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Income Taxes
6 Months Ended
Jan. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Effective Tax Rate
We compute our provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period.
Our effective tax rates for the three and six months ended January 31, 2014 were approximately 31% and 30%. Excluding discrete tax items primarily related to share-based compensation, our effective tax rates for those periods were approximately 34% and did not differ significantly from the federal statutory rate of 35%. The benefits we received from the domestic production activities deduction and the federal research and experimentation credit were substantially offset by state income taxes in both periods.
In January 2013 the American Taxpayer Relief Act of 2012 was signed into law. The Act included a reinstatement of the federal research and experimentation credit through December 31, 2013 that was retroactive to January 1, 2012. We recorded a discrete tax benefit for the retroactive effect during the three months ended January 31, 2013. As of January 31, 2014, the federal research and experimentation credit had not been reinstated.
Our effective tax rate for the three months ended January 31, 2013 was approximately 17% and we recorded a $12 million tax benefit on a pretax loss of $1 million for the six months ended January 31, 2013. Excluding discrete tax items primarily related to the reinstatement of the federal research and experimentation credit, our effective tax rates for the three and six months ended January 31, 2013 did not differ significantly from the federal statutory rate of 35%. The benefits we received from the domestic production activities deduction and the federal research and experimentation credit were substantially offset by state income taxes in both periods.
Unrecognized Tax Benefits and Other Considerations
The total amount of our unrecognized tax benefits at July 31, 2013 was $39 million. Net of related deferred tax assets, unrecognized tax benefits were $27 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $27 million. There were no material changes to these amounts during the six months ended January 31, 2014. We do not believe that it is reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months.