MGE ENERGY INC

nergy and MGE.

Effective Tax Rate.

The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:

(a)

Included are impacts of the 2017 Tax Act for the regulated utility for excess deferred taxes recognized using a normalization method of accounting in recognition of IRS rules that restrict the rate at which the excess deferred taxes may be returned to utility customers. For both thethree months ended March 31, 2024 and 2023, MGE recognized $0.9 million. For the three months ended March 31, 2024, MGE recognized $1.0 million of deferred taxes not restricted by IRS normalization rules, compared to a net collection from customers of $0.3 million for the three months ended March 31, 2023.

The Inflation Reduction Act of 2022 contains a provision that allows the transfer of certain tax credits to other corporate taxpayers in exchange for cash. MGE intends to transfer 2023 and 2024 tax credits and will account for the tax credits transferred as part of income taxes. MGE will also include any expected proceeds from the transfer of tax credits in the evaluation of realizability of deferred tax assets related to tax credits and record a valuation allowance for the difference between the tax value of the credits and the expected proceeds. The PSCW approved the deferral by MGE of any differential between tax credit transfer proceeds and the tax value of credits reflected in rates to its next rate case filing.

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