KENTUCKY UTILITIES CO

For the period ended Dec 31, 2025. Filed Feb 20, 2026.

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FY2025 · Filed Feb 20, 2026

PPLC$46.33-0.1%Stored close · as of Nov 10, 2026

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Contents

6. Income and Other Taxes

Income and Other Taxes

(PPL)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes and the tax effects of net operating loss and tax credit carryforwards. The provision for PPL's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles of the applicable jurisdiction. See Notes 1 and 7 for additional information.

Net deferred tax assets have been recognized based on management's estimates of future taxable income.

Significant components of PPL's deferred income tax assets and liabilities were as follows:

	2025	2024
Deferred Tax Assets
Deferred investment tax credits	$27	$28
Regulatory liabilities	186	133
Income taxes due to customers	397	418
Accrued pension and postretirement costs	99	112
State loss carryforwards	181	224
Federal and state tax credit carryforwards	35	24
Internal Revenue Code Section 197 intangibles	67	72
Contributions in aid of construction	206	163
Bad debt	34	37
Other	130	114
Valuation allowances	(184)	(224)
Total deferred tax assets	1,178	1,101
Deferred Tax Liabilities
Plant - net	4,105	3,898
Regulatory assets	432	432
Prepayments	49	39
Goodwill	52	38
Other	37	38
Total deferred tax liabilities	4,675	4,445
Net deferred tax liability	$3,497	$3,344

State deferred taxes are determined by entity and by jurisdiction. As a result, $9 million and $12 million of net deferred tax assets are shown as "Other noncurrent assets" on the Balance Sheets for 2025 and 2024.

At December 31, 2025, PPL had the following loss and tax credit carryforwards, related deferred tax assets and valuation allowances recorded against the deferred tax assets:

	Gross	Deferred Tax Asset	Valuation Allowance	Expiration
Loss and other carryforwards
State net operating losses	$4,281	$181	$(181)	2026-2045
State charitable contributions	1	—	—	2026-2030
Foreign capital loss	8	2	(2)	Indefinite

Gross · Deferred Tax Asset · Valuation Allowance · Expiration
Credit carryforwards
Federal investment tax credit	$26	$—	2045
Federal - other	2	—	2045
State recycling credit	6	—	2028
State - other	2	—	Indefinite

Valuation allowances have been established for the amount that, more likely than not, will not be realized. The changes in deferred tax valuation allowances were as follows:

Additions
Balance atBeginningof Period · Chargedto Income · Charged toOtherAccounts · Deductions · Balanceat Endof Period
2025	$224	$4	$—	$44(a)	$184
2024	245	3	1	25(b)	224
2023	213	54(c)	—	22(d)	245

(a)In 2025, PPL recorded a $41 million decrease in a valuation allowance on a 2005 state net operating loss carryforward that expired in 2025.

(b)In 2024, PPL recorded a $23 million decrease in a valuation allowance on a 2004 state net operating loss carryforward that expired in 2024.

(c)PPL has a Pennsylvania net operating loss fully offset by a valuation allowance. In 2023, PPL adjusted the net operating loss and related valuation allowance to be recorded at the current estimate of the applicable rate at which each portion of the net operating loss that will expire and be written off as the rate is reduced annually by one half a percentage point until the rate reaches to 4.99% in 2031.

(d)In 2023, PPL recorded a $22 million decrease in a valuation allowance on a 2003 state net operating loss carryforward that expired in 2023.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, income tax cash payments and refunds by federal and state jurisdictions, and details of "Taxes, other than income" were as follows:

	2025	2024	2023
Income Tax Expense (Benefit)
Current - Federal (a)	$46	$23	$(175)
Current - State	53	9	37
Total Current Expense (Benefit)	99	32	(138)
Deferred - Federal (a)	172	137	286
Deferred - State	27	64	48
Total Deferred Expense (Benefit), excluding operating loss carryforwards	199	201	334
Amortization of investment tax credit	(3)	(3)	(3)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal	1	1	3
Deferred - State	(5)	(3)	(12)
Total Tax Expense (Benefit) of Operating Loss Carryforwards	(4)	(2)	(9)
Total income tax expense (benefit)	$291	$228	$184
Total income tax expense (benefit) - Federal	$216	$158	$111
Total income tax expense (benefit) - State	75	70	73
Total income tax expense (benefit)	$291	$228	$184

(a)In 2025, 2024, and 2023, PPL purchased approximately $153 million, $27 million and $300 million of renewable tax credits and recorded a current tax benefit and a deferred tax expense for utilization of approximately $138 million, $61 million and $250 million of the credits, respectively.

