AEP is primarily due to an out of period adjustment related to Deferred Income Taxes and Income Tax Expense (Benefit). Management concluded the misstatement and subsequent correction was not material to prior or current period financial statements.


Year Ended December 31, 2020	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Federal:
Current	$	(138.2)	$	5.2	$	22.2	$	21.4	$	11.3	$	(26.6)	$	(11.4)	$	(13.6)
Deferred	146.9		(15.4)		65.4		(27.1)		(20.6)		74.0		8.3		19.6

Total Federal	8.7		(10.2)		87.6		(5.7)		(9.3)		47.4		(3.1)		6.0

State and Local:
Current	(16.7)		(0.1)		2.8		9.3		1.9		(5.4)		0.1		(8.2)
Deferred	48.5		(0.9)		16.3		0.7		(0.1)		3.2		8.2		11.6

Total State and Local	31.8		(1.0)		19.1		10.0		1.8		(2.2)		8.3		3.4

Income Tax Expense (Benefit)	$	40.5	$	(11.2)	$	106.7	$	4.3	$	(7.5)	$	45.2	$	5.2	$	9.4


Year Ended December 31, 2019	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Federal:
Current	$	(7.4)	$	(31.8)	$	23.7	$	36.7	$	48.1	$	(10.0)	$	25.5	$	6.9
Deferred	(71.6)		(24.7)		71.7		(126.1)		(57.1)		40.6		(26.0)		(10.0)

Total Federal	(79.0)		(56.5)		95.4		(89.4)		(9.0)		30.6		(0.5)		(3.1)

State and Local:
Current	4.4		2.9		2.4		12.0		(2.4)		1.1		0.2		0.8
Deferred	61.7		—		19.6		(0.6)		0.8		3.2		7.8		(2.4)

Total State and Local	66.1		2.9		22.0		11.4		(1.6)		4.3		8.0		(1.6)

Income Tax Expense (Benefit)	$	(12.9)	$	(53.6)	$	117.4	$	(78.0)	$	(10.6)	$	34.9	$	7.5	$	(4.7)

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:


AEP	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	2,488.1		$	2,196.7		$	1,919.8
Less: Equity Earnings – Dolet Hills	(3.4)			(2.9)			(3.0)
Income Tax Expense (Benefit)	115.5			40.5			(12.9)
Pretax Income	$	2,600.2		$	2,234.3		$	1,903.9

Income Taxes on Pretax Income at Statutory Rate (21%)	$	546.0		$	469.2		$	399.8
Increase (Decrease) in Income Taxes Resulting from the Following Items:
Reversal of Origination Flow-Through	25.9			26.5			20.4

Investment Tax Credit Amortization	(22.0)			(18.8)			(13.0)
Production Tax Credits	(98.8)			(83.1)			(59.6)
State and Local Income Taxes, Net	39.4			25.1			52.2
Removal Costs	(20.0)			(18.6)			(22.2)
AFUDC	(30.6)			(32.5)			(37.1)



Tax Adjustments (a)	(55.1)			—			—
Tax Reform Excess ADIT Reversal	(255.6)			(268.2)			(353.2)


CARES Act	—			(48.0)			—

Other	(13.7)			(11.1)			(0.2)
Income Tax Expense (Benefit)	$	115.5		$	40.5		$	(12.9)

Effective Income Tax Rate	4.4		%	1.8		%	(0.7)		%

(a)Represents an out of period adjustment related to Deferred Income Taxes and Income Tax Expense (Benefit). Management concluded the misstatement and subsequent correction was not material to prior or current period financial statements.


