N-able Inc

10. Income Taxes

For the three months ended September 30, 2024 and 2023, we recorded income tax expense of $7.9 million and $4.1 million, respectively, resulting in an effective tax rate of 42.3% and 40.6%, respectively. The increase in the effective tax rate for the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to an increase in the amount of the unbenefited loss in the United States, partially offset by a decrease in income taxes on income outside of the United States. For the nine months ended September 30, 2024 and 2023, we recorded income tax expense of $19.6 million and $13.5 million, respectively, resulting in an effective tax rate of 41.5% and 49.0%, respectively. The decrease in the effective tax rate for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to a decrease in income taxes on income outside of the United States, partially offset by an increase in the amount of the unbenefited loss in the United States.

Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of September 30, 2024, we did not have any accrued interest and penalties related to unrecognized tax benefits.

In 2021, the Organization for Economic Co-operation and Development ("OECD") released model rules for a global minimum tax known as Pillar Two. Under such rules, a minimum effective tax rate of 15% would apply to multinational companies with consolidated revenues above €750 million. Although we operate in one or more jurisdictions that have substantively enacted Pillar Two legislation, we have not exceeded the revenue threshold of €750 million, and as such, we do not expect to be subject to the Pillar Two rules in 2024.

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2012 through 2023 tax years generally remain open and subject to examination by federal, state and foreign tax authorities. We are not currently under audit in any taxing jurisdictions.