Note 6. Income Taxes

We recognized a provision for income taxes of $273 and $131 for the three months ended June 30, 2026 and 2025, respectively. The $142 increase in our provision for income taxes for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 was due to several factors. Our provision for income taxes for the three months ended June 30, 2026 was primarily attributable to the geographic mix of earnings and the recognition of a full valuation allowance against our U.S. federal and state deferred tax assets, inclusive of approximately $208 related to prior year deferred tax assets, as a result of matters discussed in "Note 17 - Commitments and Contingent Liabilities". Additionally, our provision for income taxes was impacted by profit in inventory, withholding taxes on the repatriation of earnings, the non-taxable gain on the Company’s sale of land for local Taiwanese tax purposes, and a foreign derived deduction eligible income tax benefit resulting from tax law changes pursuant to the 2025 Tax Act.

Our provision for the three months ended June 30, 2025 was primarily attributable to $169 tax expense to record a valuation allowance against our deferred tax asset for U.S. federal and state interest carryforwards, as well as $9 tax expense to record valuation allowances against certain U.S. state and foreign net operating loss carryforwards. These were partially offset by a $66 tax benefit related to environmental and litigation reserve, both recorded during the quarter.

We had a provision for income taxes of $281 and $135 for the six months ended June 30, 2026 and 2025, respectively. The $146 increase in our provision for income taxes for the six months ended June 30, 2026 was primarily attributable to the same factors discussed above.

The Company continues to record any changes and impacts of the Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (“Pillar Two”) in the quarter, which was overall not material to the Company’s effective tax rate.

As of June 30, 2026, the Company continues to record valuation allowances against certain deferred tax assets in various jurisdictions. A valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon our analysis of historical operating results, as well as projections of future taxable income/(losses) during the periods in which the temporary differences will be recoverable, management believes the uncertainty regarding the realization of U.S. Federal and state, and certain foreign deferred tax assets requires a full valuation allowance against such assets as of June 30, 2026.

This determination is assessed quarterly based on historical operating results, as well as projections of taxable income, which may be subject to change in the future and may be impacted by events subsequent to our Balance Sheet date including any future costs incurred in connection with "Note 17 - Commitments and Contingent Liabilities". Current year changes to the Company’s valuation allowances are reflected in tax expense recorded for both the three months and six months ended June 30, 2026 and 2025, respectively.

The Company accrues interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

One or more of our legal entities file income tax returns in the U.S. and in certain foreign jurisdictions. Our income tax returns may be examined by tax authorities in those jurisdictions. Significant disputes may arise with tax authorities involving issues such as the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations and relevant facts. In the U.S., the statute of limitations remains open beginning with tax year 2017. We are currently under U.S. federal audit for tax year 2017-2021.

On July 4, 2025, the U.S. government enacted the Tax Act, which includes significant changes to various tax provisions previously enacted by the TCJA. The Tax Act makes permanent extension of certain expiring provisions of TCJA, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. We have reflected the impacts of provisions with 2026 effective dates into our provision for income taxes for the three months and six months ended June 30, 2026.