M-tron Industries, Inc.

6. Income Taxes

Effective Tax Rate

The following table presents Income before income taxes by U.S. and foreign location in which such pre-tax income was earned or incurred:

Income tax expense for the years ended* December 31, 2025and2024* is as follows:

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A reconciliation of the provision for income taxes and the amount computed by applying the statutory federal income tax rate to Income before income taxes is detailed below:

Deferred Tax Assets

Deferred income taxes for2025 and2024 were provided for the temporary differences between the financial reporting basis and the income tax basis of the Company's assets and liabilities. Tax effects of temporary differences and carryforwards as of* December 31, 2025and2024* were as follows:

The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that is more likely thannot that all or some of the deferred tax asset willnot be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance isnot needed. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.

As of* December 31, 2025and2024*, the Company didnot record a valuation allowance against its deferred tax assets.

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Income Taxes Paid

Income taxes paid for the years ended* December 31, 2025and2024* are as follows:

Uncertain Tax Benefits

Significant judgment is required in determining our provision for income taxes. In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain. We review our tax contingencies on a regular basis and make appropriate accruals as necessary.

As of* December 31, 2025*, our unrecognized tax benefits totaled $236, and are included within Accrued expenses on the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

The Company will recognize any interest and penalties related to unrecognized tax positions in Income tax expense on the Consolidated Statements of Operations. Our total accrued interest and penalties associated with uncertain tax positions were immaterial as of* December 31, 2025*. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $236. We donot expect a significant change to the amount of unrecognized tax benefits over the next12 months. The Company believes that the taxes accrued in our Consolidated Balance Sheets fairly represent the amount of income taxes to be settled or realized in the future.

Tax Regulatory Matters

The Company files a consolidated U.S. federal income tax return with our eligible subsidiaries. The Company also files income tax returns in various state and local and non-U.S. jurisdictions.

The Company filed its initial consolidated U.S. federal income tax return in* October 2023and has made timely filings of required tax returns since. The statute of limitations for assessment by the Internal Revenue Service ("IRS") and state tax authorities is open for tax returns for years ended December 31, 2022,2023, and2024; although carryforward attributes that were generated prior to tax year2022, including NOL carryforwards and tax credits, may*still be adjusted upon examination by the IRS or state tax authorities, if they either have been or will be used in a future period.

One Big Beautiful Bill Act

On* July 4, 2025,the One Big Beautiful Bill Act ("OBBBA") was enacted. This legislation introduced significant and wide-ranging changes to the U.S. federal tax system. Significant components include restoration of100%* accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect includes the return to immediate expensing of domestic research and experimental expenditures ("R&E") which in some cases* mayinclude retroactive application back to2021* for businesses with gross receipts of less than*$31* million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions include limitations on tax deductions for charitable contributions.

OBBBA modified the U.S. International Tax provisions for Global Intangible Low-Taxed Income ("GILTI"), Foreign-Derived Intangible Income ("FDII"), and the Base-erosion Anti-abuse Tax ("BEAT") effective for tax years starting after* December 31, 2025.The tax rate on GILTI, renamed Net CFC Tested Income ("NCTI"), is now12.6%.* The FDII rules, renamed Foreign Derived Deduction Eligible Income ("FDDEI"), now carry a14% tax rate on FDDEI eligible income. OBBBA increases the BEAT rate from10% to10.5%

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