FLEXSTEEL INDUSTRIES INC Income Taxes Disclosure

10. INCOME TAXES

The Company recognizes deferred tax assets to the extent that they believe the assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. As of June 30, 2023, it was determined the Company had reached a more-likely-than-not position that the Company will realize the entirety of its deferred tax assets. Therefore, the Company reversed the previously recorded valuation allowance against the federal and state deferred tax assets recorded as of June 30, 2022, of $9.8 million.

Income tax expense was calculated based upon the following components of income before income taxes for the years ended June 30:

Reconciliation between the U.S. federal statutory tax rate and the effective tax rate is as follows for the years ended June 30:

The components of the gross liabilities related to unrecognized tax benefits and the related deferred tax assets are as follows:

The Company records interest expense and penalties related to income taxes as income tax expense in the consolidated statements of income. The Company does not expect that there will be any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months. The amount of unrecognized tax benefits as of June 30, 2025, and 2024 that if recognized, would affect the effective tax rate was $0.6 million and $0.4 million respectively.

The primary components of deferred tax assets and (liabilities) are as follows:

On June 30, 2025, certain state tax attribute carryforwards of $0.2 million were available, with $0.2 million of credits expiring beginning in fiscal years 2026 through 2028, and $0.1 million of state NOLs carryforward. Some of the state NOL carryforwards will have an indefinite carryforward and some will expire in varying amounts between 2035 and 2041. As of June 30, 2023, it was determined that the Company has reached a more-likely-than-not position that the Company will realize the entirety of its state attribute carryforwards and its U.S. federal deferred tax assets.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. Generally, fiscal years 2021 through 2025 remain open to examination by the Internal Revenue Service or other taxing jurisdictions to which the Company is subject.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes a number of provisions which impact the United States tax code. The regulations impacting the tax code have multiple effective dates ranging from fiscal years beginning January 1, 2025, to fiscal years beginning January 1, 2027. The Company has not adjusted its provision for income tax or measurement of deferred tax assets as of June 30, 2025, based on the changes that may be triggered by the OBBBA due

to the law being signed on July 4, 2025. The Company is currently assessing the impact of the OBBBA but does not expect it to have a material impact on our financial position and results of operations.