Orthofix Medical Inc. Income Taxes Disclosure

20. Income taxes

State taxes in California and Texas made up the majority (greater than 50%) of the tax effect in this category in 2025 and 2024. State taxes in Texas made up the majority (greater than 50%) of the tax effect in this category in 2023.

The Company historically presented deferred income tax assets as a separate and discrete line item on its consolidated balance sheet; however, as the significance of the asset has decreased as a result of the recognition of valuation allowances, the Company has reclassified this balance to be included within other long-term assets. Deferred income tax liabilities are included in Other Long Term Liabilities.

The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and income tax basis of assets and liabilities, and for operating losses and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized. Tax law and rate changes are recorded in the period such changes are enacted. The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. We recognize the tax impact of including certain foreign earnings in US taxable income as a period cost.

The valuation allowance is primarily attributable to net operating loss carryforwards and temporary differences in domestic and certain foreign jurisdictions. The net increase in the valuation allowance of $19.0 million during the year principally relates to recognizing a full valuation allowance against the net deferred tax asset within the Company’s U.S. and Italy operations. The Company considered many factors when assessing the likelihood of future realization of these deferred tax assets, including recent cumulative losses experienced by the subsidiary, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors. That increase was partially offset by a decrease of valuation allowances on net operating loss carryforwards in other foreign jurisdictions due to expiration, statutory rate changes, and changes

regarding the realizability of net deferred tax assets. It is reasonably possible that the valuation allowance will increase in 2026 due to further losses in certain jurisdictions, offset by decreases related to the expiration of foreign net operating losses.

The Company has federal net operating loss carryforwards of $428.0 million and federal research and development credits of $5.8 million. These federal carryforwards are subject to limitation under the provisions of Internal Revenue Code Section 382 and will continue to expire in 2026. The Company has state net operating loss carryforwards of approximately $292.3 million, principally related to California, Illinois, and Michigan. These carryforwards are subject to limitation under various provisions implemented by each specific state jurisdiction. Additionally, the Company has net operating loss carryforwards in various foreign jurisdictions of approximately $141.3 million, which mainly relate to the Company’s Netherlands, Brazil, Italy, and Canada operations. The majority of the foreign net operating losses do not expire. The Company also has research and development credits in Canada of $1.6 million which begin to expire in 2041.

The Company’s investment in foreign subsidiaries continues to be indefinite in nature; however, the Company may periodically repatriate a portion of these earnings to the extent that it does not incur significant additional tax liability. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings of foreign subsidiaries is not practicable.

The Company records a benefit for uncertain tax positions when the weight of available evidence indicates that it is more likely than not, based on an evaluation of the technical merits, that the tax position will be sustained on audit. The tax benefit is measured as the largest amount that is more than 50% likely to be realized upon settlement. The Company re-evaluates income tax positions periodically to consider changes in facts or circumstances such as changes in or interpretations of tax law, effectively settled issues under audit, and new audit activity. The Company includes interest and any applicable penalties related to income tax issues as part of income tax expense in its consolidated financial statements.

The Company’s unrecognized tax benefit was $1.7 million for both of the years ended December 31, 2025, and 2024, respectively. The Company recorded net interest and penalties expense (benefit) on unrecognized tax benefits of ($0.1) million, $0.2 million, and $0.2 million for the years ended December 31, 2025, 2024, and 2023, respectively, and had approximately $1.0 million and $1.0 million accrued for payment of interest and penalties as of December 31, 2025, and 2024, respectively. The entire amount of unrecognized tax benefits, including interest, would favorably impact the Company's effective tax rate if recognized.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and in certain state and foreign jurisdictions, including Italy, as well as other jurisdictions where the Company maintains operations. The statute of limitations with respect to federal and state tax filings is closed for years prior to 2022. The statute of limitations with respect to the major foreign tax filing jurisdictions is closed for years prior to 2021. The Company cannot reasonably determine if any state and local or foreign examinations will have a material impact on its financial statements and cannot predict the timing regarding the resolution of these tax examinations.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which includes a broad range of tax reform provisions affecting businesses. The OBBBA includes numerous changes to existing tax law including extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire. Additionally, the OBBBA permanently eliminates the requirement to capitalize and amortize U.S. based research and experimental expenditures over five years, making these expenditures fully deductible in the period incurred. In addition, the OBBBA returns the interest limitation rules under Internal Revenue Code (IRC) Section 163(j) to a tax basis EBITDA calculation as opposed to earnings before interest and taxes (EBIT). The Company has reflected the impact of these provisions in the 2025 income tax provision.