15. Income Taxes

The provision for income taxes for the years ended October 31, 2011, 2010 and 2009 consists of the following:

Deferred income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts and tax bases of the Company's assets and liabilities. The significant components of deferred income taxes are as follows:

No valuation allowance has been recorded for deferred tax assets reflecting management's belief that all deferred tax assets will be utilized.

A reconciliation from the U.S. Federal statutory income tax rate to the Company's effective income tax rate for the years ended October 31, 2011, 2010 and 2009 are as follows:

The exercise of non-qualified stock options resulted in a reduction of taxes payable of approximately $7.0 million, $10.8 million and $13.6 million for the years ended October 31, 2011, 2010 and 2009, respectively. Such benefit has been reflected as a component of shareholders' equity.

During fiscal 2011, the Company received approval from the Internal Revenue Service to change the Company's tax accounting for certain closed-end fund expenses. This change in tax accounting allows for the immediate tax deduction of current year closed-end fund expenses, as well as a tax deduction in the Company's fiscal 2010 tax return for previously deferred expenses. This change in accounting resulted in a decrease of deferred tax assets and a corresponding decrease in taxes payable of $94.7 million. In conjunction with the approval of the change in tax accounting, the Company filed for and received a refund of $85.0 million in fiscal 2011.

The changes in gross unrecognized tax benefits for the years ended October 31, 2011, 2010 and 2009 are as follows:

The total amount of unrecognized tax benefits as of October 31, 2011, 2010 and 2009 that, if recognized, would impact the effective tax rate is $9.5 million, $9.5 million, and $10.0 million, respectively.

The Company and its subsidiaries file income tax returns in U.S. federal, state, local and foreign jurisdictions. In the ordinary course of business, various taxing authorities may not agree with certain tax positions the Company has taken, or the applicable law may not be clear. To resolve some of these uncertainties, the Company executed Voluntary Disclosure Agreements (“VDAs”) with two state taxing authorities in fiscal 2009. The execution of the VDAs reduced the Company's income tax expense and effective tax rate by $3.1 million and 1.5%, respectively, for the year ended October 31, 2009.

In the years ended October 31, 2011, 2010 and 2009, the Company recognized $0.2 million each year in interest and penalties in its income tax provision. Accrued interest and penalties, which are included as a component of unrecognized tax benefits, totaled $1.0 million, $0.7 million, and $0.9 million at October 31, 2011, 2010 and 2009, respectively.

The Company believes that over the next 12 months current state tax audits will be completed and it is reasonably possible that the Company's uncertain state tax positions could decrease by approximately $0.3 million in that period, thereby lowering the Company's effective tax rate.

The Company is currently under audit by several states. One state previously provided the Company with a draft position that may result in a proposed adjustment to the Company's previously filed tax returns. The state is currently reevaluating its draft position. The Company believes that its tax positions related to this potential adjustment were correct, and if an adjustment is proposed, the Company intends to vigorously defend its positions. It is possible the ultimate resolution of the proposed adjustment, if unfavorable, may be material to the results of operations in the period it occurs. Pending receipt of a formal assessment, an estimate of the range of the reasonably possible change in unrecognized tax benefits over the next twelve months cannot be made.

The Company is generally no longer subject to income tax examinations by U.S. federal, state, local or non-U.S. tax authorities for fiscal years prior to fiscal 2008. The Company is currently under audit by the Commonwealth of Massachusetts for fiscal years 2004 through 2009. The Company has extended the statute of limitations for fiscal years 2004 through 2007 to enable the Commonwealth to complete its audit.