MILLERKNOLL INC

9. Income Taxes

The Company's process for determining the provision for income taxes for the three months ended August 31, 2024, involved using an estimated annual effective tax rate which was based on expected annual income and statutory tax rates across the various jurisdictions in which it operates. The effective tax rates were 66.2% and 24.4%, respectively, for the three month periods ended August 31, 2024, and September 2, 2023. The year over year change in the effective tax rate for the three months ended August 31, 2024, resulted from the current quarter reflecting pre-tax loss along with having favorable discrete impacts from stock compensation and return to provision true-ups related to the United States research and development tax credit and the prior year quarter reflecting pre-tax income with unfavorable discrete impacts related to stock compensation.

For the three months ended August 31, 2024, the effective tax rate is higher than the United States federal statutory rate due to reflecting pre-tax loss along with favorable discrete impacts from stock compensation in the United States research and development tax credit. For the three months ended September 2, 2023, the effective tax rate was higher than the United States federal statutory rate due to an unfavorable discrete tax adjustment in the quarter related to stock compensation in the United States.

The Company recognizes interest and penalties related to uncertain tax benefits through Income tax expense in its Condensed Consolidated Statements of Comprehensive Income. Interest and penalties recognized in the Company's Condensed Consolidated Statements of Comprehensive Income were negligible for the three months ended August 31, 2024, and September 2, 2023.

The Company's recorded liability for potential interest and penalties related to uncertain tax benefits was:

The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months as a result of these audits. Tax payments related to these audits, if any, are not expected to be material to the Company's Condensed Consolidated Statements of Comprehensive Income.

For the majority of tax jurisdictions, the Company is no longer subject to state, local, or non-United States income tax examinations by tax authorities for fiscal years before 2019.