Income Taxes

9 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

6. INCOME TAXES

We record estimated accrued interest and penalties related to uncertain tax positions in income tax expense. At June 30, 2011, we had approximately $16.7 million of reserves for uncertain tax positions, including estimated accrued interest and penalties of $4.8 million, which are included in Other Long Term Liabilities in the Consolidated Balance Sheet. All $16.7 million of the net uncertain tax liabilities would affect the effective tax rate if recognized. A summary of activity related to the net uncertain tax positions including penalties and interest for the nine months ended June 30, 2011 is as follows (in thousands):

	Liability for Uncertain Tax Positions
Balance at September 30, 2010	$	9,968
Increases based on tax positions related to the current fiscal year		866
Increases based on tax positions related to prior fiscal years		5,866
Balance at June 30, 2011	$	16,700

Our United States tax returns for fiscal year 2006 and subsequent years remain subject to examination by tax authorities. As we conduct business globally, we have various tax years remaining open to examination in our international tax jurisdictions. We do not anticipate that any tax contingencies resolved during the next 12 months will have a material impact on our consolidated financial position, results of operations or cash flows.

We have recorded an estimated valuation allowance of approximately $1.7 million and $5.1 million on deferred tax assets primarily related to our United States net operating loss carryforwards for the three and nine months ended June 30, 2011, respectively.

As a result of working in foreign jurisdictions, we earned a high level of operating income in certain nontaxable and deemed profit tax jurisdictions, which significantly reduced our effective tax rate for the three and nine months ended June 30, 2011 when compared to the United States statutory rate. Our effective tax rate of 14% for the current quarter and 18% for the nine months ended June 30, 2011 is lower than the effective tax rates of 30% for the prior fiscal year quarter and 21% for the prior fiscal year to date period due to the valuation allowance on deferred tax assets we booked in fiscal year 2010.