INCOME TAXES

3 Months Ended

6 Months Ended

Jun. 30, 2014

Jun. 30, 2014

INCOME TAXES

NOTE 3. INCOME TAXES

Moody’s effective tax rate was 33.1% and 32.2% for the three months ended June 30, 2014 and 2013, respectively and 31.5% and 30.5% for the six month periods ended June 30, 2014 and 2013, respectively. The increase in the ETR compared to the second quarter of 2013 was primarily due to higher taxes on foreign income. The six months ended June 30, 2013 ETR included a tax benefit related to U.S. tax legislation enacted in early 2013 which retroactively extended certain tax benefits to the 2012 tax year, as well as tax benefits on a litigation settlement in the first quarter of 2013. The ETR for the six month period ended June 30, 2014 includes a benefit related to the reversal of UTPs resulting from the favorable resolution of certain international tax matters. 

The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating (expense) income, net. The Company had an increase in its UTPs of $13.7 million ($12.1 million net of federal tax benefit) during the second quarter of 2014 and an overall increase in its UTPs during the first six months of 2014 of $8.9 million ($4.3 million net of federal tax benefits).

Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various states, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for the years 2008 through 2010 are under examination and its returns for 2011 and 2012 remain open to examination. The Company’s New York State tax returns for 2011 and 2012 remain open to examination. Income tax filings in the U.K. for 2012 remain open to examination.

For ongoing audits, it is possible the balance of UTBs could decrease in the next twelve months as a result of the settlement of these audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues might be raised by tax authorities which could necessitate increases to the balance of UTBs. As the Company is unable to predict the timing or outcome of these audits, it is therefore unable to estimate the amount of changes to the balance of UTBs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years by tax jurisdiction in accordance with the applicable provisions of Topic 740 of the ASC regarding UTBs.

The following table shows the amount the Company paid for income taxes:

NOTE 3. INCOME TAXES

Moody’s effective tax rate was 33.1% and 32.2% for the three months ended June 30, 2014 and 2013, respectively and 31.5% and 30.5% for the six month periods ended June 30, 2014 and 2013, respectively. The increase in the ETR compared to the second quarter of 2013 was primarily due to higher taxes on foreign income. The six months ended June 30, 2013 ETR included a tax benefit related to U.S. tax legislation enacted in early 2013 which retroactively extended certain tax benefits to the 2012 tax year, as well as tax benefits on a litigation settlement in the first quarter of 2013. The ETR for the six month period ended June 30, 2014 includes a benefit related to the reversal of UTPs resulting from the favorable resolution of certain international tax matters. 

The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating (expense) income, net. The Company had an increase in its UTPs of $13.7 million ($12.1 million net of federal tax benefit) during the second quarter of 2014 and an overall increase in its UTPs during the first six months of 2014 of $8.9 million ($4.3 million net of federal tax benefits).

Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various states, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for the years 2008 through 2010 are under examination and its returns for 2011 and 2012 remain open to examination. The Company’s New York State tax returns for 2011 and 2012 remain open to examination. Income tax filings in the U.K. for 2012 remain open to examination.

For ongoing audits, it is possible the balance of UTBs could decrease in the next twelve months as a result of the settlement of these audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues might be raised by tax authorities which could necessitate increases to the balance of UTBs. As the Company is unable to predict the timing or outcome of these audits, it is therefore unable to estimate the amount of changes to the balance of UTBs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years by tax jurisdiction in accordance with the applicable provisions of Topic 740 of the ASC regarding UTBs.

The following table shows the amount the Company paid for income taxes:

	Six Months Ended
	June 30,
	2014		2013
Income Taxes Paid*	$	216.7	$	231.6
* Payments in 2013 include $50 million of 2012 estimated federal taxes paid in the first quarter of 2013 pursuant to IRS relief due to Hurricane Sandy.