ATLANTIC CITY ELECTRIC CO

6. Income Taxes (All Registrants)

Rate Reconciliation

The effective income tax rate from continuing operations varies from the U.S. federal statutory rate principally due to the following:

(a)Positive percentages represent income tax expense. Negative percentages represent income tax benefit.

(b)Exelon and Registrants had no adjustments to the following disclosure categories: Foreign Tax Effects, Effects of Changes in Tax Law or Rates Enacted in the Current Period, Effects of Cross-Border Tax Laws, and Changes in Valuation Allowances.

(c)For PECO, the lower effective tax rate is primarily related to state income taxes, net of federal income tax benefit and plant basis differences attributable to tax repair deductions.

(d)For ComEd, the lower effective tax rate is primarily due to CEJA which resulted in the acceleration of certain income tax benefits being provided to customers.

State and local Income Tax (Major Jurisdictions)

The state and local jurisdictions that comprise the majority of the effect of the state and local income tax, net of federal income taxes category by Registrant are presented below:

Unrecognized Tax Benefits

Exelon, PHI and DPL have the following unrecognized tax benefits at March 31, 2026 and December 31, 2025. ComEd's, PECO's, BGE's, Pepco's, and ACE's amounts are not material.

(a)At March 31, 2026 and December 31, 2025, Exelon's unrecognized tax benefits is inclusive of $20 million related to Constellation's share of unrecognized tax benefits for periods prior to the separation. Exelon reflected an offsetting receivable of $20 million in Other deferred debits and other assets in the Consolidated Balance Sheet for these amounts.

Other Tax Matters

Tax Matters Agreement (Exelon)

In February 2022, in connection with the separation between Exelon and Constellation, the parties entered into a TMA. The TMA governs the respective rights, responsibilities, and obligations between Exelon and Constellation after the separation with respect to tax liabilities, refunds and attributes for open tax years that Constellation was part of Exelon’s consolidated group for U.S. federal, state, and local tax purposes.

Indemnification for Taxes. As a former subsidiary of Exelon, Constellation has joint and several liability with Exelon to the IRS and certain state jurisdictions relating to the taxable periods prior to the separation. The TMA specifies that Constellation is liable for their share of taxes required to be paid by Exelon with respect to taxable periods prior to the separation to the extent Constellation would have been responsible for such taxes under the Exelon tax sharing agreement when Constellation was included in Exelon's consolidated group. At March 31, 2026, there isno balance due to or from Constellation.

Tax Refunds. The TMA specifies that Constellation is entitled to their share of any future tax refunds claimed by Exelon with respect to taxable periods prior to the separation to the extent that Constellation would have received such tax refunds under the Exelon tax sharing agreement when Constellation was included in Exelon's consolidated group. At March 31, 2026, there isno balance due to or from Constellation.

Tax Attributes. At the date of separation certain tax attributes, primarily pre-separation tax credit carryforwards, that were generated by Constellation were required by law to be allocated to Exelon. The TMA provides that Exelon will reimburse Constellation when those allocated tax attribute carryforwards are utilized. In 2026, Exelon received $235 million of payments from Constellation as reimbursement for a reduction in previously utilized pre-separation tax credit carryforwards due to amended federal tax returns filed in Q1 2026. At March 31, 2026, Exelon recorded a payable of $58 million and $373 million in Other current liabilities and Other deferred credits and other liabilities, respectively, in the Consolidated Balance Sheet for tax attribute carryforwards that are expected to be utilized and reimbursed to Constellation.

Corporate Alternative Minimum Tax (All Registrants)

On August 16, 2022, the IRA was signed into law and implements a new corporate alternative minimum tax (CAMT) that imposes a 15.0% tax on modified GAAP net income. Corporations will now pay the greater of 15.0% of financial statement pre-tax income (with certain adjustments) or their regular federal tax liability, which is federal taxable income multiplied by 21.0% federal corporate tax rate. Corporations are entitled to a tax credit (minimum tax credit) to the extent the CAMT liability exceeds the regular tax liability. This amount can be carried forward indefinitely and used in future years when regular tax exceeds the CAMT.

For the years ended December 31, 2025, December 31, 2024, and December 31, 2023, based on the existing guidance in effect at that time, Exelon and each of the Utility Registrants were subject to and reported the CAMT on a separate Registrant basis in the Consolidated Statements of Operations and Comprehensive Income and the Consolidated Balance Sheets.

On February 18, 2026, the U.S. Treasury issued guidance addressing the implementation of CAMT in the form of a notice. The new guidance permits corporate taxpayers to deduct repair and maintenance costs in the calculation of their CAMT liabilities. The notice applies retroactively, permitting Exelon to file amended returns for both 2024 and 2023 to reduce its CAMT liability by $80 million. Pursuant to the TMA, Exelon received reimbursement from Constellation for $235 million due to the reduction in the amount of Constellation's tax credits needed to offset Exelon's CAMT liability on its amended returns.

The impact of the notice was recorded as of March 31, 2026.

Allocation of Income Taxes to Regulated Utilities (All Registrants)

In Q2 2024, the IRS issued a series of PLRs, to another taxpayer, providing guidance with respect to the application of the tax normalization rules to the allocation of consolidated tax benefits among the members of a consolidated group associated with NOLC for ratemaking purposes. The rulings provide that for ratemaking purposes the tax benefit of NOLC should be reflected on a separate company basis not taking into consideration the utilization of losses by other affiliates. A PLR issued to another taxpayer may not be relied on as precedent.

For the Utility Registrants, except for PECO, the methodology prescribed by the IRS in these PLRs could result in a material reduction of the regulatory liability established for EDITs arising from the TCJA corporate tax rate change that are being amortized and flowed through to customers as well as a reduction in the accumulated deferred income taxes included in rate base for ratemaking purposes. The Utility Registrants, except for PECO, filed PLR requests with the IRS confirming the treatment of the NOLC for ratemaking purposes. The Utility Registrants will record the impact, if any, upon receiving the PLR from the IRS.