AEP Texas	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	289.8		$	241.0		$	178.3
Income Tax Expense (Benefit)	43.1			(11.2)			(53.6)
Pretax Income	$	332.9		$	229.8		$	124.7

Income Taxes on Pretax Income at Statutory Rate (21%)	$	69.9		$	48.3		$	26.2
Increase (Decrease) in Income Taxes Resulting from the Following Items:




State and Local Income Taxes, Net	2.4			(0.8)			2.3

AFUDC	(4.5)			(4.1)			(3.2)
Parent Company Loss Benefit	(3.2)			(4.5)			(3.8)



Tax Reform Excess ADIT Reversal	(21.3)			(47.9)			(73.4)




Other	(0.2)			(2.2)			(1.7)
Income Tax Expense (Benefit)	$	43.1		$	(11.2)		$	(53.6)

Effective Income Tax Rate	12.9		%	(4.9)		%	(43.0)		%


AEPTCo	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	591.7		$	423.4		$	439.7
Income Tax Expense	144.1			106.7			117.4
Pretax Income	$	735.8		$	530.1		$	557.1

Income Taxes on Pretax Income at Statutory Rate (21%)	$	154.5		$	111.3		$	117.0
Increase (Decrease) in Income Taxes Resulting from the Following Items:




State and Local Income Taxes, Net	19.8			15.1			17.4

AFUDC	(14.1)			(15.5)			(17.7)
Parent Company Loss Benefit	(18.3)			(7.0)			(4.2)







Other	2.2			2.8			4.9
Income Tax Expense	$	144.1		$	106.7		$	117.4

Effective Income Tax Rate	19.6		%	20.1		%	21.1		%


APCo	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	348.9		$	369.7		$	306.3
Income Tax Expense (Benefit)	22.1			4.3			(78.0)
Pretax Income	$	371.0		$	374.0		$	228.3

Income Taxes on Pretax Income at Statutory Rate (21%)	$	77.9		$	78.5		$	47.9
Increase (Decrease) in Income Taxes Resulting from the Following Items:
Reversal of Origination Flow-Through	11.7			12.7			10.8



State and Local Income Taxes, Net	2.1			7.9			9.0
Removal Costs	(7.3)			(5.7)			(6.4)
AFUDC	(4.6)			(4.5)			(5.2)
Parent Company Loss Benefit	—			(6.2)			(4.1)


Tax Adjustments (a)	4.5			—			—
Tax Reform Excess ADIT Reversal	(60.5)			(72.3)			(130.4)

Federal Return to Provision	(1.6)			(7.2)			(1.0)

Other	(0.1)			1.1			1.4
Income Tax Expense (Benefit)	$	22.1		$	4.3		$	(78.0)

Effective Income Tax Rate	6.0		%	1.1		%	(34.2)		%


I&M	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	279.8		$	284.8		$	269.4
Income Tax Benefit	(10.6)			(7.5)			(10.6)
Pretax Income	$	269.2		$	277.3		$	258.8

Income Taxes on Pretax Income at Statutory Rate (21%)	$	56.5		$	58.2		$	54.3
Increase (Decrease) in Income Taxes Resulting from the Following Items:
Reversal of Origination Flow-Through	3.5			1.6			4.0

Investment Tax Credit Amortization	(6.4)			(4.5)			(3.6)

State and Local Income Taxes, Net	(1.3)			1.5			(1.2)
Removal Costs	(9.7)			(10.5)			(12.8)
AFUDC	(2.7)			(2.4)			(4.1)
Parent Company Loss Benefit	(2.8)			(6.4)			(3.3)



Tax Reform Excess ADIT Reversal	(46.3)			(46.8)			(42.5)



Other	(1.4)			1.8			(1.4)
Income Tax Benefit	$	(10.6)		$	(7.5)		$	(10.6)

Effective Income Tax Rate	(3.9)		%	(2.7)		%	(4.1)		%


OPCo	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	253.6		$	271.4		$	297.1
Income Tax Expense	34.4			45.2			34.9
Pretax Income	$	288.0		$	316.6		$	332.0

Income Taxes on Pretax Income at Statutory Rate (21%)	$	60.5		$	66.5		$	69.7
Increase (Decrease) in Income Taxes Resulting from the Following Items:
Reversal of Origination Flow-Through	2.2			3.7			(1.4)



State and Local Income Taxes, Net	—			(1.7)			3.4

AFUDC	(2.3)			(2.6)			(3.8)



Tax Adjustments (a)	8.9			—			—
Tax Reform Excess ADIT Reversal	(32.6)			(27.2)			(27.3)

Federal Return to Provision	(1.2)			6.5			(3.7)

