Income Taxes

3 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

The Company recorded income tax expense of $13.2 million for the three months ended December 31, 2020, or 15.9% of pre-tax income, compared to $20.7 million, or 21.4% of pre-tax income, for the three months ended December 31, 2019. Results for the three months ended December 31, 2020 were favorably impacted by $6.7 million of net discrete tax benefits, including $4.2 million of uncertain tax benefit reserve releases and $2.1 million of interest income, related to amended returns that were approved by the Joint Committee on Taxation. Results for the three months ended December 31, 2019 were favorably impacted by $1.1 million of net discrete tax benefits, including a $1.5 million benefit related to employee stock-based compensation payments.

The Company’s liability for gross unrecognized tax benefits, excluding related interest and penalties, was $66.4 million and $79.8 million as of December 31, 2020 and September 30, 2020, respectively. As of December 31, 2020, net unrecognized tax benefits, excluding interest and penalties, of $17.4 million would affect the Company’s net income if recognized.

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the “Provision for income taxes” in the Condensed Consolidated Statements of Income. During the three months ended December 31, 2020 and 2019, the Company recognized expense of $0.5 million and $0.1 million, respectively, related to interest and penalties. At December 31, 2020, the Company had accruals for the payment of interest and penalties of $6.2 million. During the next twelve months, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce net unrecognized tax benefits by approximately $4.1 million because the Company’s tax positions are sustained on audit, the Company agrees to their disallowance or the statutes of limitations close.