POOL CORP Income Taxes Disclosure

Note 7 - Income Taxes

In 2024, several countries in which we operate adopted the Global Anti-Base Erosion Model Rules (Pillar Two), which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The Pillar Two directive did not have a material effect on our financial statements.

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of deductible nonqualified stock options and the lapse of restrictions on deductible restricted stock awards or increase for tax deficiencies. To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit. To the extent realized tax deductions are less than the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax expense. We record all excess tax benefits or deficiencies as income tax benefit or expense in the income statement. We recorded excess tax benefits of $4.6 million to our income tax provision in 2025, $8.8 million in 2024 and $6.7 million in 2023.

At December 31, 2025, certain of our international subsidiaries had tax loss carryforwards totaling approximately $11.0 million, which expire in various years after 2026. Deferred tax assets related to the tax loss carryforwards of these international subsidiaries were $3.1 million as of December 31, 2025 and $2.3 million as of December 31, 2024. We have recorded a corresponding valuation allowance of $2.7 million and $2.1 million in the respective years.

As of December 31, 2025, United States income taxes were not provided on earnings or cash balances of our foreign subsidiaries, outside of the provisions of the transition tax from U.S. tax reform enacted in December 2017. As we have historically invested or expect to invest the undistributed earnings indefinitely to fund current cash flow needs in the countries where held, additional income tax provisions may be required. Determining the amount of unrecognized deferred tax liability on these undistributed earnings and cash balances is not practicable due to the complexity of tax laws and regulations and the varying circumstances, tax treatments and timing of any future repatriation.

The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $16.5 million at December 31, 2025 and $15.5 million at December 31, 2024.

We record interest expense related to unrecognized tax benefits in Interest and other non-operating expenses, net, while we record related penalties in Selling and Administrative expenses on our Consolidated Statements of Income. For unrecognized tax benefits, we had interest expense of $0.4 million in 2025 and $0.8 million in 2024. Accrued interest related to unrecognized tax benefits was approximately $3.2 million at December 31, 2025 and $2.7 million at December 31, 2024.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2022.