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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Note 14 — Income Taxes
Consolidated loss before taxes and noncontrolling interests for domestic and foreign operations is as follows:
Year Ended December 31,
202220212020
(In millions)
Foreign$(1,090)$(1,091)$(1,614)
Domestic(297)(383)(262)
Total loss before income taxes from continuing operations$(1,387)$(1,474)$(1,876)
The components of the income tax expense (benefit) from continuing operations are as follows:
Year Ended December 31,
202220212020
(In millions)
Foreign:
Current$136 $32 $7 
Deferred(21)(12)3 
Federal:
Current20 8 (5)
Deferred19 (33)21 
State:
Current— — (2)
Total income tax expense (benefit)$154 $(5)$24 
The reconciliation of the statutory federal income tax rate and the Company's effective tax rate for continuing operations is as follows:
Year Ended December 31,
202220212020
Statutory federal income tax rate(21.0)%(21.0)%(21.0)%
Increase (decrease) in tax rate resulting from:
Change in valuation allowance15.8 %13.1 %11.4 %
Foreign and U.S. tax rate differential9.0 %6.7 %7.8 %
Tax exempt loss of foreign subsidiary4.5 %0.6 %2.4 %
Other, net2.8 %0.3 %0.7 %
Effective tax rate11.1 %(0.3)%1.3 %
The Company enjoys an income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company benefited from this tax exemption through December 31, 2022. The VML gaming losses incurred during 2022, 2021 and 2020 did not generate a tax benefit because they are not subject to tax. In April 2019, the Company entered into a renewed agreement with the Macao government, effective through June 26, 2022, providing for payments as a substitution for a 12% tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits; namely an annual payment of 38 million patacas (approximately $5 million at exchange rates in effect on December 31, 2022) for each of the years 2021 and 2020, each payment to be made on or before January 31 of the following year, and a payment of 18 million patacas (approximately $2 million at exchange rates in effect on December 31, 2022) for the period between January 1, 2022 through June 26, 2022, to be paid on or before July 26, 2022. In September 2013, the Company and the Internal Revenue Service entered into a Pre-Filing Agreement providing the Macao special gaming tax (35% of gross gaming revenue) qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. foreign tax credit.
The Company's foreign and U.S. tax rate differential reflects the fact that the U.S. tax rate of 21% is higher than the statutory tax rates in Singapore and Macao of 17% and 12%, respectively.
The primary tax affected components of the Company's net deferred tax assets (liabilities) are as follows:
December 31,
20222021
(In millions)
Deferred tax assets:
U.S. foreign tax credit carryforwards$3,720 $4,815 
Net operating loss carryforwards481 539 
Stock-based compensation17 16 
Accrued expenses9 21 
Provision for credit losses1 14 
Interest expense carryforward— 18 
Deferred gain on mall sale transactions
— 11 
Pre-opening expenses— 6 
Other14 2 
4,242 5,442 
Less — valuation allowances(4,083)(5,034)
Total deferred tax assets159 408 
Deferred tax liabilities:
Property and equipment(174)(273)
Prepaid expenses(2)(5)
Other(4)(6)
Total deferred tax liabilities(180)(284)
Deferred tax assets (liabilities), net$(21)$124 
The Company's U.S. foreign tax credit carryforwards were $3.76 billion and $4.87 billion as of December 31, 2022 and 2021, respectively, which expire beginning in 2023 and 2022, respectively. There was a valuation allowance of $3.61 billion and $4.62 billion as of December 31, 2022 and 2021, respectively, provided on certain net U.S. deferred tax assets, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition. The Company’s U.S. net operating loss carryforward was $563 million as of December 31, 2021. The Company's U.S. interest expense carryforward was $87 million as of December 31, 2021. The U.S. net operating loss carryforward and the interest expense carryforward were fully utilized during 2022 due to the sale of the Company's Las Vegas Operations. Net operating loss carryforwards for the Company's foreign subsidiaries were $3.96 billion and $3.46 billion as of December 31, 2022 and 2021, respectively, which expire beginning in 2023 and 2022, respectively. There are valuation allowances of $475 million and $416 million as of December 31, 2022 and 2021, respectively, provided on the net deferred tax assets of certain foreign jurisdictions, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition.
Undistributed earnings of subsidiaries are accounted for as a temporary difference, except deferred tax liabilities are not recorded for undistributed earnings of foreign subsidiaries deemed to be indefinitely reinvested in foreign jurisdictions. The Company does not consider current year's tax earnings and profits of its foreign subsidiaries to be indefinitely reinvested. Beginning with the year ended December 31, 2015, the Company's major foreign subsidiaries distributed, and may continue to distribute, earnings in excess of their current year's tax earnings and profits in order to meet the Company's liquidity needs. As of December 31, 2022, the amount of earnings and profits of foreign subsidiaries the Company does not intend to repatriate was $910 million. The Company does not expect withholding taxes or other foreign income taxes to apply should these earnings be distributed in the form of dividends or otherwise.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows:
December 31,
202220212020
(In millions)
Balance at the beginning of the year$136 $131 $134 
Additions to tax positions related to prior years— — — 
Reductions to tax positions related to prior years(15)(4)(14)
Additions to tax positions related to current year15 9 11 
Balance at the end of the year$136 $136 $131 
As of December 31, 2022, 2021 and 2020, unrecognized tax benefits of $36 million, $57 million and $60 million, respectively, were recorded as reductions to the U.S. foreign tax credit deferred tax asset. As of December 31, 2022, 2021 and 2020, unrecognized tax benefits of $100 million, $79 million and $71 million, respectively, were recorded in other long-term liabilities.
Included in the unrecognized tax benefit balance as of December 31, 2022, 2021 and 2020, are $122 million, $126 million and $123 million, respectively, of uncertain tax benefits that would affect the effective income tax rate if recognized.
The Company's major tax jurisdictions are the U.S., Macao and Singapore. The Company could be subject to examination for tax years beginning in 2018 in Macao and Singapore and tax years 2010 through 2015 and 2019 through 2021 in the U.S. The Company believes it has adequately reserved and provided for its uncertain tax positions; however, there is no assurance the taxing authorities will not propose adjustments that are different from the Company's expected outcome and it could impact the provision for income taxes.
The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statement of operations. Interest and penalties of $13 million, $10 million and $7 million were accrued as of December 31, 2022, 2021 and 2020, respectively. The Company does not expect a significant increase or decrease in unrecognized tax benefits over the next twelve months.
The Inflation Reduction Act of 2022 (“IRA”) was signed into law on August 16, 2022. The IRA contains numerous provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-year period effective in tax years beginning after December 31, 2022. Applicable corporations would be allowed to claim a credit for the corporate minimum tax paid against regular tax in future years. The IRA also includes a 1% excise tax on corporate stock repurchases beginning January 1, 2023. The CAMT could impact our future cash flows and results of operations. The Internal Revenue Service has been granted broad authority to issue regulations or other guidance that could clarify how these taxes will be applied. The Company will continue to evaluate the impact of the IRA as additional information becomes available.