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Income Taxes
9 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
During the third quarters of 2015 and 2014, income tax expense related to continuing operations was $183 million and $254 million and included net discrete tax benefits of $10 million and net discrete tax expense of $119 million. During the first nine months of 2015 and 2014, income tax expense related to continuing operations was $587 million and $641 million and included net discrete tax benefits of $28 million and net discrete tax expense of $119 million.
As of December 31, 2014, we had $612 million of unrecognized tax benefits, of which $457 million would reduce income tax expense and the effective tax rate, if recognized. During the next twelve months, it is reasonably possible that audit resolutions and the expiration of statutes of limitations could potentially reduce our unrecognized tax benefits by up to $169 million. However, this amount may change as we continue to have ongoing negotiations with various taxing authorities throughout the year.
We have received reassessments from the Canada Revenue Agency (“CRA”) related to a transfer pricing matter impacting years 2003 through 2010. On December 13, 2013, the Tax Court of Canada dismissed our appeal of the 2003 reassessment and we have filed a Notice of Appeal to the Federal Court of Appeal regarding this tax year. During the third quarter of 2015, we submitted additional information to the Federal Court of Appeal. During the first quarter of 2015, we filed a Notice of Appeal with the Tax Court of Canada relating to the 2004 through 2008 reassessments.  The ultimate resolution of these issues could result in an increase or decrease to income tax expense.
During the first quarter of 2015, we reached an agreement with the Internal Revenue Service (“IRS”) to settle all outstanding issues relating to years 2003 through 2006 and recognized a discrete tax benefit of $17 million to record a previously unrecognized tax benefit. During the second quarter of 2015, we paid additional taxes of $21 million related to these years, which were previously accrued.
The IRS is currently examining our U.S. corporation income tax returns for 2007 through 2009. The CRA is currently examining our Canadian income tax returns for 2011 through 2013. In nearly all jurisdictions, the tax years prior to 2003 are no longer subject to examination.
We report interest and penalties on tax deficiencies as income tax expense. During the first nine months of 2015, we recognized income tax expense of $12 million, before any tax benefit, related to interest and penalties in our condensed consolidated statements of operations. At December 31, 2014, before any tax benefits, our accrued interest and penalties on unrecognized tax benefits amounted to $162 million.