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Income Taxes
9 Months Ended
Mar. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Fluctuations in our provision for income taxes as a percentage of pretax earnings (“effective tax rate”) are due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items.
During the three months ended March 31, 2015 and 2014, the effective tax rate was 34.6 percent and 38.0 percent, respectively.
During the nine months ended March 31, 2015 and 2014, the effective tax rate was 36.3 percent and 35.5 percent, respectively. The effective tax rate during the nine months ended March 31, 2014 was impacted by net favorable discrete items of $18 million. The discrete items include the favorable impact of the settlement of federal and state tax controversies ($67 million) and the unfavorable impact of remeasurement of unrecognized tax benefits ($61 million).
At March 31, 2015 and June 30, 2014, we had $526 million and $510 million of unrecognized tax benefits, respectively. The March 31, 2015 and June 30, 2014 balances include $333 million and $322 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate.
At March 31, 2015 and June 30, 2014, we had $154 million and $143 million, respectively, accrued for the payment of interest and penalties related to unrecognized tax benefits, which we recognize in the provision for income taxes. These balances are gross amounts before any tax benefits and are included in deferred income taxes and other liabilities in the condensed consolidated balance sheets.
It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next 12 months due to activities of the U.S. Internal Revenue Service ("IRS") or other taxing authorities, possible settlement of audit issues, reassessment of existing unrecognized tax benefits or the expiration of statutes of limitations. We estimate that the range of the possible change in unrecognized tax benefits within the next 12 months is a net decrease of zero to $175 million, exclusive of penalties and interest.
We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. The IRS is currently conducting audits of fiscal years 2006 through 2010, and our transfer pricing arrangements continue to be under review as part of these audits.
We are a party to a tax matters agreement with CareFusion Corporation ("CareFusion"), which has been acquired by Becton, Dickinson and Company. Under the tax matters agreement, CareFusion is obligated to indemnify us for certain tax exposures and transaction taxes prior to our fiscal 2010 spin-off of CareFusion. The indemnification receivable was $217 million and $210 million at March 31, 2015 and June 30, 2014, respectively, and is included in other assets in the condensed consolidated balance sheets.