In the table above, the following income tax expense (benefit) are excluded from income taxes:

	2025	2024	2023
Other comprehensive income	$(6)	$(8)	$(14)
Valuation allowance recorded to other comprehensive income	—	—	(1)
Total	$(6)	$(8)	$(15)

	2025		2024		2023
	Amount	Percent	Amount	Percent	Amount	Percent
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate	$309	21.0%	$234	21.0%	$194	21.0%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	75	5.0%	67	6.1%	69	7.5%
Tax credits (federal):
Investment tax credits	(17)	(1.1)%	(5)	(0.5)%	(19)	(2.1)%
Other tax credits	(1)	(0.1)%	(5)	(0.5)%	(7)	(0.7)%
Subtotal	(18)	(1.2)%	(10)	(1.0)%	(26)	(2.8)%
Utility rate-making tax adjustments (federal and state):
Amortization of excess deferred taxes	(51)	(3.4)%	(46)	(4.1)%	(48)	(5.2)%
AFUDC Equity	(20)	(1.3)%	(10)	(0.9)%	(6)	(0.7)%
Flow-through rate-making (b)	(10)	(0.6)%	(11)	(1.0)%	(4)	(0.5)%
Subtotal	(81)	(5.3)%	(67)	(6.0)%	(58)	(6.4)%
Other	6	0.3%	4	0.3%	5	0.6%
Total increase (decrease)	(18)	(1.2)%	(6)	(0.6)%	(10)	(1.1)%
Total income tax expense	$291	19.8%	$228	20.4%	$184	19.9%

(a) Jurisdictions that make up the majority of state income taxes, net of federal effect, are Kentucky and Pennsylvania.

(b) Flow-through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.

Income tax cash payments (refunds) by federal and state jurisdictions:

	2025	2024	2023
Federal	$66(a)	$(149)(b)	$252(c)
Pennsylvania	20	21	24
Kentucky	6	4	4
Other states	1	1	1
Total	$93	$(123)	$281

(a) Includes purchase price of transferable tax credits of $40 million.

(b) Includes refund for the carry-back of acquired transferable tax credits applied to the 2021 tax return of $200 million and purchase price of transferable tax credits of $20 million.

	2025	2024	2023
Taxes, other than income
State gross earnings and state gross receipts	$214	$167	$195
Property and other	209	207	197
Total	$423	$374	$392

The provision for PPL Electric's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the PAPUC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.

Significant components of PPL Electric's deferred income tax assets and liabilities were as follows:

	2025	2024
Deferred Tax Assets
Accrued pension and postretirement costs	$29	$36
Contributions in aid of construction	156	120
Regulatory liabilities	57	40
Income taxes due to customers	177	184
Other	25	22
Total deferred tax assets	444	402
Deferred Tax Liabilities
Electric utility plant - net	2,028	1,934
Regulatory assets	165	160
Prepayments	30	30
Other	2	4
Total deferred tax liabilities	2,225	2,128
Net deferred tax liability	$1,781	$1,726

PPL Electric expects to have adequate levels of taxable income to realize its recorded deferred income tax assets.

	2025	2024	2023
Income Tax Expense
Current - Federal	$136	$44	$91
Current - State	44	4	31
Total Current Expense	180	48	122
Deferred - Federal	17	86	28
Deferred - State	7	42	18
Total Deferred Expense, excluding operating loss carryforwards	24	128	46
Total income tax expense	$204	$176	$168
Total income tax expense - Federal	$153	$130	$119
Total income tax expense - State	51	46	49
Total income tax expense	$204	$176	$168

	2025		2024		2023
	Amount	Percent	Amount	Percent	Amount	Percent
Reconciliation of Income Tax Expense (Benefit)
Taxes at statutory tax rate	$177	21.0%	$158	21.0%	$144	21.0%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	52	6.1%	47	6.2%	48	7.1%
Utility rate-making tax adjustments (federal and state):
Amortization of excess deferred federal income taxes	(10)	(1.2)%	(10)	(1.3)%	(11)	(1.6)%
AFUDC Equity	(8)	(1.0)%	(6)	(0.7)%	(4)	(0.7)%
Flow-through rate-making (b)	(10)	(1.2)%	(11)	(1.5)%	(4)	(0.7)%
Subtotal	(28)	(3.4)%	(27)	(3.5)%	(19)	(3.0)%
Other	3	0.5%	(2)	(0.2)%	(5)	(0.6)%
Total increase (decrease)	27	3.2%	18	2.5%	24	3.5%
Total income tax expense	$204	24.2%	$176	23.5%	$168	24.5%

(a) The jurisdiction that makes up the majority of state income taxes, net of federal effect, is Pennsylvania.

