NOTE 12. INCOME TAXES

At the end of each interim period, the Company estimates the annual effective income tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect, and are individually computed are recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.

The Company’s effective income tax rate for the three months ended September 30, 2014 was lower than the U.S. statutory tax rate primarily due to the impact from foreign operations which are subject to lower tax rates partially offset by the impact of nondeductible items. The Company’s effective income tax rate for the three months ended September 30, 2013 was higher than the U.S. statutory rate primarily due to the impact of the refund received from a foreign jurisdiction, which is discussed below.

In the first quarter of fiscal 2014, the Company recorded a receivable related to a refund of taxes plus interest in a foreign jurisdiction of $555 million and recorded a tax benefit, net of applicable taxes on interest, of $483 million to Income tax benefit in the Statements of Operations for the three months ended September 30, 2013. Refunds received related to this matter were remitted to 21st Century Fox, net of applicable taxes on interest, in accordance with the terms of the Tax Sharing and Indemnification Agreement. Accordingly, for the three months ended September 30, 2013, the Company recorded an expense to Other, net of $483 million for the payable to 21st Century Fox in the Statements of Operations. Refer to the table below for the net impact of the tax refund and interest, net of tax, recorded in the Statements of Operations:


	For the three months ended September 30, 2013
	(in millions)
Other, net	$	(483	)
Income tax benefit		483

Net impact to the Statement of Operations	$	—

The Company paid gross income taxes of $19 million during the three months ended September 30, 2014 and 2013, and received income tax refunds of $3 million and $17 million, respectively.