14. INCOME TAXES

INCOME TAX PROVISION FROM CONTINUING OPERATIONS

Years Ended September 30,	2014			2013			2012

Distribution of Income Before Tax
US	$	314.8		$	374.0		$	354.6
Foreign		6.5			28.3			(11.8	)
Total	$	321.3		$	402.3		$	342.8

Components of Income Tax Provision
Federal	$	61.1		$	141.0		$	92.6
State		4.5			14.6			8.5
Foreign		14.2			23.5			14.1
Total current		79.8			179.1			115.2

Federal		0.6			(36.6	)		(16.8	)
State		0.6			(1.8	)		(0.8	)
Foreign		(7.6	)		(11.1	)		(4.5	)
Total deferred		(6.4	)		(49.5	)		(22.1	)

Total income tax provision	$	73.4		$	129.6		$	93.1

Reconciliation of Statutory Federal Rate to Effective Rate
Federal statutory tax		35.0	%		35.0	%		35.0	%
State income tax, net		0.7	%		1.8	%		1.4	%
Foreign subsidiaries tax, net		1.0	%		0.5	%		4.2	%
Manufacturer's deduction		-3.0	%		-3.4	%		-2.5	%
Entraction closures		0.0	%		0.0	%		-12.4	%
Change in Income Tax Contingencies		-11.7	%		-0.6	%		0.3	%
Other, net		0.8	%		-1.1	%		1.2	%
Total effective rate		22.8	%		32.2	%		27.2	%

DEFERRED INCOME TAXES

September 30,	2014			2013
Deferred Tax Assets
Reserves	$	115.0		$	127.7
Jackpot payment timing difference		109.6			119.5
Share-based compensation		25.8			29.6
Net operating loss carryforwards		37.2			36.1
Property, plant and equipment		2.6			-
Goodwill and intangibles		66.4			58.4
Capital loss carryover		23.6			24.4
Other		6.8			11.7
Total deferred income tax assets		387.0			407.4
Valuation allowance		(62.0	)		(63.2	)
Total deferred income tax assets, net		325.0			344.2

Deferred Tax Liabilities
Interest expense on convertible debt		(30.9	)		(38.7	)
Property, plant and equipment		-			(15.3	)
Goodwill and intangibles		(33.6	)		(36.3	)
Other		(21.0	)		(14.3	)
Total deferred income tax liabilities		(85.5	)		(104.6	)
Net Deferred Income Tax Assets	$	239.5		$	239.6

Balance Sheet Location at September 30,	2014		2013
Current deferred income tax assets	$	98.3	$	111.1
Non-current deferred income tax assets		142.0		128.8
Non-current deferred income tax liabilities (included in other liabilities)		0.8		0.3

Total valuation allowance decreased $1.2 million during 2014, primarily related to foreign deferred assets and the utilization of capital losses in the US. The valuation allowance is based on our assessment that it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future.

Net operating loss carryforwards at September 30, 2014 included $7.7 million in the US and $120.5 million in foreign countries and expire in tax years 2014 through 2031. Net capital loss carryover totaled $63.1 million at September 30, 2014 and expires in tax years 2015 through 2017.

At September 30, 2014, we had not provided US deferred income taxes or foreign withholding taxes on $200.8 million in unrecognized temporary differences related to the basis of our investments in foreign subsidiaries expected to be permanently reinvested in operations outside the US. We do not anticipate any events that would cause such earnings to become taxable in the US. Determination of the amount of any unrecognized deferred income tax liability on these undistributed earnings is not practicable.

UNCERTAIN TAX BENEFITS

Aggregate Changes in Unrecognized Tax Benefits

September 30,	2014			2013			2012
Beginning balance	$	109.2		$	111.5		$	116.4
Increases related to prior year tax positions		6.6			1.7			2.2
Decreases related to prior year tax positions		(53.5	)		(3.3	)		(8.8	)
Increases related to current year tax positions		0.5			3.2			4.9
Decreases related to current year tax positions		-			(1.3	)		(3.2	)
Reductions due to lapse of statute of limitations		(15.3	)		(2.6	)		-
Reductions for settlements with taxing authorities		-			-			-
Ending balance	$	47.5		$	109.2		$	111.5

The amount of unrecognized tax benefits that would impact our effective tax rate, if recognized, totaled $36.1 million at September 30, 2014 and $80.8 million at September 30, 2013.

Interest and penalties related to unrecognized tax benefits are included in our income tax provision. During the years ended September 30, 2014, 2013, and 2012, we recognized a benefit of $10.6 million, a benefit of $0.4 million, and an expense of $2.4 million, respectively, in interest and penalties. Accrued interest and penalties, net of federal income tax benefits, totaled $8.0 million at September 30, 2014 and $18.6 million at September 30, 2013.

On November 13, 2013, we reached effective settlement with the US tax authorities related to our 1999, 2006, 2007, 2008, and 2009 tax years. As a result, we reduced our income tax provision by approximately $29.6 million and our unrecognized tax benefits by approximately $33.1 million, inclusive of interest and penalties. We are generally no longer subject to US federal, state, local or foreign income tax examination by tax authorities for years before 2009.