NEOGEN CORP

10. Income Taxes

Income before income taxes by source consists of the following amounts:

The provision for income taxes consists of the following:

The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense, including the additional disclosure requirements as set forth in ASU 2023-09, which we adopted in fiscal year 2026 on a prospective basis is as follows:

1 State and local taxes in California, Pennsylvania, and City of Lansing, Michigan accounted for the majority (greater than 50 percent) of the tax impact in this category.

The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense based on the applicable guidance prior to the adoption of ASU 2023-09 is as follows:

Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $15.1 million, $9.4 million, and $7.1 million in fiscal years 2026, 2025, and 2024, respectively. The Company’s research and development credits were $0.7 million, $2.1 million, and $0.6 million in fiscal years 2026, 2025, and 2024, respectively.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred income tax liabilities and assets are as follows:

The Company has the following net operating loss carryforwards:

Valuation allowances against certain deferred tax assets are established based on management’s determination of a more likely than not standard that the tax benefits will not be realized. Management evaluates all available evidence, both positive and negative, when determining the need for a valuation allowance. Valuation allowances related to net operating losses are primarily evaluated based on evidence (or lack thereof) of historical and future earnings. Valuation allowances related to long-lived assets primarily are evaluated based on Management’s tax planning and intentions for underlying assets.

The following table provides additional detail on our income taxes paid, net of refunds, in 2026. Income taxes paid by jurisdiction include all jurisdictions that individually exceed 5% of our total income taxes paid, net of refunds received:

We are subject to income taxes in the U.S. (federal and state) and in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. The Company’s policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties included in the unrecognized tax benefits reserve was $0.8 million at May 31, 2026, $0.4 million at May 31, 2025, and $0.2 million at May 31, 2024. Of the total unrecognized tax benefits at May 31, 2026 and 2025, $5.0 million and $3.8 million, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate.

The reconciliation of our unrecognized tax benefits is as follows:

The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 2022 and preceding years.

The Company has not provided deferred taxes on undistributed earnings of foreign subsidiaries that are permanently reinvested in operations. The related temporary differences could become taxable upon repatriation. It is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. The Company is closely monitoring developments and evaluating the impact these new rules will have on our tax rate, including eligibility to qualify for certain safe harbors. Where no safe harbor is met, the

Companyhas included in its income tax for the year ended May 31, 2026, a calculated amount of “top-up” tax for its foreign subsidiaries as required under the applicable rules of the countries that have adopted the Pillar Two directives. For the year ended May 31, 2026, the company has incurred a total top-up tax under Pillar Two of $1.0 million, with respect to its operations in Ireland

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the United States. OBBBA includes significant provisions, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for depreciation and interest expenses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. There was not a significant impact to our income tax expense or effective tax rate for the year ended May 31, 2026.