Note 12: Income Taxes

Provision for taxes

HP's effective tax rate was 23.5% and 19.5% for the three months ended April 30, 2013 and 2012, respectively, and 22.5% and 19.5% for the six months ended April 30, 2013 and 2012, respectively. HP's effective tax rate increased in the three and six months ended April 30, 2013, in part due to the lower tax rates of the discrete items described below. HP's effective tax rate generally differs from the U.S. federal statutory rate of 35% due to favorable tax rates associated with certain earnings from HP's operations in lower-tax jurisdictions throughout the world. HP has not provided U.S. taxes for all of such earnings because HP plans to reinvest some of those earnings indefinitely outside the United States.

In the three and six months ended April 30, 2013, HP recorded discrete items resulting in a net tax benefit of $108 million and $103 million, respectively. These amounts included tax benefits of $47 million and $63 million on restructuring and acquisition-related charges for the three and six months ended April 30, 2013, respectively. Other discrete items for the three and six months ended April 30, 2013 included tax benefits of $81 million and $131 million, respectively, for various adjustments to estimated tax provisions of foreign jurisdictions and miscellaneous tax charges of $20 million and tax benefits of $9 million, respectively. In addition, in January 2013, the American Taxpayer Relief Act of 2012 was signed into law. In the first quarter of fiscal 2013, HP recorded a tax benefit of $50 million arising from the retroactive research and development credit provided by that legislation. HP also recorded a tax charge of $150 million related to a past uncertain tax position in the first quarter of fiscal 2013, increasing the effective tax rate.

In the three and six months ended April 30, 2012, HP recorded discrete items with a net tax benefit of $25 million and $74 million, respectively, decreasing the effective tax rate. These amounts included net tax benefits of $22 million and $50 million, respectively, from restructuring and acquisition charges.

As of April 30, 2013, the amount of gross unrecognized tax benefits was $2.8 billion, of which up to $1.5 billion would affect HP's effective tax rate if realized. HP recognizes interest income from favorable settlements and income tax receivables and interest expense and penalties accrued on unrecognized tax benefits within income tax expense. As of April 30, 2013, HP had accrued a net payable of $207 million for interest and penalties.

HP engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. HP does not expect complete resolution of any Internal Revenue Service audit cycle within the next 12 months. However, it is reasonably possible that certain federal, foreign and state tax issues may be concluded in the next 12 months, including issues involving transfer pricing and other matters. Accordingly, HP believes it is reasonably possible that its existing unrecognized tax benefits may be decreased by an amount up to $205 million within the next 12 months.

In the Consolidated Condensed Financial Statements, current and long-term deferred tax assets and deferred tax liabilities are presented as follows:

	April 30, 2013			October 31, 2012

	In millions
Current deferred tax assets	$	4,107		$	3,783
Current deferred tax liabilities		(300	)		(230	)
Long-term deferred tax assets		1,567			1,581
Long-term deferred tax liabilities		(3,790	)		(2,948	)

Net deferred tax position	$	1,584		$	2,186