Income Taxes

3 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

INCOME TAXES

8. INCOME TAXES

Income taxes have been provided at an overall effective rate of 30.1% and 13.7% for the three month periods ended December 31, 2011 and 2010, respectively. Our effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and related statutory tax rate in each jurisdiction, and discrete events, such as settlements of audits.

In the three month period ended December 31, 2011, we recorded a discrete tax benefit of $0.1 million for the release of income tax reserves due to the expiration of the statutes of limitations from various U.S. tax jurisdictions.

In the three month period ended December 31, 2010, we recorded a discrete tax benefit of $0.6 million primarily related to the release of income tax reserves due to the expiration of the statutes of limitations from various jurisdictions, primarily foreign. The enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provided for the extension of the research and development tax credit that allowed us to record a benefit for tax credits earned during the last three quarters of fiscal 2010 in the first quarter of fiscal 2011. The aforementioned discrete income tax benefits reduced our effective tax rate for the three month period ended December 31, 2010 from 35.2 % to 13.7%.

A reconciliation of the beginning and ending amount of uncertain tax positions is (in thousands):

Unrecognized tax benefits as of September 30, 2011	$	2,061
Decreases related to:
Prior year income tax positions		(67	)
Expiration of the statutes of limitations		(83	)
Unrecognized tax benefits as of December 31, 2011	$	1,911

The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate is $1.8 million.

We recognize interest and penalties related to income tax matters in income tax expense. During both the three months ended December 31, 2011 and 2010 we recognized a net benefit of $0.1 million of interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2011 and September 30, 2011, we had accrued interest and penalties related to unrecognized tax benefits of $0.5 million and $0.6 million, respectively, included in long-term income taxes payable on our condensed consolidated balance sheet.

There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will increase or decrease significantly over the next 12 months.

We operate in multiple tax jurisdictions both in the U.S. and outside of the U.S. Accordingly, we must determine the appropriate allocation of income to each of these jurisdictions. This determination requires us to make several estimates and assumptions. Tax audits associated with the allocation of this income, and other complex issues, may require an extended period of time to resolve and may result in adjustments to our income tax balances in those years that are material to our consolidated financial position and results of operations. We are no longer subject to income tax examination for taxable years prior to fiscal 2009 and 2007 in the case of U.S. federal and non-U.S. income tax authorities, respectively, and for tax years generally before fiscal 2007, in the case of state taxing authorities, consisting primarily of Minnesota and California.