Evergy Inc

20. TAXES

Components of income tax expense are detailed in the following tables.

Effective Income Tax Rates

Effective income tax rates reflected in the financial statements and the reasons for their differences from the statutory federal rates are detailed in the following tables.

Deferred Income Taxes

The tax effects of major temporary differences resulting in deferred income tax assets (liabilities) in the consolidated balance sheets is in the following table.

Tax Credit Carryforwards

As of December 31, 2024 and 2023, Evergy had $388.3 million and $284.1 million, respectively, of federal general business income tax credit carryforwards. As of December 31, 2024 and 2023, Evergy Kansas Central had $291.6 million and $237.9 million, respectively, of federal general business income tax credit carryforwards. As of December 31, 2024 and 2023, Evergy Metro had $95.3 million and $43.6 million, respectively, of federal general business income tax credit carryforwards. The carryforwards for Evergy, Evergy Kansas Central and Evergy Metro relate primarily to PTCs and research and development tax credits and expire in the years 2025 to 2044. Approximately $0.1 million of Evergy's credits are related to Low Income Housing credits that were acquired in the acquisition of Evergy Missouri West.

The Evergy Companies' federal general business income tax credit carryforwards include PTCs related to the generation of electricity from nuclear energy. As of December 31, 2024, Evergy, Evergy Kansas Central and Evergy Metro had $132.3 million, $65.1 million and $67.2 million, respectively, of nuclear energy PTCs. Beginning in 2024, nuclear units, including Wolf Creek, are eligible for a production tax credit through 2032. The credit is for $15.00 per MWh and is subject to a phase-out when gross receipts from the facility are between $25.00 per MWh and $43.75 per MWh. The credit may be used to offset Evergy's income tax liability or be transferred to an unrelated third party. The Evergy Companies have estimated the credit based on the existing Internal Revenue Service (IRS) regulations. The IRS is expected to provide guidance regarding the type of revenue to be included in the computation of gross receipts in 2025 and any changes would be reflected subsequently in the estimate. The

Evergy Companies have recorded a regulatory liability for these tax credits as the benefits are expected to be returned to customers as a reduction to revenue in future regulatory proceedings.

The year of origin of Evergy's, Evergy Kansas Central's and Evergy Metro's related tax benefit amounts for federal tax credit carryforwards as of December 31, 2024 are detailed in the following table.

As of December 31, 2024 and 2023, Evergy had $4.9 million and $4.8 million of tax benefits, respectively, related to state income tax credit carryforwards. As of December 31, 2024 and 2023, Evergy Kansas Central had $4.9 million and $4.8 million of tax benefits, respectively, related to state income tax credit carryforwards. The state income tax credits relate primarily to the Kansas high performance incentive program tax credits and expire in the years 2038 to 2039. Due to the elimination of the Kansas corporate income tax for utilities, Evergy and Evergy Kansas Central expect a portion of these state NOL carryforwards to expire unutilized and have provided a valuation allowance against $2.7 million of the state tax benefits.

Net Operating Loss Carryforwards

As of December 31, 2023, Evergy had $17.2 million of tax benefits related to federal net operating loss (NOL) carryforwards. Any unutilized federal NOL carryforwards expired in 2024.

In addition, Evergy also had deferred tax benefits of $4.4 million and $5.3 million related to state NOLs as of December 31, 2024 and 2023, respectively. The state NOL carryforwards expire in years 2025 to 2042. Evergy does not expect to utilize $4.2 million of NOLs before the expiration date of the carryforwards of NOLs in certain states. Therefore, a valuation allowance has been provided against $4.2 million of state tax benefits.

Valuation Allowances

Evergy is required to assess the ultimate realization of deferred tax assets using a "more likely than not" assessment threshold. This assessment takes into consideration tax planning strategies within Evergy's control. As a result of this assessment, Evergy has established a partial valuation allowance for state tax NOL carryforwards and tax credit carryforwards. During 2024, $7.9 million of tax benefits was recorded in continuing operations primarily related to federal and state NOLs that expired. The tax benefits were offset by the reduction in related deferred tax assets.

Uncertain Tax Positions

Evergy is considered open to U.S. federal examination for years after 2009 due to the carryforward of net operating losses and general business income tax credits. With few exceptions, Evergy is no longer subject to state and local tax examinations by tax authorities for years before 2021. As of December 31, 2024, Evergy does not have any significant income tax issues under examination and does not have any uncertain tax positions recorded.