MADISON GAS & ELECTRIC CO

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 Tax Cut and Jobs Act of 2017 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 September 30, 2025 and 2024, MGE recognized $0.9 million. For the nine months ended September 30, 2025 and 2024, MGE recognized $2.7 million and $2.6 million, respectively. For the three and nine months ended September 30, 2024, MGE recognized $1.0 million and $3.1 million, respectively, of deferred taxes not restricted by IRS normalization rules.

In 2024, MGE sold transfer-eligible tax credits generated in 2023 and 2024. MGE elects to account for the transferred tax credits under the framework of Accounting for Income Taxes. The sale of tax credits is presented in the operating activities section of the consolidated statements of cash flows consistent with the presentation of cash taxes paid. MGE includes any expected proceeds from the transfer of tax credits in the evaluation of realizability of deferred tax assets related to tax credits and records 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.

Pensi