Other	(1.1)			—			(2.0)
Income Tax Expense	$	34.4		$	45.2		$	34.9

Effective Income Tax Rate	11.9		%	14.3		%	10.5		%


PSO	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	141.1		$	123.0		$	137.6
Income Tax Expense	4.1			5.2			7.5
Pretax Income	$	145.2		$	128.2		$	145.1

Income Taxes on Pretax Income at Statutory Rate (21%)	$	30.5		$	26.9		$	30.5
Increase (Decrease) in Income Taxes Resulting from the Following Items:


Investment Tax Credit Amortization	(1.8)			(2.1)			(0.5)
Production Tax Credits	(6.0)			—			—
State and Local Income Taxes, Net	6.4			6.5			6.3


Parent Company Loss Benefit	—			(0.2)			(2.1)



Tax Reform Excess ADIT Reversal	(25.4)			(25.5)			(24.5)




Other	0.4			(0.4)			(2.2)
Income Tax Expense	$	4.1		$	5.2		$	7.5

Effective Income Tax Rate	2.8		%	4.1		%	5.2		%


SWEPCo	Years Ended December 31,
	2021			2020			2019
	(in millions)
Net Income	$	242.1		$	183.7		$	162.2
Less: Equity Earnings – Dolet Hills	(3.4)			(2.9)			(3.0)
Income Tax Expense (Benefit)	(0.6)			9.4			(4.7)
Pretax Income	$	238.1		$	190.2		$	154.5

Income Taxes on Pretax Income at Statutory Rate (21%)	$	50.0		$	39.9		$	32.4
Increase (Decrease) in Income Taxes Resulting from the Following Items:
Reversal of Origination Flow-Through	1.8			1.9			1.9
Depletion	(2.7)			(3.4)			(3.4)

Production Tax Credits	(7.2)			—			—
State and Local Income Taxes, Net	(8.0)			2.7			(1.3)


Parent Company Loss Benefit	—			(5.6)			(1.6)



Tax Reform Excess ADIT Reversal	(31.1)			(21.9)			(29.9)




Other	(3.4)			(4.2)			(2.8)
Income Tax Expense (Benefit)	$	(0.6)		$	9.4		$	(4.7)

Effective Income Tax Rate	(0.3)		%	4.9		%	(3.0)		%


AEP	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	3,277.0	$	3,259.7
Deferred Tax Liabilities	(11,479.5)		(11,500.6)
Net Deferred Tax Liabilities	$	(8,202.5)	$	(8,240.9)

Property Related Temporary Differences	$	(7,020.3)	$	(7,340.5)
Amounts Due to Customers for Future Income Taxes	1,033.0		1,075.8
Deferred State Income Taxes	(1,116.7)		(1,317.6)

Securitized Assets	(128.8)		(140.0)

Regulatory Assets	(645.4)		(391.6)
Accrued Nuclear Decommissioning	(743.2)		(626.4)
Net Operating Loss Carryforward	285.7		112.9
Tax Credit Carryforward	439.8		323.6
Operating Lease Liability	114.2		183.7
Investment in Partnership	(392.1)		(362.0)





All Other, Net	(28.7)		241.2
Net Deferred Tax Liabilities	$	(8,202.5)	$	(8,240.9)


AEP Texas	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	173.8	$	183.6
Deferred Tax Liabilities	(1,262.7)		(1,200.3)
Net Deferred Tax Liabilities	$	(1,088.9)	$	(1,016.7)

Property Related Temporary Differences	$	(1,060.2)	$	(1,039.6)
Amounts Due to Customers for Future Income Taxes	110.0		114.4
Deferred State Income Taxes	(32.2)		(29.1)


Securitized Transition Assets	(84.4)		(90.2)
Regulatory Assets	(45.1)		(47.4)



Operating Lease Liability	15.8		18.0






All Other, Net	7.2		57.2
Net Deferred Tax Liabilities	$	(1,088.9)	$	(1,016.7)


AEPTCo	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	158.8	$	166.5
Deferred Tax Liabilities	(1,121.7)		(1,073.4)
Net Deferred Tax Liabilities	$	(962.9)	$	(906.9)

Property Related Temporary Differences	$	(997.0)	$	(937.8)
Amounts Due to Customers for Future Income Taxes	118.2		118.9
Deferred State Income Taxes	(94.5)		(98.3)





