INCOME TAXES

9 Months Ended

Sep. 30, 2016

NOTE 3. INCOME TAXES

Moody’s effective tax rate was 30.5% and 32.0% for the three months ended September 30, 2016 and 2015, respectively and 31.5% and 31.7% for the nine month periods ended September 30, 2016 and 2015, respectively. The decrease in the ETR compared to the third quarter of 2015 was primarily due to lower taxes on non-US income.

The Company classifies interest related to UTBs in interest income (expense), net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating income (expense), net. The Company had an increase in its UTBs of $2.9 million ($2.1 million net of federal tax) during the third quarter of 2016 and an overall decrease in its UTBs during the first nine months of 2016 of $2.3 million (increase of $0.6 million net of federal tax). 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 through 2015 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:

	Nine Months Ended
	September 30,
	2016		2015
Income taxes paid	$	242.8	$	299.9