REGAL REXNORD CORP

10. INCOME TAXES

The effective tax rate for the three months ended March 31, 2025 was 21.2% versus 34.8% for the three months ended March 31, 2024. The decrease was primarily driven by the non-deductible loss incurred in the prior year associated with the divestiture of the industrial motors and generators businesses which represented the substantial majority of the Industrial Systems operating segment.

As of March 31, 2025 and December 31, 2024, the Company had approximately $4.3 million and $4.2 million of unrecognized tax benefits, all of which would impact the effective income tax rate if recognized. Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. The Company had approximately $0.8 million and $0.7 million of accrued interest as of March 31, 2025 and December 31, 2024, respectively.

The Company conducts business globally and, as a result, files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The US Internal Revenue Service is currently conducting an audit of the Company's 2022 income tax return. No material deficiencies have been assessed related to ongoing audits as of March 31, 2025.