MCGRATH RENTCORP Income Taxes Disclosure

NOTE 9. INCOME TAXES

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the U.S. federal statutory income tax rate to the income before provision for income taxes was as follows:

The Company's tax loss carryforwards for the year ended December 31, 2025, were $2.4 million for state jurisdictions which are expected to result in a future state tax benefit of $0.1 million. The availability of these tax losses to offset future income varies by jurisdiction. Furthermore, the ability to utilize the tax losses may be subject to additional limitations. The Company’s state net operating loss carryforwards have differing carryforward periods. The Company anticipates that the available net operating losses as of December 31, 2025, will be utilized prior to their respective expiration dates.

For income tax purposes, deductible compensation related to share-based awards is based on the value of the award when realized, which may be different than the compensation expense recognized by the company for financial statement purposes which is based on the award value on the date of grant. The difference between the value of the award upon grant, and the value of the award when ultimately realized, creates either additional tax expense or benefit. In 2025, 2024 and 2023 exercise of share-based awards by employees resulted in an excess tax benefit of $0.8 million, $0.9 million and $2.7 million, respectively.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company evaluated all of its tax positions for which the statute of limitations remained open and determined there were no material unrecognized tax benefits as of December 31, 2025 and 2024. In addition, there have been no material changes in unrecognized benefits during 2025, 2024 and 2023.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to interpretation of the related tax laws and regulations and require the application of significant judgment.

Our income tax returns are subject to examination by federal, state and foreign tax authorities. There may be differing interpretations of tax laws and regulations, and as a result, disputes may arise with these tax authorities involving the timing and amount of deductions and allocation of income. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2021.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision (benefit) for income taxes in the accompanying consolidated statements of income for all periods presented. Such interest and penalties were not significant for the years ended December 31, 2025, 2024 and 2023.