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Income Taxes
 3 Months Ended
Mar. 31, 2022
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 2022 and 2021, adjusted for tax expense associated with certain discrete items.

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.

The ETR for each of the Registrants are included in the following tables:
Three Months Ended March 31, 2022
AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
U.S. Federal Statutory Rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) due to:
State Income Tax, net of Federal Benefit
1.5 %0.3 %2.6 %2.9 %1.6 %0.7 %0.6 %2.3 %
Tax Reform Excess ADIT Reversal
(6.6)%(2.0)%0.3 %(5.8)%(17.3)%(7.8)%(15.3)%(4.9)%
Production and Investment Tax Credits
(8.0)%(0.2)%— %— %(1.4)%— %(26.2)%(23.1)%
Flow Through
0.3 %0.3 %0.3 %1.7 %(1.9)%0.9 %0.6 %(0.6)%
AFUDC Equity
(0.9)%(0.9)%(1.6)%(0.7)%(0.6)%(0.6)%(0.7)%(0.5)%
Discrete Tax Adjustments
(0.6)%— %— %(0.6)%— %— %— %— %
Other
0.2 %(0.1)%— %— %(0.2)%— %(0.8)%0.6 %
Effective Income Tax Rate6.9 %18.4 %22.6 %18.5 %1.2 %14.2 %(20.8)%(5.2)%
Three Months Ended March 31, 2021
AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo
U.S. Federal Statutory Rate21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %21.0 %
Increase (decrease) due to:
State Income Tax, net of Federal Benefit
2.3 %1.4 %2.7 %3.2 %1.3 %0.7 %4.7 %(0.8)%
Tax Reform Excess ADIT Reversal
(9.2)%(7.8)%0.3 %(18.0)%(17.9)%(9.7)%(24.7)%(5.9)%
Production and Investment Tax Credits
(5.5)%(0.3)%— %— %(1.7)%— %(8.2)%(5.1)%
Flow Through
0.3 %0.3 %0.2 %1.6 %(1.0)%1.1 %0.6 %(0.7)%
AFUDC Equity
(0.9)%(1.4)%(1.7)%(1.1)%(0.2)%(1.1)%(0.5)%(0.4)%
Parent Company Loss Benefit
— %— %(1.9)%(2.9)%(2.5)%— %— %— %
Discrete Tax Adjustments0.5 %— %— %— %— %(4.0)%— %— %
Other
0.1 %0.1 %0.1 %0.1 %— %0.2 %(0.9)%0.1 %
Effective Income Tax Rate8.6 %13.3 %20.7 %3.9 %(1.0)%8.2 %(8.0)%8.2 %
Federal and State Income Tax Audit Status

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 March 31, 2022, the IRS has not issued any proposed adjustment and has accepted the 2014 amended return as filed. 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. Generally, the statutes of limitations 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.