Income Taxes

9 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Effective Tax Rate

The effective income tax rate was 17.8% and 21.6% during the quarters ended June 30, 2019 and 2018 as adjusted, respectively, and 11.4% and 13.1% during the nine months ended June 30, 2019 and 2018 as adjusted, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The effective tax rate for both the nine months ended June 30, 2019 and 2018 was impacted by recording of excess tax benefits relating to stock awards that vested in December of both years. In addition, the tax rate for the nine months ended June 30, 2018 was affected by recording the impact of the Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017 by the U.S. government. The Tax Act makes broad and complex changes to the U.S. tax code that affect our fiscal year ended September 30, 2018 and fiscal year ended September 30, 2019, including, but not limited to: (1) reducing the U.S. federal corporate tax rate; (2) requiring a one-time transition tax on certain un-repatriated earnings of foreign subsidiaries; (3) repealing the performance-based compensation exception for certain employees; (4) instituting the concept of Global Intangible Low-Taxed Income (“GILTI”); and (5) instituting the concept of Foreign Derived Intangible Income.

The Tax Act subjects U.S. corporations to tax on their GILTI. Due to the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of GAAP. Under GAAP, we can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into our measurement of deferred taxes. We have not yet adopted an accounting policy in regard to GILTI.

The total unrecognized tax benefit for uncertain tax positions is estimated to be $5.5 million and $6.1 million at June 30, 2019 and September 30, 2018, respectively. We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our condensed consolidated statements of income and comprehensive income. We have accrued interest of $0.3 million related to unrecognized tax benefits as of June 30, 2019 and September 30, 2018.