FRANKLIN ELECTRIC CO INC

9. INCOME TAXES

The Company’s effective tax rate for the nine-month period ended September 30, 2024 was 22.9 percent as compared to 20.1 percent for the nine-month period ended September 30, 2023. The effective tax rate differs from the U.S. statutory rate of 21 percent primarily due to state taxes and foreign earnings taxed at rates higher than the U.S. statutory rate partially offset by the recognition of the U.S. foreign-derived intangible income (FDII) provisions and certain discrete events including excess tax benefits from share-based compensation. For the third quarter of 2024, the effective tax rate was 23.6 percent compared to 20.2 percent for the third quarter of 2023.

The increase in the effective tax rate for the third quarter and first nine months of 2024 compared to the comparable periods in the prior year was a result of less favorable discrete events in 2024, primarily related to excess tax benefits from share-based compensation, in addition to an increase in the rate on foreign earnings with the implementation of the European Union’s Pillar Two Directive.