Ultra Clean Holdings Inc

6. INCOME TAX

The Company’s effective tax rate was 151.0% and 366.7% for the three months ended March 28, 2025 and March 29, 2024, respectively. The income tax provision was $7.4 million and $9.9 million for the three months ended March 28, 2025 and March 29, 2024, respectively. The change in respective tax rates reflects, primarily, changes in the geographic mix of worldwide earnings and financial results in jurisdictions which are taxed at different rates and the impact of losses in jurisdictions with full valuation allowances on deferred tax assets. Company management continuously evaluates the need for a valuation allowance and, as of March 28, 2025, concluded that a full valuation allowance on its U.S. federal and state and certain of its foreign deferred tax assets was still appropriate.

As of March 28, 2025 and March 29, 2024, the Company’s gross liability for unrecognized tax benefits, excluding interest, was $2.4 million and $2.9 million, respectively. Increases or decreases to interest and penalties on uncertain tax positions are included in the income tax provision in the Condensed Consolidated Statements of Operations. Although it is possible that some of the unrecognized tax benefits could be settled within the next twelve months, the Company cannot reasonably estimate the outcome at this time.

The Organization for Economic Co-operation and Development and the G20 Inclusive Framework on Base Erosion and Profit Shifting (the “Inclusive Framework”) have put forth Pillar Two proposals that ensure a minimal level of taxation. Several countries in which the Company operates have adopted legislation to implement the Inclusive Framework’s global corporate minimum tax rate of fifteen percent. This legislation became effective in certain jurisdictions the Company operates in for the current fiscal year, ending December 26, 2025. Based on the Company’s current analysis of the enacted Pillar Two provisions and transitional safe harbor provisions, Pillar Two will not have a significant impact on the Company's financial statements for fiscal year 2025