Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 — Income Taxes

The following table summarizes our U.S. and foreign income (loss) before income taxes:

	Year Ended December 31,
	2021		2020		2019
	(In millions)
U.S.	$	(274)	$	(2,354)	$	172
Foreign	236		(797)		603
Total	$	(38)	$	(3,151)	$	775

Provision for Income Taxes

The following table summarizes our provision for income taxes:

	Year Ended December 31,
	2021		2020		2019
			(In millions)
Current income tax (benefit) expense:
U.S. federal	$	17	$	(31)	$	76
State	7		—		20
Foreign	68		96		198
Current income tax expense	92		65		294
Deferred income tax (benefit) expense:
U.S. federal	(137)		(315)		(53)
State	(19)		(65)		(9)
Foreign	11		(108)		(29)
Deferred income tax (benefit) expense	(145)		(488)		(91)
Income tax (benefit) expense	$	(53)	$	(423)	$	203

We reduced our current income tax payable by $28 million, $1 million and $60 million for the years ended December 31, 2021, 2020 and 2019 for tax deductions attributable to stock-based compensation.

Deferred Income Taxes

As of December 31, 2021 and 2020, the significant components of our deferred tax assets and deferred tax liabilities were as follows:

	December 31,
	2021		2020
	(In millions)
Deferred tax assets:
Provision for accrued expenses	$	85	$	91
Deferred loyalty rewards	186		180
Net operating loss and tax credit carryforwards	939		752
Stock-based compensation	25		70
Property and equipment	19		54
Operating lease liabilities	96		135
Long-term investments	106		87
Other	62		89
Total deferred tax assets	1,518		1,458
Less valuation allowance	(171)		(216)
Net deferred tax assets	$	1,347	$	1,242
Deferred tax liabilities:
Goodwill and intangible assets	(418)		(422)
Anticipatory foreign tax credits	(113)		(98)
Operating lease ROU assets	(93)		(126)
Other	(15)		(4)
Total deferred tax liabilities	$	(639)	$	(650)
Net deferred tax assets	$	708	$	592

As of December 31, 2021, we had U.S. federal, state, and foreign net operating loss carryforwards (“NOLs”) of approximately $1.9 billion, $892 million and $1.1 billion. U.S. federal NOLs of $1.9 billion may be carried forward indefinitely. State NOLs of $164 million may be carried forward indefinitely, and state NOLs of $728 million expire at various times starting from 2022. Foreign NOLs of $191 million may be carried forward indefinitely, and foreign NOLs of $919 million expire at various times starting from 2022.

As of December 31, 2021, we have a valuation allowance of approximately $171 million related to certain tax attribute carryforwards for which it is more likely than not the tax benefits will not be realized. The valuation allowance decreased by $45 million from the amount recorded as of December 31, 2020 primarily due to the utilization of capital loss carryforwards, as well as foreign operating losses. The amount of the deferred tax asset considered realizable, however, may be adjusted if estimates of future taxable income increase, taxable income of the appropriate character is forecasted, capital gains are realized or if objective negative evidence in the form of cumulative GAAP losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

Due to the one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits in 2017, the majority of previously unremitted earnings have been subjected to U.S. federal income tax. To the extent the repatriation resulted in differences between the GAAP and tax carrying values of Expedia Group’s investment in foreign subsidiaries whose offshore earnings are not indefinitely reinvested, or to the extent future distributions from these subsidiaries will be taxable, a deferred tax liability has been accrued. The amount of undistributed earnings in foreign subsidiaries where the foreign subsidiary has or will invest undistributed earnings indefinitely outside of the United States, and for which future distributions could be taxable, was $69 million as of December 31, 2021. The unrecognized deferred tax liability related to the U.S. federal income tax consequences of these earnings was $18 million as of December 31, 2021. 