(b) Flow-through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.

	2025	2024	2023
Federal	$109	$62	$68
Pennsylvania	20	21	24
Total	$129	$83	$92

	2025	2024	2023
Taxes, other than income
State gross receipts	$144	$122	$136
Property and other	7	9	7
Total	$151	$131	$143

(LG&E)

The provision for LG&E's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.

Significant components of LG&E's deferred income tax assets and liabilities were as follows:

	2025	2024
Deferred Tax Assets
Contributions in aid of construction	$17	$18
Regulatory liabilities	18	18
Accrued pension and postretirement costs	—	4
Deferred investment tax credits	7	7
Income taxes due to customers	104	110
State tax credit carryforwards	5	6
Lease liabilities	4	4
Other	9	6
Valuation allowances	(5)	(6)
Total deferred tax assets	159	167
Deferred Tax Liabilities
Plant - net	884	875
Regulatory assets	87	88
Lease right-of-use assets	4	4
Other	3	3
Total deferred tax liabilities	978	970
Net deferred tax liability	$819	$803

At December 31, 2025, LG&E had $5 million of state credit carryforwards that expire in 2028 and a $5 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income.

	2025	2024	2023
Income Tax Expense (Benefit)
Current - Federal	$72	$60	$70
Current - State	14	11	13
Total Current Expense (Benefit)	86	71	83
Deferred - Federal	(10)	1	(15)
Deferred - State	3	6	2
Total Deferred Expense (Benefit)	(7)	7	(13)
Amortization of investment tax credit - Federal	(1)	(1)	(1)
Total income tax expense (benefit)	$78	$77	$69
Total income tax expense (benefit) - Federal	$61	$60	$54
Total income tax expense (benefit) - State	17	17	15
Total income tax expense (benefit)	$78	$77	$69

	2025		2024		2023
	Amount	Percent	Amount	Percent	Amount	Percent
Reconciliation of Income Tax Expense (Benefit)
Taxes at statutory tax rate	$81	21.0%	$79	21.0%	$70	21.0%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	15	3.8%	14	3.7%	13	3.8%
Utility rate-making tax adjustments (federal and state):
Amortization of excess deferred taxes	(14)	(3.5)%	(13)	(3.4)%	(13)	(3.9)%
AFUDC Equity	(4)	(1.1)%	(2)	(0.4)%	(1)	(0.3)%
Subtotal	(18)	(4.6)%	(15)	(3.8)%	(14)	(4.2)%
Other	—	—%	(1)	(0.3)%	—	—%
Total increase (decrease)	(3)	(0.8)%	(2)	(0.4)%	(1)	(0.4)%
Total income tax expense	$78	20.2%	$77	20.6%	$69	20.6%

(a)The jurisdiction that makes up the majority of state income taxes, net of federal effect, is Kentucky.

	2025	2024	2023
Federal	$67	$62	$71
Kentucky	14	11	13
Total	$81	$73	$84

	2025	2024	2023
Taxes, other than income
Property and other	$51	$49	$48
Total	$51	$49	$48

(KU)

The provision for KU's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC, the VSCC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.

Significant components of KU's deferred income tax assets and liabilities were as follows:

	2025	2024
Deferred Tax Assets
Contributions in aid of construction	$17	$12
Regulatory liabilities	31	29
Deferred investment tax credits	20	20
Income taxes due to customers	117	124
State tax credit carryforwards	3	4
Lease liabilities	7	6
Other	8	4
Valuation allowances	(1)	(2)
Total deferred tax assets	202	197
Deferred Tax Liabilities
Plant - net	1,085	1,053
Regulatory assets	56	55
Pension and postretirement costs	8	6
Lease right-of-use assets	7	6
Other	2	1
Total deferred tax liabilities	1,158	1,121
Net deferred tax liability	$956	$924

At December 31, 2025, KU had $3 million of state credit carryforwards of which $1 million will expire in 2028 and $2 million that has an indefinite carryforward period. At December 31, 2025, KU had a $1 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income.

