OSI SYSTEMS INC Income Taxes Disclosure

10.INCOME TAXES

The following is a geographical breakdown of income before the provision for income taxes (in thousands):

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Our provision (benefit) for income taxes consists of the following (in thousands):

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As of June 30, 2024 and 2025, our liability for uncertain tax positions was $18.1 million and $15.4 million, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $15.1 million as of June 30, 2025.

We recognize potential interest and penalties related to income tax matters in income tax expense. As of June 30, 2025, we have accrued $2.9  million for interest and penalties. Our uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. These include fiscal years after 2021 for federal purposes, fiscal years after 2020 for state purposes and fiscal years after 2017 for various foreign jurisdictions. Future developments, such as the settlement of income tax positions or the expiration of applicable statutes of limitation, could result in changes to our liability for unrecognized tax benefits. Since the ultimate resolution of uncertain tax positions depends on many factors and assumptions, we are not able to estimate the range of potential changes in the liability for unrecognized tax benefits or the timing of such changes.

A summary of activity of unrecognized tax benefits for fiscal 2024 and 2025 is as follows (in thousands).

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Deferred income tax assets (liabilities) consisted of the following (in thousands):

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The components of the net deferred income tax liability are classified in the consolidated balance sheets as follows (in thousands):

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The components of current taxes receivable and payable and prepaid taxes are classified in the consolidated balance sheets as follows (in thousands):

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As of June 30, 2025, we had federal, state and foreign net operating losses carryforwards of approximately $0.5 million, $15.6 million and $8.7 million, respectively. Our net operating loss carryforwards will begin to expire in the tax year ending June 30, 2026. As of June 30, 2025, we had federal and state tax credit carryforwards of approximately $2.9 million and $7.3 million, respectively. Our credit carryforwards will begin to expire in the tax year ending June 30, 2032.

We have established valuation allowances that relate to the net operating losses of certain subsidiaries, capital losses, and tax credits. During the year ended June 30, 2025, we recorded a net aggregated increase of $1.0 million to these valuation allowances. We evaluate the need for valuation allowances on a jurisdiction-by-jurisdiction basis and release such allowances when sufficient positive evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized.

We recognized all excess tax benefits and tax deficiencies related to equity-based compensation as a component of income tax expense or benefit in the period in which they occur, in accordance with ASC718. An income tax benefit of approximately $0.8 and $1.7 million was recognized in fiscal 2024 and 2025, respectively.

The consolidated effective income tax rate differs from the federal statutory income tax rate due primarily to the following:

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The provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment with significant operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.