TOOTSIE ROLL INDUSTRIES INC Income Taxes Disclosure

NOTE 4—INCOME TAXES:

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The domestic and foreign components of pretax income are as follows:

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The provision for income taxes is comprised of the following:

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Deferred taxes reflect temporary differences between the tax basis and financial statement carrying value of assets and liabilities. The significant temporary differences that comprised the deferred tax assets and liabilities are as follows:

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The valuation allowances as of December 31, 2025 and 2024 were primarily related to foreign jurisdictions’ net operating loss carryforwards and state credits that we do not expect to realize.

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The amounts of the Company’s foreign subsidiary valuation allowances for net operating loss carryforwards were $6,474 and $4,681 at December 31, 2025 and 2024, respectively.

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The Company has benefits related to state tax credit carryforwards valuation allowances were $1,669 and $1,499 at December 31, 2025 and 2024, respectively.

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The effective income tax rate differs from the statutory rate as follows:

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The comparative prior periods’ effective income tax rate differs from the statutory rate as follows:

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In 2024 the Board revoked its authorization that permitted management to take appropriate action to preserve the full income tax deductibility of certain amounts under its nonqualified deferred compensation plans after determining that it was no longer feasible in light of changes to Section 162(m) of the Internal Revenue Code made by the Tax Cuts and Jobs Act of 2017. Given this Board action and the resulting expectation that certain additional amounts of deferred compensation will not be tax deductible in future years, the Company concluded that it will be required under generally accepted accounting principles in the United States of America to write off the related deferred tax assets. The adjustment to the deferred tax assets resulted in a non-cash tax charge of $11,010 in 2024. The remaining balance represents deferred compensation amounts that are expected to be tax deductible in the future.

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Income taxes paid, net of refunds, as shown in the consolidated statement of cash flows are as follows:

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Income taxes paid, net of refunds, exceeded 5 percent of total income taxes paid in the following jurisdictions:

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The income taxes paid for the years ended December 31, 2024 and 2023 were $38,165 and $19,583, respectively.

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As a result of the 2017 Tax Cuts and Jobs Act, the Company asserts it is permanently reinvested in its foreign subsidiaries earnings outside of United States.

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At December 31, 2025 and 2024, the Company had unrecognized tax benefits of $2,873 and $2,114, respectively. Included in this balance is $2,271 and $1,671, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. As of December 31, 2025 and 2024, $609 and $450, respectively, of interest and penalties were included in the liability for uncertain tax positions.

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A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

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The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes on the Consolidated Statements of Earnings and Retained Earnings.

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The Company is subject to taxation in the U.S. and various state and foreign jurisdictions, primarily Canada and Mexico. The Company generally remains subject to examination by U.S. federal, state and foreign tax authorities for the years 2023 through 2025. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2022 and prior.

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On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OBBBA”) which includes, among other provisions, changes to the U.S. corporate income tax system, including the allowance of 100% expensing of qualified asset expenditures, immediate expensing of qualifying domestic research and development expenses and permanent extensions of certain other provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for 2025, beginning January 19, 2025. The enactment did not have a material impact on our effective tax rate for the year ended December 31, 2025.