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Income tax expense. Income tax expense and the effective tax rates are summarized as follows (in thousands, except effective tax rates):
Three Months Ended Nine Months Ended July 27, July 28, July 27, July 28, 2013 2012 2013 2012 Income tax expense
$ 23,104 $ 14,995 $ 111,177 $ 11,080Effective tax rate 16.3 % 25.7 % 43.5 % 7.3 % In general, our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due to state taxes, the effect of non-U.S. operations, non-deductible stock-based compensation expense and adjustments to unrecognized tax benefits (additionally, see Note 13, "Income Taxes," of the Notes to Condensed Consolidated Financial Statements). The income tax expense recorded for the three months ended July 27, 2013, is partially offset by discrete benefits of $7.1 millionfrom reserve releases resulting from expiring statute of limitations and settlement of tax audits. We recorded an income tax expense for the nine months ended July 27, 2013, primarily due to a discrete charge of $78.2 millionto reduce previously recognized Californiadeferred tax assets as a result of a change in Californiatax law. This charge was partially offset by discrete benefits discussed above, and from $10.6 millionof reserve releases as a result of settling an IRSaudit, and from an increase in the federal research and development tax credit of $5.7 millionthat was reinstated on January 2, 2013, for two years and made retroactive to January 1, 2012. The income tax expense recorded for the three and nine months ended July 28, 2012, includes discrete benefits from net reserve releases related to settling tax audits and from expiring statutes of limitations, and a lower benefit from the federal research and development tax credit which expired on December 31, 2011, and, therefore, was not applicable in calendar year 2012. Based on the fiscal year 2013 financial forecast, we expect our effective tax rate in fiscal year 2013 to be higher than fiscal year 2012. Factors such as the mix of IP Networking versus SAN products, and domestic versus international profits, affect our tax expense. As estimates and judgments are used to project such domestic and international earnings, the impact to our tax provision could vary if the current planning or assumptions change. Our income tax provision could change from either effects of changing tax laws and regulations, or differences in international revenues and earnings from those historically achieved; a factor largely influenced by the buying behavior of our OEM and channel partners. In addition, we do not forecast discrete events, such as settlement of tax audits with governmental authorities due to their inherent uncertainty. Such settlements have in the past and could in the future materially impact our tax expense. Given that the tax rate is affected by several different factors, it is not possible to estimate our future tax rate with a high degree of certainty. The IRSand other tax authorities regularly examine our income tax returns. The IRSis currently examining our federal tax returns for fiscal years 2009 and 2010. In addition, we are in negotiations with foreign tax authorities to obtain correlative relief on transfer pricing adjustments previously settled with the IRS. We believe that our reserves for unrecognized tax benefits are adequate for all open tax years. The timing of income tax examinations, as well as the amounts and timing of related settlements, if any, are highly uncertain. We believe that before the end of fiscal year 2013, it is reasonably possible that either certain audits will conclude or the statutes of limitations relating to certain income tax examination periods will expire, or both. After we reach settlement with the tax authorities, we expect to record a corresponding adjustment to our unrecognized tax benefits. Taking into consideration the inherent uncertainty as to settlement terms, the timing of payments and the impact of such settlements on other uncertain tax positions, we estimate the range of potential decreases in underlying uncertain tax positions is between $0and $3.6 millionin the next twelve months. For additional discussion, see Note 13, "Income Taxes," of the Notes to Condensed Consolidated Financial Statements. We believe that sufficient positive evidence exists from historical operations and projections of taxable income in future years to conclude that it is more likely than not that we will realize our deferred tax assets except for Californiadeferred tax assets and our capital loss carryforwards. Accordingly, we apply a valuation allowance to the Californiadeferred tax assets due to the recent change in Californialaw and to capital loss carryforwards due to the limited carryforward periods of these tax assets.