Income Taxes

6 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Note 19. 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 March 31,						Six Months Ended March 31,
	2025			2024			2025			2024
Earnings before income taxes	$	132,963		$	120,624		$	234,817		$	230,344
Income tax expense		24,014			23,068			38,777			42,744
Effective tax rate		18.1	%		19.1	%		16.5	%		18.6	%

The decrease in the effective tax rate for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily attributable to a decrease to the projected future withholding taxes on unremitted foreign earnings. This decrease was partially offset by a decrease to the research and development credit.

The decrease in the effective tax rate for first half of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to a larger stock-based compensation tax benefit and a decrease to projected future withholding taxes on unremitted foreign earnings. This decrease was partially offset by a decrease to the research and development credit.

Gross unrecognized tax benefits were $17,054 as of March 31, 2025, and $14,273 as of September 30, 2024. At March 31, 2025, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was $9,185. At this time, Woodward believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $1,909 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 2021 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.