13. Income taxes

The following table presents the provision for income taxes and our effective tax rate for the three and nine months ended April 30, 2017 and 2016:

	Three Months Ended						Nine Months Ended
	April 30,						April 30,
(in millions except percentages)	2017			2016			2017			2016
(Benefit)/provision for income taxes	$	(4.9	)	$	1.7		$	(1.9	)	$	2.9
Effective tax rate		8	%		26	%		4	%		46	%

The effective income tax rate on operations is based upon the estimated income for the year, including the goodwill and intangibles impairments discussed elsewhere, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies.

Our effective tax rate for the three months ended April 30, 2017 is lower than the statutory rate of 35% primarily due to operating losses generated in the United States, tax credits in the United States and Canada in spite of operating losses, and non-recurring discrete tax items. Our effective tax rate for the nine months ended April 30, 2017 is lower than the statutory rate of 35% primarily due to losses generated in the US by impairment charges, income generated outside the United States in countries with lower tax rates, tax credits in the United States and Canada, and discrete tax benefits. The tax provision for the three and nine months ended April 30, 2017 includes discrete tax benefits totaling $0.5 million and $0.9 million, respectively.

Our effective tax rate for the three and nine months ended April 30, 2016 differs from the statutory rate of 35% primarily due to non-deductible and reserve items related to the BK Medical matter and expiration of statute of limitations for the income tax returns in the United States for fiscal year ended July 31, 2012. Additional impacts to our rate resulted from income generated outside the United States in countries with lower tax rates and from tax Credits in the United States and Canada. The tax provision for the three and nine months ended April 30, 2016 includes discrete tax benefits totaling $(0.2) million and $1.1 million, respectively. For more information on the BK Medical matter, please refer to Note 11. Commitments, guarantees and contingencies in our Annual Report on Form 10-K for fiscal year 2016, as filed with the SEC on September 27, 2016.

We are subject to U.S. Federal income tax as well as the income tax of multiple state and foreign jurisdictions. As of April 30, 2017, we have concluded all U.S. Federal income tax matters through the year ended July 31, 2012.

We accrue interest and, if applicable, penalties for any uncertain tax positions. This interest and penalty expense is treated as a component of income tax expense. At April 30, 2017 and July 31, 2016, we had approximately $0.3 million and $0.4 million accrued for interest and penalties on unrecognized tax benefits.

At April 30, 2017, we had $6.9 million of unrecognized tax benefits for uncertain tax positions and $0.3 million of related accrued interest and penalties. We are unable to reasonably estimate the amount and period in which these liabilities might be paid.

We do not provide for U.S. Federal income taxes on undistributed earnings of consolidated foreign subsidiaries, as such earnings are intended to be indefinitely reinvested in those operations. Determination of the potential deferred income tax liability on these undistributed earnings is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs. The circumstances that would affect the calculations would be the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes and the opportunity to use foreign tax credits.