VICOR CORP Income Taxes Disclosure

The tax provision includes estimated federal, state and foreign income taxes on the Company's pre-tax income. The tax provisions also may include discrete items, generally related to increases or decreases in tax reserves, tax provision versus tax return differences and accrued interest for potential liabilities.

Prior to December 31, 2025, the Company maintained a valuation allowance against a significant portion of its deferred tax assets, consisting of net operating loss carryforwards, tax credit carryforwards, and deductible temporary differences. Based on the Company's history of cumulative earnings before taxes for financial reporting purposes over a 12-quarter period and expected future taxable income, management determined it was more likely than not a significant portion of the deferred tax assets would be realized. As a result, at December 31, 2025, the Company reversed $43,648,000 of its valuation allowance related to certain deductible temporary differences expected to be realized in future periods. This tax benefit was partially offset by estimated federal, state, and foreign income taxes.

As of December 31, 2025, the Company has a remaining valuation allowance of approximately $17,931,000 against certain deferred tax assets, for which realization cannot be considered more likely than not at this time. Such deferred tax assets principally relate to tax credit carryforwards in certain state jurisdictions for which sufficient taxable income for utilization cannot be projected at this time, or the credits may expire without being utilized. If and when management determines the remaining valuation allowance should be released, the adjustment would result in a tax benefit in the Consolidated Statements of Operations and may be material.

As of December 31, 2025, the Company has $43,081,000 of federal net operating loss carryforwards available, and has state net operating losses of approximately $89,139,000, which will begin to expire in 2041. The Company has federal and state research and development tax credit carryforwards of $16,464,000 and $22,279,000, which will begin to expire in 2040 and 2026, respectively.

The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. The total amount of unrecognized tax benefits, that is the aggregate tax effect of differences between tax return positions and the benefits recognized in the Company’s financial statements, as of December 31, 2025, 2024, and 2023 of $4,974,000, $4,585,000, and $4,184,000, respectively, if recognized, may decrease the Company’s income tax provision and effective tax rate. None of the unrecognized tax benefits as of December 31, 2025 are expected to significantly change during the next twelve months.

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2025, 2024, and 2023, the Company recognized approximately $75,000, $36,000, and $23,000, respectively, in net interest expense. As of December 31, 2025 and 2024, the Company had accrued approximately $125,000 and $52,000, respectively, for the potential payment of interest.

The Company files income tax returns in the United States and various foreign tax jurisdictions. These tax returns are generally open to examination by the relevant tax authorities from three to seven years from the date they are filed. The tax filings relating to the Company’s federal and state taxes are currently open to examination for tax years 2022 through 2024 and 2020 through 2024, respectively. In addition, the Company generated federal research and development credits in tax years 2005 through 2024. These years may also be subject to examination when the credits are carried forward and utilized in future years.

* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.