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 effects of changes in enacted tax laws or rates or tax status are recognized in the interim period in which the change occurs.

The Company’s effective tax rate for the three and nine months ended March 31, 2015 was lower than the U.S. statutory tax rate primarily due to the impact of foreign operations which are subject to lower tax rates, partially offset by the impact of nondeductible items and changes in our accrued liability for uncertain tax positions.

The Company’s effective income tax rate for the three months ended March 31, 2014 was lower than the U.S. statutory rate primarily due to foreign tax refunds that were accrued in the quarter, resolution of uncertain state tax positions in the quarter and the impact of foreign operations which are subject to lower tax rates. The effective tax rate for the nine months ended March 31, 2014 was higher than the U.S. statutory rate primarily due to the impact of tax refunds received from a foreign jurisdiction which is discussed below.

For the nine months ended March 31, 2014, the Company recorded a receivable related to a refund of taxes plus interest in a foreign jurisdiction of $794 million and recorded a tax benefit, net of applicable taxes on interest, of $721 million to Income tax benefit in the Statements of Operations. 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 nine months ended March 31, 2014, the Company recorded an expense to Other, net of $721 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 nine months ended March 31, 2014
Other, net	$	(721	)
Income tax benefit		721

Net impact to the Statement of Operations	$	—

As of March 31, 2014, the Company received $794 million from the foreign tax authority. As of March 31, 2014, the Company paid 21st Century Fox $721 million. Amounts paid to 21st Century Fox are net of the estimated tax associated with interest related to the refund. The Company accounts for interest on taxes as a component of Income tax (expense) benefit.

The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company is currently undergoing tax examinations in several States and foreign jurisdictions. A foreign tax authority has issued notices asserting additional taxes. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid, however, our liability may need to be adjusted as new information becomes known and as tax examinations continue to progress.

During the nine months ended March 31, 2015 and 2014, the Company paid gross income taxes of $81 million and $69 million, respectively, and received income tax refunds of $5 million and $840 million, respectively. The income tax refunds for the nine months ended March 31, 2014 included the $794 million related to amounts received from the foreign tax authority discussed above.