Income Taxes

9 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 18. Income taxes

The determination of the estimated annual effective tax rate is based upon a number of significant estimates and judgments. In addition, as a global commercial enterprise, Woodward’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, changes in the estimate of the amount of undistributed foreign earnings that Woodward considers indefinitely reinvested, issuance of future guidance, interpretation, and rule-making, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following table sets forth the tax expense and the effective tax rate for Woodward’s earnings before income taxes:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2024			2023			2024			2023
Earnings before income taxes	$	122,096		$	105,738		$	352,440		$	177,728
Income tax expense		20,021			21,139			62,765			28,012
Effective tax rate		16.4	%		20.0	%		17.8	%		15.8	%

The decrease in the effective tax rate for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is primarily attributable to a larger stock-based compensation tax benefit in the current quarter. This decrease was partially offset by higher accrued future withholding taxes on unremitted foreign earnings in the current quarter.

The increase in the effective tax rate for the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023 is primarily attributable to higher accrued future withholding taxes on unremitted foreign earnings in the current fiscal year. Additionally, the increase is attributable to a release of uncertain tax positions that did not recur in the

current fiscal year. These increases were partially offset by a larger stock-based compensation tax benefit in the current fiscal year.

Gross unrecognized tax benefits were $13,723 as of June 30, 2024, and $11,112 as of September 30, 2023. At June 30, 2024, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was $8,718. Woodward believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $2,178 in the next twelve months due to the completion of review by tax authorities, lapses of statutes, and the settlement of tax positions. Woodward’s tax expense includes accruals for potential interest and penalties related to unrecognized tax benefits and all other interest and penalties related to tax payments.

Woodward’s tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes of limitation may result in changes to tax expense. Generally, Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years 2020 and thereafter. Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2018 and thereafter. Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include 2018 and thereafter.