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 June 30,				Six Months Ended June 30,
Company	2019		2018		2019		2018
AEP	(13.5	)%	12.0	%	(1.0	)%	15.0	%
AEP Texas	(234.4	)%	16.2	%	(84.0	)%	16.2	%
AEPTCo	19.5	%	22.7	%	20.1	%	21.7	%
APCo	(52.1	)%	17.0	%	(29.5	)%	17.8	%
I&M	(0.2	)%	0.7	%	(1.8	)%	7.6	%
OPCo	16.4	%	21.6	%	14.3	%	21.0	%
PSO	0.7	%	14.9	%	0.6	%	14.5	%
SWEPCo	—	%	12.4	%	2.0	%	14.0	%

The decrease in the ETR was primarily due to $58 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (239.7)%. Amortization of Excess ADIT not subject to normalization requirements for the three months ended June 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 impact of the Texas Storm Cost Securitization financing order was treated as a discrete item.

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 (95.0)%. Amortization of Excess ADIT not subject to normalization requirements for the six months ended June 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 impact of the Texas Storm Cost Securitization financing order was treated as a discrete item.

The decrease in the ETR was primarily due to the FERC order issued in May 2019 regarding the 2018 ROE settlement and its $3 million impact on AFUDC equity which impacted the ETR by (1.7)%. See “FERC Transmission Complaint - AEP’s PJM Participants” section of Note 4 for additional information.

The decrease in the ETR was primarily due to the FERC order issued in May 2019 regarding the 2018 ROE settlement and its $3 million impact on AFUDC equity which impacted the ETR by (0.9)%. See “FERC Transmission Complaint - AEP’s PJM Participants” section of Note 4 for additional information.

The decrease in the ETR was primarily due to $24 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (65.9)%. Amortization of Excess ADIT not subject to normalization requirements for the three months ended June 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 $65 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (44.8)%. Amortization of Excess ADIT not subject to normalization requirements for the six months ended June 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 $4 million of increased favorable book/tax differences accounted for on a flow-through basis partially offset by $2 million of increased state income tax expenses which impacted the ETR by (5.4)% and 3.2%, respectively.

The decrease in the ETR was primarily due to $9 million of increased favorable book/tax differences accounted for on a flow-through basis and $8 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (5.7)% and (5.8)%, respectively. The decrease in ETR was partially offset by $5 million of increased state income tax expenses which impacted the ETR by 3.1%. Amortization of Excess ADIT not subject to normalization requirements for the six months ended June 30, 2019 reflects the Tax Reform elements of the 2017 Indiana Base Rate Case approved by the IURC in May 2018.

The decrease in the ETR was primarily due to $2 million of increased amortization of Excess ADIT not subject to normalization requirements which impacted the ETR by (4)%. Amortization of Excess ADIT not subject to normalization requirements for the three months ended June 30, 2019 reflects the October 2018 PUCO Tax Reform order.

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 (5.1)%. Amortization of Excess ADIT not subject to normalization requirements for the six months ended June, 2019 reflects the October 2018 PUCO Tax Reform order.

The decrease in the ETR was primarily due to $7 million of increased amortization of Excess ADIT not subject to normalization requirements partially offset by $1 million of decreased amortization of Excess ADIT subject to normalization requirements which impacted the ETR by (16.9)%, and 2.4%, respectively. Amortization of Excess ADIT not subject to normalization requirements for the three months ended June 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 $8 million of increased amortization of Excess ADIT not subject to normalization requirements partially offset by decreased amortization of Excess ADIT subject to normalization requirements which impacted the ETR by (16.9)% and 2.7%, respectively. Amortization of Excess ADIT not subject to normalization requirements for the six months ended June 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 $1 million of increased amortization of Excess ADIT not subject to normalization requirements and $1 million of decreased state tax expenses which impacted the ETR by (8.4)% and (1.3)%, respectively. Amortization of Excess ADIT not subject to normalization requirements for the three months ended June 30, 2019 reflects Tax Reform elements incorporated into 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 $4 million of increased amortization of Excess ADIT not subject to normalization requirements and $1 million of decreased state tax expenses which impacted the ETR by (10.8)% and (1.2)%, respectively. Amortization of Excess ADIT not subject to normalization requirements for the six months ended June 30, 2019 reflects Tax Reform elements incorporated into the Louisiana 2018 Formula Rate Filing as well as the Arkansas Tax Reform order issued by the APSC in September 2018.

AEP and subsidiaries file income tax returns in various state and local jurisdictions. These taxing authorities routinely examine the tax returns. AEP and subsidiaries are currently under examination in several state and local jurisdictions. However, it is possible that previously filed tax returns have positions that may be challenged by these tax authorities. Management believes that adequate provisions for income taxes have been made for potential liabilities resulting from such challenges and that the ultimate resolution of these audits will not materially impact net income. The Registrants are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 2007.

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.