Income Taxes

3 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At the end of each interim period, we estimate a base effective tax rate that we expect for the full fiscal year based on our most recent forecast of pre-tax income, permanent book and tax differences and global tax planning strategies. We use this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant unusual items and items that are reported net of their related tax effects in the period in which they occur.

The effective tax rate was 5.7 percent in the three months ended December 31, 2019, compared to 33.5 percent in the three months ended December 31, 2018. The effective tax rate was lower than the U.S. statutory rate of 21 percent in the three months ended December 31, 2019, primarily due to PTC investment adjustments, tax benefits recognizable upon the formation of the Sensia joint venture, and excess income tax benefits of share-based compensation. The effective tax rate was higher than the U.S. statutory rate of 21 percent in the three months ended December 31, 2018, because of the PTC investment adjustments without a corresponding tax benefit.

Unrecognized Tax Benefits

The amount of gross unrecognized tax benefits was $19.9 million at December 31, 2019, and September 30, 2019, of which the entire amount would reduce our effective tax rate if recognized.

Accrued interest and penalties related to unrecognized tax benefits were $3.5 million and $3.3 million at December 31, 2019, and September 30, 2019, respectively. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision.

We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $18.5 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations. If all of the unrecognized tax benefits were recognized, the net reduction to our income tax provision, including the recognition of interest and penalties and offsetting tax assets, could be up to $19.9 million.

We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal income tax examinations for years before 2016 and are no longer subject to state, local and foreign income tax examinations for years before 2009.