Note 14 - Income Taxes

12 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

14. INCOME TAXES

Income Tax Provision From Continuing Operations

Distribution Of Income Before Tax

September 30,	2012			2011		2010
US	$	354.6		$	367.8	$	224.9
Non – US		(11.8	)		60.1		80.0
Total	$	342.8		$	427.9	$	304.9

Components Of Income Tax Provision

September 30,	2012			2011		2010
Federal	$	92.6		$	87.7	$	13.2
State		8.5			6.6		8.0
Foreign		14.1			14.4		22.4
Total current		115.2			108.7		43.6
Federal		(16.8	)		18.6		41.1
State		(0.8	)		3.5		(4.6	)
Foreign		(4.5	)		4.8		5.2
Total deferred		(22.1	)		26.9		41.7
Total income tax provision	$	93.1		$	135.6	$	85.3

Reconciliation Of Statutory Federal Rate To Effective Rate

September 30,	2012			2011			2010
Federal statutory tax		35.0	%		35.0	%		35.0	%
State income tax, net		1.4	%		1.5	%		0.7	%
Foreign subsidiaries tax, net		4.2	%		-0.4	%		-0.6	%
Manufacturer's deduction		-2.5	%		-3.3	%		-1.4	%
Change in income tax contingencies		0.3	%		-0.6	%		-10.7	%
Changes in valuation allowance		0.0	%		-0.6	%		2.4	%
Entraction closures		-12.4	%		0.0	%		0.0	%
Other, net		1.2	%		0.1	%		2.6	%
Total effective rate		27.2	%		31.7	%		28.0	%

Income Taxes Receivable

Presented as a component of other assets and deferred costs, income taxes receivable is comprised of prepaid US taxes on intercompany sales, as well as tax overpayments and pending refunds in various US and foreign jurisdictions. Income taxes receivable increased to $86.8 million at September 30, 2012 from $62.1 million at September 30, 2011, primarily due to the deduction for certain Entraction closures in the fourth quarter of fiscal 2012.

Deferred Income Taxes

Significant Components of Deferred Income Taxes

September 30,	2012			2011
Deferred Tax Assets
Reserves	$	106.4		$	94.8
Jackpot payment timing difference		134.3			134.4
Share-based compensation		28.9			27.9
Net operating loss carry forwards		45.4			44.4
Goodwill and intangibles		44.8			25.8
Capital loss carryover		26.2			26.7
Other		14.4			11.0
Total deferred income tax assets		400.4			365.0
Valuation allowance		(74.0	)		(65.5	)
Total deferred income tax assets, net		326.4			299.5
Deferred Tax Liabilities
Interest expense on convertible debt		(39.4	)		(36.9	)
Property, plant and equipment		(31.4	)		(21.2	)
Intangibles		(42.2	)		(47.9	)
Other		(13.3	)		(12.5	)
Total deferred income tax liabilities		(126.3	)		(118.5	)
Net Deferred Income Tax Assets	$	200.1		$	181.0

September 30,	2012		2011
Current deferred income tax assets	$	96.7	$	97.1
Non-current deferred income tax assets		106.5		84.6
Non-current deferred income tax liabilities (included in other liabilities)		3.1		0.7

Net deferred income tax assets increased approximately $19.1 million in 2012 primarily due to the addition of DoubleDown intangibles.

Our net operating loss carry-forwards at September 30, 2012 included $12.7 million in the US and $134.8 million in foreign countries and expire in tax years 2013 through 2024.

Net capital loss carryover totaled $70.1 million at September 30, 2012 and expires in tax years 2014 through 2016. Our 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.

At September 30, 2012, we had not provided US deferred income taxes or foreign withholding taxes on $204.2 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,	2012			2011			2010
Beginning balance	$	116.4		$	83.8		$	91.5
Increases related to prior year tax positions		2.2			7.7			23.6
Decreases related to prior year tax positions		(8.8	)		(1.9	)		(1.6	)
Increases related to current year tax positions		4.9			36.5			11.6
Decreases related to current year tax positions		(3.2	)		(1.1	)		(5.8	)
Reductions due to lapse of statute of limitations		-			(8.6	)		-
Reductions for settlements with taxing authorities		-			-			(35.5	)
Ending Balance	$	111.5		$	116.4		$	83.8

The amount of unrecognized tax benefits that would impact our effective tax rate, if recognized, totaled $79.2 million at September 30, 2012 and $72.7 million at September 30, 2011.

Interest and penalties related to unrecognized tax benefits are included in our income tax provision. Interest on unrecognized tax benefits was $2.4 million during 2012, and a benefit of $2.0 million and $15.1 million in 2011 and 2010, respectively, resulting from the reversal of interest and penalties related to settlements with tax authorities and the lapse of statute of limitations. Accrued interest and penalties related to uncertain tax positions, net of federal income tax benefits, totaled $23.4 million at September 30, 2012 and $20.1 million at September 30, 2011.

Unrecognized tax benefits decreased $4.9 million during 2012, primarily due to transfer pricing adjustments between North America and subsidiaries worldwide. Unrecognized tax benefits increased $32.6 million during 2011, primarily due to amended state income tax return filings and transfer pricing adjustments between IGT and worldwide subsidiaries.

At September 30, 2012, we were under examination by the IRS for amended returns filed for 1999, 2006, 2007, 2008, and 2009, as well as our originally filed returns for 2008 and 2009. We are also subject to examination in various state and foreign jurisdictions, and except for the examination of the 1999 amended federal income tax return, we are generally no longer subject to US federal, state, local or foreign income tax examination by tax authorities for years before 2005. We do not believe our total unrecognized tax benefits will change significantly during the next twelve months.