Remove the MDM profile and see if anything changes. If so, you have a rogue profile on the machine. Otherwise check for updates in the terminal with "softwareupdate --list".

This is likely due to the softwareupdate service being broken/flaky for the past year+. Check out this post for more details: https://community.jamf.com/t5/jamf-pro/big-sur-11-6-x-software-update-hangs/m-p/257525

I've found restarting, sometimes multiple times, fixes it. Sometimes the kickstart (sudo launchctl kickstart -k system/com.apple.softwareupdated) command listed in that thread works. If you are experiencing this, it is a bug on Apple's side and there's not much you can do, except to potentially schedule the kickstart command to run periodically on your machines. 

This.

In the MacAdmin slack, this is a very common issue with 12.5 and kickstart seems to be the most recommended workaround for now. Makes it hard to update machines when Apple wants to empower the users to update the devices themselves, but their stuff is broken and users can't even find the update. 

Thanks everyone for your help, it seems to be the Apple OS Update bug. I removed Nudge, had the user reboot and they were able to update. Working with other users to reboot without removing the Nudge to see if it does make a difference. However, the OS deferred was for sure not set. Thanks again.