Net Operating Loss Carryforward	8.1		13.2








All Other, Net	2.3		(2.9)
Net Deferred Tax Liabilities	$	(962.9)	$	(906.9)


APCo	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	495.1	$	500.6
Deferred Tax Liabilities	(2,299.8)		(2,250.5)
Net Deferred Tax Liabilities	$	(1,804.7)	$	(1,749.9)

Property Related Temporary Differences	$	(1,476.5)	$	(1,412.0)
Amounts Due to Customers for Future Income Taxes	182.1		198.3
Deferred State Income Taxes	(288.8)		(336.5)

Securitized Assets	(39.3)		(44.7)

Regulatory Assets	(177.0)		(114.8)



Operating Lease Liability	14.2		16.7






All Other, Net	(19.4)		(56.9)
Net Deferred Tax Liabilities	$	(1,804.7)	$	(1,749.9)


I&M	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	1,072.2	$	989.5
Deferred Tax Liabilities	(2,172.4)		(2,053.9)
Net Deferred Tax Liabilities	$	(1,100.2)	$	(1,064.4)

Property Related Temporary Differences	$	(286.2)	$	(409.2)
Amounts Due to Customers for Future Income Taxes	135.5		147.9
Deferred State Income Taxes	(222.0)		(211.1)



Regulatory Assets	(23.6)		(16.5)
Accrued Nuclear Decommissioning	(743.2)		(626.4)


Operating Lease Liability	13.5		46.6






All Other, Net	25.8		4.3
Net Deferred Tax Liabilities	$	(1,100.2)	$	(1,064.4)


OPCo	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	204.4	$	210.8
Deferred Tax Liabilities	(1,205.3)		(1,165.9)
Net Deferred Tax Liabilities	$	(1,000.9)	$	(955.1)

Property Related Temporary Differences	$	(1,042.0)	$	(1,016.0)
Amounts Due to Customers for Future Income Taxes	117.7		121.1
Deferred State Income Taxes	(58.8)		(40.7)



Regulatory Assets	(39.8)		(53.7)



Operating Lease Liability	17.2		19.4






All Other, Net	4.8		14.8
Net Deferred Tax Liabilities	$	(1,000.9)	$	(955.1)


PSO	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	170.0	$	239.8
Deferred Tax Liabilities	(952.3)		(928.3)
Net Deferred Tax Liabilities	$	(782.3)	$	(688.5)

Property Related Temporary Differences	$	(708.6)	$	(661.8)
Amounts Due to Customers for Future Income Taxes	111.5		118.5
Deferred State Income Taxes	(83.2)		(107.7)



Regulatory Assets	(228.0)		(39.1)

Net Operating Loss Carryforward	111.4		12.9








All Other, Net	14.6		(11.3)
Net Deferred Tax Liabilities	$	(782.3)	$	(688.5)


SWEPCo	December 31,
	2021		2020
	(in millions)
Deferred Tax Assets	$	336.4	$	338.1
Deferred Tax Liabilities	(1,424.0)		(1,355.7)
Net Deferred Tax Liabilities	$	(1,087.6)	$	(1,017.6)

Property Related Temporary Differences	$	(989.6)	$	(985.1)
Amounts Due to Customers for Future Income Taxes	154.8		162.7
Deferred State Income Taxes	(234.9)		(214.7)



Regulatory Assets	(101.4)		(26.2)

Net Operating Loss Carryforward	67.4		33.4








All Other, Net	16.1		12.3
Net Deferred Tax Liabilities	$	(1,087.6)	$	(1,017.6)

AEP and subsidiaries join in the filing of a consolidated federal income tax return. The allocation of the AEP System’s current consolidated federal income tax to the AEP System companies allocates the benefit of current tax loss of the parent company (Parent Company Loss Benefit) to the AEP System subsidiaries with taxable income reducing their current tax expense proportionately. The consolidated NOL of the AEP System is allocated to each company in the consolidated group with taxable losses. With the exception of the allocation of the consolidated AEP System NOL, the loss of the Parent and tax credits, the method of allocation reflects a separate return result for each company in the consolidated group.

