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Income Taxes
9 Months Ended
Jun. 30, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company recorded an income tax benefit of $2.8 million and $0.9 million for the three and nine months ended June 30, 2014, respectively. The tax benefit is driven by U.S. and German pre-tax losses in the current quarter and $0.7 million of reductions in unrecognized tax benefits resulting from the expiration of the statute of limitations in one of the Company's foreign jurisdictions. These benefits are partially offset by foreign income taxes and interest related to unrecognized tax benefits.
The gross deferred tax assets, including current and noncurrent, decreased from $113.5 million to $85.1 million during the three months ended June 30, 2014. The decrease of $28.4 million was primarily driven by a tax provision of $29.9 million related to the gain on the sale of discontinued operations. The gain on sale of discontinued operations was reported net of the tax effect in the Consolidated Statements of Operations.
The Company recorded an income tax benefit of $1.5 million and $5.1 million for the three and nine months ended June 30, 2013, respectively. The tax benefit for the three months ended June 30, 2013 was calculated based on quarterly pre-tax income. This unusual relationship between tax expense and pre-tax income was driven by a change in the estimated annual effective tax rate during the quarter which increased the estimate of year-to-date tax benefits on the losses incurred during the first nine months of the year. This benefit was partially offset by tax expense of $1.0 million related to a one-time dividend from a foreign subsidiary.
The tax benefit for the nine months ended June 30, 2013 was driven primarily by U.S. pre-tax losses. The tax benefit also included $0.9 million of tax benefits recognized from the reinstatement of the U.S. federal research and development tax credit which is offset by the tax expense of $1.0 million related to a one-time dividend from a foreign subsidiary.
The Company evaluates the realizability of its deferred tax assets by jurisdiction and assesses the need for a valuation allowance on a quarterly basis. As of June 30, 2014, the Company has continued to maintain a valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these attributes. The Company has also continued to maintain a valuation allowance in certain jurisdictions that have not generated historical cumulative profitability.
The Company is subject to U.S. federal income tax and various state, local and foreign income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company's interpretation of applicable tax laws in the jurisdictions in which it files. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company has income tax audits in progress in various jurisdictions in which it operates. In the Company's U.S. and foreign jurisdictions, the years that may be examined vary, with the earliest tax year being 2006. Based on the outcome of these examinations, or the expiration of statutes of limitations for specific jurisdictions, the related unrecognized tax benefits could change from those recorded in the Company's Consolidated Balance Sheets. It is reasonably possible that the unrecognized tax benefit will be reduced by an amount in the range between $1.5 million and $2.6 million during the next twelve months as the result of the expiration of statutes of limitations and the settlement of foreign income tax audits.