Income taxes

The consolidated effective tax rate for the quarter ended September 30, 2017 was 26% as compared to the prior year’s rate of 18%. The effective tax rate for the quarter ended October 1, 2016 benefited from excess tax benefits from share-based compensation totaling $16 million.

The consolidated effective tax rates for the year-to-date periods ended September 30, 2017 and October 1, 2016 were 23% and 22%, respectively. For the year-to-date period ended September 30, 2017, the effective tax rate benefited from a deferred tax benefit of $39 million resulting from intercompany transfers of intellectual property under the application of the newly adopted standard. See discussion regarding the adoption of ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, in Note 1. The effective tax rate for the year-to-date period ended October 1, 2016 benefited from excess tax benefits from share-based compensation totaling $34 million as well as the completion of certain tax examinations.

As of September 30, 2017, the Company classified $8 million of unrecognized tax benefits as a net current liability. Management’s estimate of reasonably possible changes in unrecognized tax benefits during the next twelve months consists of the current liability balance expected to be settled within one year, offset by approximately $5 million of projected additions related primarily to ongoing intercompany transfer pricing activity. Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation in this estimate.

Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the quarter ended September 30, 2017; $37 million of this total represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.



(millions)
December 31, 2016	$	63
Tax positions related to current year:
Additions	4
Reductions	—
Tax positions related to prior years:
Additions	3
Reductions	(8		)
Settlements	(4		)
Lapse in statute of limitations	(2		)
September 30, 2017	$	56

The accrual balance for tax-related interest was approximately $20 million at September 30, 2017.