Income Taxes

3 Months Ended

Dec. 31, 2021

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
	December 31,
	2021			2020
Earnings before income taxes	$	37,746		$	47,584
Income tax expense		7,441			6,014
Effective tax rate		19.7	%		12.6	%

The increase in the effective tax rate for the three-months ended December 31, 2021 compared to the three-months ended December 31, 2020 is primarily attributable to a reduction in the income tax benefit from stock-based compensation exercises and the net impact of increased projected full-year earnings.

Gross unrecognized tax benefits were $13,135 as of December 31, 2021, and $15,199 as of September 30, 2021.  At December 31, 2021, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was $8,356.  At this time, Woodward believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $4,345 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.  Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years 2018 and thereafter.  Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2017 and thereafter.  Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include 2017 and thereafter.