
5.	INCOME TAXES

The effective tax rate was 16.2 percent and 12.3 percent for the three and six months ended April 30, 2013, respectively, compared to 13.0 percent and 11.7 percent for the same periods last year. The increase in the effective tax rate for the three months ended April 30, 2013 primarily relates to a $12 million out of period adjustment to tax expense, recognized during the quarter, associated with the write-off of deferred tax assets related to foreign tax credits incorrectly claimed in prior years.

The income tax provision for the three and six months ended April 30, 2013 included net discrete tax expense of $14 million and $3 million, respectively. The net discrete tax charges for the three months ended April 30, 2013 included the aforementioned $12 million out of period adjustment. The net discrete tax charges for the six months ended April 30, 2013 included a net discrete tax benefit of $11 million, recognized in the first quarter of 2013, primarily due to research and development tax credits relating to the company's prior fiscal year. The income tax provision for the three and six months ended April 30, 2012 included net discrete tax expense of $10 million and $14 million, respectively. The net discrete tax charges for the three months ended April 30, 2012 primarily related to U.S. penalties and withholding taxes.

In the U.S., tax years remain open back to the year 2006 for federal income tax purposes and the year 2000 for significant states. Agilent's U.S. federal income tax returns for 2006 through 2007 are currently under audit by the IRS. During the three months ended July 31, 2012, the company received a Revenue Agents Report (“RAR”) for these years and filed a protest to dispute certain adjustments, the most significant of which pertains to the amount of a gain from the disposition of a business that was allocated to the U.S. for income tax purposes. There can be no assurance that the outcome of this dispute will not have a material adverse effect on our operating results or financial condition. In other major jurisdictions where the company conducts business, the tax years generally remain open back to the year 2003. With these jurisdictions and the U.S., it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.