INCOME TAXES

6 Months Ended

Jun. 30, 2016

NOTE 3. INCOME TAXES

Moody’s effective tax rate was 31.9% and 30.4% for the three months ended June 30, 2016 and 2015, respectively, and 32.1% and 31.5% for the six month periods ended June 30, 2016 and 2015, respectively. The increase in the ETR compared to the second quarter of 2015 and the six month period ended June 30, 2015 was primarily due to a benefit in the prior year resulting from a favorable state tax ruling.

The Company classifies interest related to UTBs 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 a decrease in its UTBs of $11.7 million ($7.6 million net of federal tax benefit) during the second quarter of 2016 and an overall decrease in its UTBs during the first six months of 2016 of $5.3 million ($1.4 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 state, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for the years 2011 and 2012 are under examination and its returns for 2013 and 2014 remain open to examination. The Company’s New York State tax returns for 2011 through 2014 are currently under examination and the Company’s New York City tax return for 2014 remains open to examination. The Company’s U.K. tax return for 2012 is currently under examination and its returns for 2013 and 2014 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,
	2016		2015
Income taxes paid	$	151.8	$	191.1