Karman Holdings Inc. Income Taxes Disclosure

Income Before Taxes

Income Tax Expense (Benefit)

Effective Tax Rate

Deferred Taxes

Deferred tax assets and liabilities reflect the net tax effects of tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for tax purposes. Significant components of the Company’s deferred tax assets and liabilities are summarized as follows:

Our deferred tax liabilities increased by $22.5 million of which $11.9 million was recorded to goodwill as a result of our acquisitions (See Note 4, Business Combinations).

The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Because of the Company’s history of net taxable income, the Company believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently likely to be realized and, accordingly, has not provided a valuation allowance on its deferred tax assets.

Utilization of the interest expense carryforwards may be subject to annual limitations due to ownership changes that have occurred or that could occur in the future, as required by Sections 382 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as similar state provisions. These ownership changes may limit the amount of interest expense that can be utilized annually to offset future taxable income. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of outstanding stock of a company by certain stockholders.

Tax Carryforwards

Uncertain Tax Provisions

Included in the balance of unrecognized tax benefits as of December 31, 2025, 2024 and 2023 are $3.5 million, $1.7 million and $0.6 million respectively, of unrecognized tax benefits that would affect the ETR.

The Company recognized interest expense related to uncertain tax positions as tax expense of $0.4 million and $0.3 million for the years ended December 31, 2025 and 2024 respectively. The total accrued interest liability was $0.7 million and $0.4 million for the years ended December 31, 2025 and 2024 respectively. Interest expense related to uncertain tax positions and accrued interest liability for the year ended December 31, 2023 was immaterial.

The Company files income tax returns in the United States, California, Alabama, and Texas. The Company is subject to income tax examination by federal and state tax authorities for years beginning in 2022 and 2021, respectively.