The statute of limitations for the IRS to examine AEP and subsidiaries originally filed federal return has expired for tax years 2016 and earlier. In the third quarter of 2019, AEP and subsidiaries elected to amend the 2014 through 2017 federal returns. In the first quarter of 2020, the IRS notified AEP that it was beginning an examination of these amended returns, including the net operating loss carryback to 2015 that originated in the 2017 return. As of December 31, 2021, the IRS has not issued any proposed adjustments and the IRS is limited in their proposed adjustments to the amount AEP claimed on the amended returns. AEP has agreed to extend the statute of limitations on the 2017 tax return to December 31, 2022 to allow time for the audit to be completed and the Congressional Joint Committee on Taxation to approve the associated refund claim.

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. The Registrants are no longer subject to state or local examinations by tax authorities for years before 2012. In addition, management is monitoring and continues to evaluate the potential impact of federal legislation and corresponding state conformity.

As of December 31, 2021, AEP has no federal net income tax operating loss carryforward from prior years but does expect to generate a tax operating loss of $674 million for tax year 2021. AEP, AEPTCo, APCo, OPCo, PSO and SWEPCo have state net income tax operating loss carryforwards as indicated in the table below:


		State Net Income
		Tax Operating Loss		Years of
Company	State/Municipality	Carryforward		Expiration
		(in millions)
AEP	Arkansas	$	161.8	2022	-	2031
AEP	Colorado	82.8		2041
AEP	Illinois	55.2		2031	-	2041
AEP	Indiana	304.4		2039	-	2041
AEP	Kentucky	230.4		2030	-	2037
AEP	Louisiana	566.7		NA
AEP	Michigan	65.2		2029	-	2031
AEP	New Jersey	36.5		2036	-	2041
AEP	New Mexico	32.6		2037	-	2039
AEP	Ohio Municipal	1,027.9		2022	-	2026
AEP	Oklahoma	1,357.1		2034	-	2037
AEP	Pennsylvania	82.7		2030	-	2041
AEP	Tennessee	53.0		2030	-	2036
AEP	Virginia	20.9		2030	-	2037
AEP	West Virginia	99.5		2029	-	2037
AEPTCo	Oklahoma	107.8		2034	-	2037

APCo	West Virginia	62.9		NA

OPCo	Ohio Municipal	76.0		2022	-	2026
PSO	Oklahoma	1,229.8		2034	-	2037
SWEPCo	Arkansas	160.7		2022	-	2031
SWEPCo	Louisiana	554.7		NA

As of December 31, 2021, AEP recorded a valuation allowance of $25 million, against certain state and municipal net income tax operating loss carryforwards since future taxable income is not expected to be sufficient to realize the remaining state net income tax operating loss tax benefits before the carryforward expires. Management anticipates future taxable income will be sufficient to realize the remaining state net income tax operating loss tax benefits before the carryforward expires for each state.

Federal and state net income tax operating losses sustained in 2016, 2017 and 2019 resulted in unused federal and state income tax credits. As of December 31, 2021, the Registrants have federal tax credit carryforwards and AEP and PSO have state tax credit carryforwards as indicated in the table below. If these credits are not utilized, federal general business tax credits will expire in the years 2036 through 2041 and state tax credits will remain available indefinitely.



	Total Federal		Total State
	Tax Credit		Tax Credit
Company	Carryforward		Carryforward
	(in millions)
AEP	$	439.8	$	38.8
AEP Texas	0.3		—
AEPTCo	0.1		—
APCo	1.3		—
I&M	16.9		—
OPCo	0.4		—
PSO	6.3		38.8
SWEPCo	7.9		—

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.

The reconciliations of the beginning and ending amounts of unrecognized tax benefits for AEP are presented below. The amount and activity of unrecognized tax benefits for Registrant Subsidiaries was immaterial for periods presented:


	AEP
	2021		2020		2019
	(in millions)
Balance as of January 1,	$	13.2	$	24.1	$	14.6
Increase – Tax Positions Taken During a Prior Period	1.2		0.6		8.8
Decrease – Tax Positions Taken During a Prior Period	(3.2)		(14.5)		(2.1)
Increase – Tax Positions Taken During the Current Year	3.1		3.0		2.8
Decrease – Tax Positions Taken During the Current Year	—		—		—

Decrease – Settlements with Taxing Authorities	—		—		—
Decrease – Lapse of the Applicable Statute of Limitations	—		—		—
Balance as of December 31,	$	14.3	$	13.2	$	24.1

Management believes that there will be no significant net increase or decrease in unrecognized benefits within 12 months of the reporting date. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate for AEP as of December 31, 2021, 2020 and 2019 were $14 million, $12 million, and $20 million, respectively.

