Company: AWK
Filing Date: 2025-02-27
Form Type: S-3ASR
Source: 0001410636-25-000050
Chunk: 14

Company: American Water Works Company, Inc.
Filing Date: 2025-02-27
Form: S-3ASR
Chunk 14
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 Directors may increase or decrease dividends, or may not declare a dividend.

17. What are the tax consequences of participating in the Plan?

The discussion below is only a summary of some of the important U.S. federal income tax consequences of participation in the Plan for U.S. Participants (as defined below). This summary is not a complete description of all of the tax consequences of your participation in the Plan and is subject to change based on changes in tax laws and regulations. Participants in the Plan are advised to consult their own tax advisors with respect to the tax consequences of participation in the Plan (including the effect of federal, state, local and foreign tax laws and U.S. tax withholding laws).

For U.S. federal income tax purposes, a “U.S. Participant” is (1) an individual who is a citizen or resident of the U.S.; (2) a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S. or of a political subdivision thereof (including the District of Columbia); (3) an estate whose income is subject to U.S. federal income taxation regardless of its source; or (4) any trust if (a) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) it has a valid election in place to be treated as a U.S. person.

The U.S. federal income tax consequences of participating in the Plan are as follows:

• Cash dividends reinvested under the Plan are taxable to a U.S. Participant as if they had been paid to a U.S. Participant in cash on the applicable dividend payment date and may be eligible for reduced rates of income tax as qualified dividend income if specified conditions are satisfied. Such dividends will be taxable for U.S. federal income tax purposes as dividend income to the extent of American Water’s current or accumulated earnings and profits, with any excess over our earnings and profits being treated first as a tax-free return of capital to the extent of the tax basis of the U.S. Participant’s shares of American Water common stock, and then as capital gain from the sale or exchange of American Water common stock. Subject to the discussion below regarding the “average basis method,” the tax basis of shares purchased with reinvested dividends or additional cash purchases generally is the amount a U.S. Participant paid to acquire the shares, and the holding