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Income Taxes
3 Months Ended
Sep. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10 – Income Taxes

Our provision for income taxes is based on an estimated annual tax rate for the year applied to federal, state and foreign income. Income tax expense for the three months ended September 30, 2016 and 2015 was $37.4 million and $33.5 million, respectively. The effective tax rate for the three months ended September 30, 2016 and 2015 was 26.8 percent and 27.7 percent, respectively. The decrease in the effective tax rate for the three months ended September 30, 2016 compared to the same period in the prior year was primarily due to income mix and rate differentials between the U.S. and foreign jurisdictions.

As of September 30, 2016 unrecognized tax benefits and the related interest were $65.7 million and $2.9 million, respectively, all of which would affect the tax rate if recognized. During the three months ended September 30, 2016, $0.4 million of tax reserves were established on new uncertain tax positions. Related interest on prior year exposures was increased by $0.1 million.

 

We periodically reevaluate the recognition and measurement threshold of our uncertain tax positions based on new or additional evidence such as tax authority administrative pronouncements, rulings and court decisions. The ultimate settlement however, may be materially different from the amount accrued. Our significant jurisdictions that are under examination are Germany, Austria and the U.S. The examination by the German revenue authorities for fiscal years 2005 through 2010 is closed, with the exception of one remaining issue that will proceed to the fiscal authority and court. In addition, the German revenue authorities notified us that the examination for fiscal years 2011 to 2014 will commence during the second quarter of fiscal year 2017. Austria was recently notified that the examination for fiscal years 2011 to 2014 will commence during the second quarter of fiscal year 2017. The tax years currently under examination by the United States Internal Revenue Service (“IRS”) are fiscal years 2014 and 2015 for Harman and fiscal years 2010 to 2012 for Harman Connected Services Holding Corp. (fka Symphony Teleca Corporation). We do not expect these examinations to be closed for at least the next 12 months. Fiscal years 2006 to 2008 (and 2012 to 2013 for any rollforward adjustments) for Harman are currently in the IRS Appeals process and are awaiting resolution. 

 

Although the final resolution of the examinations and appeals is uncertain, we believe that the ultimate disposition will not have a material adverse effect on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income or our Condensed Consolidated Statements of Cash Flow. While we expect the amount of unrecognized tax benefits to change, we are unable to quantify the change at this time.