ADVANCED ENERGY INDUSTRIES INC Income Taxes Disclosure

NOTE 14.           INCOME TAXES

The geographic distribution of pretax income from continuing operations was as follows:

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The income tax provision (benefit) from continuing operations is summarized as follows:

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The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

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The income taxes paid (net of refunds) is summarized as follows:

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From the above amounts, income taxes paid (net of refunds) exceed the 5% of taxes paid threshold in the following foreign jurisdictions. U.S. state and local jurisdictions did not exceed the 5% threshold.

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From the above amounts, states that equal more than 50% of our state income taxes paid (net of refunds) but do not exceed the 5% of taxes paid include the following jurisdictions.

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Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following:

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Of the $137.1 million and $120.8 million net deferred tax assets as of December 31, 2025 and 2024, respectively, $137.7 million and $121.4 million, respectively, were included as a net non-current deferred tax asset within other assets on the Consolidated Balance Sheets. $0.6 million for both years were included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

During 2025, we completed a series of intercompany restructuring actions that created additional future taxable income that was previously not available in certain tax jurisdictions. Based on updated financial projections and planned business integration steps, these activities provided sufficient positive evidence to support the realization of deferred tax assets for which valuation allowances had previously been recorded. As a result, in 2025, we released deferred tax valuation allowances totaling $9.8 million with a corresponding decrease to tax expense. We will continue to update financial projections and integration plans on a periodic basis, and additional adjustments to the valuation allowance may be required in future periods.

As of December 31, 2025, we have recorded a total valuation allowance on $2.6 million of our U.S. domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions. The remaining valuation allowance on deferred tax assets approximates $34.0 million and is associated primarily with operations in Hong Kong, China, and Switzerland. As of December 31, 2025, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will more likely than not be recognized. For the year ended December 31, 2025, the valuation allowance decreased by $5.8 million.

As of December 31, 2025, we had U.S., foreign and state tax loss carryforwards of $28.4 million, $347.7 million, and $105.2 million, respectively. Additionally, we had $1.9 million and $30.5 million of capital loss and interest expense limitation carryforwards, respectively. Finally, we had U.S. and state tax credit carryforwards of $4.8 million and $2.0 million, respectively. The U.S. and state net operating losses, tax credits, and interest expense limitation are subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws. These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period. Much of the foreign loss carryforwards, and $8.1 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore. This tax holiday is in effect through June 30, 2027. The tax holiday is conditional upon our meeting certain employment and investment thresholds. The expected benefit of the tax holidays may be limited by the impact of Pillar II global minimum tax or other actions taken by these countries. For the years ended December 31, 2025, 2024 and 2023, the impact of the tax holidays decreased foreign taxes by $31.0 million, $12.4 million, and $14.3 million, respectively, and the benefit on earnings per diluted share was $0.82, $0.33, and $0.38, respectively.

We have undistributed earnings in certain foreign subsidiaries that we have indefinitely invested, and on which we have not recognized deferred taxes.

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We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements. The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

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The unrecognized tax benefits of $4.9 million, if recognized, will impact our effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $0.9 million and $0.8 million of accrued interest and penalties on December 31, 2025 and 2024, respectively. With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2022.

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As of December 31, 2025, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”). Specifically, the OECD released prospective “Side-by-Side” guidance in early 2026 which is generally beneficial to U.S. parented organizations, but will require adoption by member countries to implement. As countries continue to make revisions to their legislation and release additional guidance with respect to the global minimum tax, we continue to determine any potential cash tax expense and tax rate impact in the countries in which we operate.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company

has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending December 31, 2025.