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Income Taxes
9 Months Ended
Jun. 30, 2012
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
At the end of each interim period, we estimate a base effective tax rate that we expect for the full fiscal year based on our most recent forecast of pre-tax income, permanent book and tax differences and global tax planning strategies. We use this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant unusual or extraordinary items and items that are reported net of their related tax effects. We record the tax effect of significant unusual or extraordinary items and items that are reported net of their tax effects in the period in which they occur.
The effective tax rate for the nine months ended June 30, 2012 was 23.8 percent. The effective rate was lower than the U.S. statutory rate of 35 percent primarily because we benefited from lower non-U.S. tax rates.
The amount of gross unrecognized tax benefits was $75.1 million ($30.2 million net of offsetting tax benefits) at June 30, 2012 and September 30, 2011. These unrecognized tax benefits would reduce our effective tax rate if recognized. Offsetting tax benefits primarily consist of tax receivables that were recorded in other assets and a foreign tax credit item that was recorded in deferred income taxes.
There was no material change in the amount of unrecognized tax benefits in the first nine months of 2012. We believe it is reasonably possible that the amount of unrecognized tax benefits could be reduced by up to $8.8 million and the amount of offsetting tax benefits could be reduced by up to $0.9 million during the next 12 months as a result of the resolution of worldwide tax matters and the lapses of statutes of limitations.
We recognize interest and penalties related to tax matters in tax expense. Accrued interest and penalties were $20.7 million and $16.9 million at June 30, 2012 and at September 30, 2011, respectively.
We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal income tax examinations for years before 2009 and are no longer subject to state, local and foreign income tax examinations for years before 2003.