Income Taxes

6 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Note 10—Income Taxes

The effective income tax rates were 32% and 30% for the three and six months ended March 31, 2013, respectively, and 20% and 28% for the three and six months ended March 31, 2012, respectively. The effective tax rates for the three and six months ended March 31, 2013, differ from the effective tax rates in the same periods in fiscal 2012 due mainly to:

• certain foreign tax credit benefits related to prior years recognized in the second quarter of fiscal 2013;

• a $76 million tax benefit recognized in the first quarter of fiscal 2013, as a result of new guidance issued by the state of California regarding apportionment rules for years prior to fiscal 2012; and

• the absence of a one-time, non-cash benefit of $208 million from the remeasurement of existing net deferred tax liabilities recorded in the second quarter of fiscal 2012 as a result of the California state apportionment rule changes adopted during that quarter.

During the three and six months ended March 31, 2013, the Company's gross unrecognized tax benefits increased by $338 million and $221 million, respectively, $247 million and $171 million of which, respectively, would favorably impact our effective income tax rate if recognized. The increase in gross unrecognized tax benefits is primarily due to changes in judgments and estimates related to various state tax positions across several jurisdictions. During the three and six months ended March 31, 2013, the Company accrued $3 million and $5 million of interest, respectively, and $1 million and $2 million of penalties, respectively, related to uncertain tax positions. During the three and six months ended March 31, 2012, the Company accrued $7 million and $14 million of interest, respectively, and no penalties related to uncertain tax positions.

The Company reclassified $1.6 billion from deferred tax assets to income tax receivable in the first quarter of the current fiscal year to reflect the current tax deduction related to payments totaling $4.4 billion made in connection with the covered litigation. See Note 2—Retrospective Responsibility PlanandNote 11—Legal Matters. The income tax receivable will be applied to reduce income taxes payable throughout fiscal 2013.