	2025	2024	2023
Income Tax Expense (Benefit)
Current - Federal	$83	$87	$73
Current - State	16	17	13
Total Current Expense (Benefit)	99	104	86
Deferred - Federal	(4)	(15)	(11)
Deferred - State	6	2	4
Total Deferred Expense (Benefit)	2	(13)	(7)
Amortization of investment tax credit - Federal	(2)	(2)	(2)
Total income tax expense (benefit)	$99	$89	$77
Total income tax expense (benefit) - Federal	$77	$70	$60
Total income tax expense (benefit) - State	22	19	17
Total income tax expense (benefit)	$99	$89	$77

	2025		2024		2023
	Amount	Percent	Amount	Percent	Amount	Percent
Reconciliation of Income Tax Expense (Benefit)
Taxes at statutory tax rate	$104	21.0%	$93	21.0%	$82	21.0%
Increase (decrease) due to:
State income taxes, net of federal income tax benefit (a)	19	3.8%	16	3.7%	15	3.8%
Utility rate-making tax adjustment (federal and state):
Amortization of excess deferred federal and state income taxes	(18)	(3.6)%	(17)	(3.7)%	(17)	(4.3)%
AFUDC Equity	(5)	(1.0)%	(2)	(0.6)%	—	—%
Subtotal	(23)	(4.6)%	(19)	(4.3)%	(17)	(4.3)%
Other	(1)	(0.3)%	(1)	(0.4)%	(3)	(0.7)%
Total decrease	(5)	(1.1)%	(4)	(1.0)%	(5)	(1.2)%
Total income tax expense	$99	19.9%	$89	20.0%	$77	19.8%

(a)The jurisdiction that makes up the majority of state income taxes, net of federal effect, is Kentucky.

	2025	2024	2023
Federal	$78	$85	$65
Kentucky	15	16	12
Other	1	1	1
Total	$94	$102	$78

	2025	2024	2023
Taxes, other than income
Property and other	$51	$49	$45
Total	$51	$49	$45

Unrecognized Tax Benefits

PPL or its subsidiaries file tax returns infour major tax jurisdictions. The income tax provisions for PPL Electric, LG&E and KU are calculated in accordance with an intercompany tax sharing agreement, which provides that taxable income be calculated as if each subsidiary filed a separate consolidated return. PPL Electric or its subsidiaries indirectly or directly file tax returns inthree major tax jurisdictions, and LG&E and KU indirectly or directly file tax returns intwo major tax jurisdictions. With few exceptions, at December 31, 2025, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows.

	PPL	PPL Electric	LG&E	KU
U.S. (federal)	2020 and prior	2020 and prior	2020 and prior	2020 and prior
Pennsylvania (state)	2021 and prior	2021 and prior	n/a	n/a
Kentucky (state)	2020 and prior	2020 and prior	2020 and prior	2020 and prior

Other

One Big Beautiful Bill Act(All Registrants)

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act. The Registrants are continuing to review the law to assess any material impacts to the financial statements.

Additionally, on July 7, 2025, President Trump issued an Executive Order directing the Treasury to take action to strictly enforce the termination of clean electricity tax credits under IRC Sections 45Y and 48E for wind and solar. On August 15, 2025, the IRS issued Notice 2025-42, primarily tightening the rules regarding when a solar project is considered to have commenced construction. In addition, the One Big Beautiful Bill Act included new rules addressing Foreign Entities of Concern (FEOC). These rules are supply‑chain, foreign entity ownership and debt issuance restrictions that may limit eligibility for certain U.S. clean energy tax credits such as those provided for in IRC Sections 45Y and 48E.

On February 12, 2026, the Treasury and the IRS issued Notice 2026-15, which provides interim guidance on the FEOC restrictions on certain clean electricity tax credits. Additionally, the IRS is expected to issue further guidance on the tax provisions of the One Big Beautiful Bill Act. The Registrants do not currently anticipate these rules or guidance to result in limitations on its clean energy projects and associated tax credits but will continue to monitor closely.

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