REGAL REXNORD CORP

11. INCOME TAXES

The effective tax rate for the three months ended September 30, 2025 was 12.9% versus 10.3% for the three months ended September 30, 2024. The effective tax rate for the three months ended September 30, 2025 was higher due to discrete tax benefits in 2024 associated with a reduction in withholding taxes, partially offset by discrete tax benefits in 2025 associated with a tax rate reduction in Germany. The effective tax rate for the nine months ended September 30, 2025 and September 30, 2024 was 18.4% and 25.4%, respectively. The effective tax rate for the nine months ended September 30, 2025 was lower than the same period in 2024 primarily due to the tax effects associated with the divestiture of the industrial motors and generators businesses in 2024 and discrete tax benefits in 2025 associated with a tax rate reduction in Germany, partially offset by discrete tax benefits in 2024 associated with a reduction in withholding taxes.

As of September 30, 2025 and December 31, 2024, the Company had approximately $4.4 million and $4.2 million, respectively, 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 $0.8 million and $0.7 million of accrued interest as of September 30, 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 September 30, 2025.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into U.S. law, which contains a broad range of tax reform provisions, including domestic research and development cost expensing, extension of 100% bonus depreciation, limitations on interest expense deductions and revisions to international tax regimes. The Company has completed its evaluation of the financial impacts of the OBBBA and does not currently anticipate a material effect on our annual effective tax rate or cash flows as a result of this legislation.