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Income Taxes
9 Months Ended
Jun. 30, 2013
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 was 20.9 percent and 22.9 percent in the three and nine months ended June 30, 2013, respectively, compared to 22.1 percent and 23.8 percent in the three and nine months ended June 30, 2012, respectively. The effective tax rate was lower than the U.S. statutory rate of 35 percent in each period primarily because we benefited from lower non-U.S. tax rates. We recognized net discrete tax benefits of $10.0 million and $6.0 million in the three months ended June 30, 2013 and 2012, respectively, primarily related to the favorable resolution of tax matters in various global jurisdictions. We recognized net discrete tax benefits of $14.5 million in the nine months ended June 30, 2013, primarily related to the favorable resolution of tax matters in various global jurisdictions and the retroactive extension of the U.S. federal research and development tax credit. We recognized net discrete tax benefits of $4.6 million in the nine months ended June 30, 2012, primarily related to the favorable resolution of tax matters in various global jurisdictions.
The amount of gross unrecognized tax benefits was $64.5 million and $70.3 million at June 30, 2013 and September 30, 2012, respectively, of which the entire amount would reduce our effective tax rate if recognized.
Accrued interest and penalties related to unrecognized tax benefits were $17.2 million and $20.1 million at June 30, 2013 and September 30, 2012, respectively. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision.
If the unrecognized tax benefits were recognized, the net impact on our income tax provision, including the recognition of interest and penalties and offsetting tax assets, would be $31.3 million as of June 30, 2013.
There was no material change in the amount of unrecognized tax benefits in the nine months ended June 30, 2013. We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $9.3 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations.
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 2010 and are no longer subject to state, local and foreign income tax examinations for years before 2003.