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions including a 5-year NOL carryback from years 2018-2020. In the third quarter of 2020, AEP requested a $95 million refund of taxes paid in 2014 under the 5-year NOL carryback provision of the CARES Act. AEP carried back a NOL generated on the 2019 Federal income tax return at a 21% federal corporate income tax rate to the 2014 Federal income tax return at a 35% corporate income tax rate. As a result of the change in the corporate income tax rates between the two periods, AEP realized a tax benefit of $48 million during the third quarter of 2020 primarily at the Generation & Marketing segment. AEP received the $95 million refund in the fourth quarter of 2021.

In March 2021, the American Rescue Plan Act of 2021 (the “American Rescue Plan”) was signed into law. The American Rescue Plan was a COVID-19 relief package that addressed a variety of topics, including the non-deductibility of certain executive compensation. Specifically, the American Rescue Plan changes the officers subject to IRC Section 162(m) from the CEO, CFO and three top paid officers to the CEO, CFO and eight top paid officers beginning in 2027.

IRS Notice 2021-41 was issued in June 2021 by the IRS providing further extension of the continuity safe harbor for PTC and ITC-eligible projects and revising the facts and circumstances rules. For PTC and ITC-eligible projects for which construction began in calendar years 2016 through 2019, the continuity safe harbor is extended to six years. Prior guidance (IRS Notice 2020-41) had only extended the safe harbor for projects beginning in 2016 and 2017 to 5 years. Furthermore, for PTC and ITC-eligible projects for which construction began in 2020, the continuity safe harbor is extended to five years. Under a facts and circumstances analysis, the continuity requirement may be satisfied under either the continuous construction test or the continuous efforts test, regardless of whether the physical work test or the five percent safe harbor is used.

In April 2021, West Virginia enacted House Bill (HB) 2026. HB 2026 changes the state income tax apportionment formula from a ratio that includes property, payroll and sales to a single sales factor apportionment regime effective for tax years beginning on or after January 1, 2022. HB 2026 also eliminates the “throw out” rule related to sales of tangible personal property for sales factor apportionment calculation purposes and introduces a market-based sourcing for sales of services and intangible property. During 2021, AEP recorded $23 million in Income Tax Expense as a result of remeasuring West Virginia deferred taxes under the new apportionment methodology. The enacted legislation does not impact AEP Texas, PSO or SWEPCo.

In May 2021, Oklahoma enacted HB 2960. HB 2960 reduces the Oklahoma corporate income tax rate from 6% to 4%. During 2021, AEP recorded an immaterial amount of Income Tax Benefit as a result of remeasuring Oklahoma deferred taxes at the lowered statutory tax rate of 4%. The enacted legislation does not impact APCo, I&M or OPCo.

In November 2021, Louisiana approved Constitutional Amendment 2, thereby also enacting HB 292. HB 292 reduces the Louisiana corporate income tax rate from 8% to 7.5%. In the fourth quarter of 2021, AEP recorded an immaterial amount of Income Tax Expense as a result of remeasuring Louisiana deferred taxes at the lowered statutory tax rate of 7.5%. The enacted legislation does not impact AEP Texas, APCo, I&M, OPCo or PSO.

In December 2021, Arkansas enacted HB 1001. HB 1001 reduces the Arkansas corporate income tax rate from 5.9% to 5.7%, with additional reductions to 5.3% contingent upon future events. In the fourth quarter of 2021, AEP recorded an immaterial amount of Income Tax Expense as a result of remeasuring Arkansas deferred taxes at the lowered statutory tax rate of 5.7%. The enacted legislation does not impact AEP Texas, APCo, I&M, OPCo or PSO.