Reconciliation of U.S. Federal Statutory Income Tax Rate to Effective Income Tax Rate

A reconciliation of amounts computed by applying the U.S. federal statutory income tax rate to income before income taxes to total income tax expense is as follows:

	Year Ended December 31,
	2021		2020		2019
			(In millions)
Income tax (benefit) expense at the U.S. federal statutory rate of 21%	$	(8)	$	(662)	$	163
Foreign tax rate differential	3		16		40
U.S. federal research and development credit	(27)		(24)		(25)
Excess tax benefits related to stock-based compensation	(52)		6		(12)
Nondeductible compensation	42		15		13
Unrecognized tax benefits and related interest	6		36		17
Change in valuation allowance	(24)		139		(2)
Return to provision true-ups	4		(20)		(12)
State taxes	(9)		(48)		22
Non-deductible goodwill impairment	—		170		—
Divestitures and entity restructuring	(6)		(53)		—
Foreign-derived intangible income	—		—		(14)
Other, net	18		2		13
Income tax (benefit) expense	$	(53)	$	(423)	$	203

Our effective tax rate for 2021 was higher than the 21% U.S. federal statutory income tax rate due to excess tax benefits related to stock-based compensation, release of valuation allowance and research and experimentation credits, partially offset by nondeductible compensation, measured against a pre-tax loss. Our effective tax rate for 2020 was lower than the 21% U.S. federal statutory income tax rate due to valuation allowances and nondeductible impairments measured against a pre-tax loss Our effective tax rate for 2019 was higher than the 21% U.S. federal statutory income tax rate due to state income taxes, foreign income taxed at higher than the U.S. federal statutory tax rate, as well as losses in foreign jurisdictions for which we did not record a tax benefit.

Unrecognized Tax Benefits and Interest

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits and interest is as follows:

	2021		2020		2019
			(In millions)
Balance, beginning of year	$	345	$	305	$	293
Increases to tax positions related to the current year	11		16		12
Increases to tax positions related to prior years	3		18		5
Decreases to tax positions related to prior years	(11)		(2)		—
Reductions due to lapsed statute of limitations	—		(4)		(2)
Settlements during current year	(6)		—		(11)
Interest and penalties	7		12		8
Balance, end of year	$	349	$	345	$	305

As of December 31, 2021, we had $349 million of gross unrecognized tax benefits, $213 million of which, if recognized, would affect the effective tax rate. As of December 31, 2020, we had $345 million of gross unrecognized tax benefits, $219 million of which, if recognized, would affect the effective tax rate. As of December 31, 2019, we had $305 million of gross unrecognized tax benefits, $188 million of which, if recognized, would affect the effective tax rate.

As of December 31, 2021 and 2020, total gross interest and penalties accrued was $56 million and $49 million, respectively. We recognized interest expense of $7 million in 2021, $12 million in 2020 and $8 million in 2019 in connection with our unrecognized tax benefits.

The Company is routinely audited by U.S. federal, state, local and foreign income tax authorities. These audits include questioning the timing and amount of income and deductions, and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service ("IRS") is currently examining Expedia Group’s consolidated U.S. federal income tax returns for the periods ended December 31, 2011 through December 31, 2016. The Company has consented to an extension of the statute of limitations, until March 31, 2023 related to the 2011 through 2016 tax years, and until June 30, 2022 related to the 2017 tax year. As of December 31, 2021, for the Expedia Group, Inc. and Subsidiaries group, statute of limitations for tax years 2011 through 2020 remain open to examination in the U.S. federal jurisdiction and most state jurisdictions. For the HomeAway and Orbitz groups, the tax years 2001 through 2015 remain subject to examination in the U.S. federal and most state jurisdictions due to NOL carryforwards.

During the fourth quarter of 2019, the Internal Revenue Service (“IRS”) issued final adjustments related to transfer pricing with our foreign subsidiaries for our 2011 to 2013 tax years. The proposed adjustments would increase our U.S. taxable income by $696 million, which would result in U.S. federal tax of approximately $244 million, subject to interest. We do not agree with the position of the IRS. We filed a protest with the IRS for our 2011 to 2013 tax years and Appeals returned the case to Exam for further review. We are also under examination by the IRS for our 2014 to 2016 tax years. Subsequent years remain open to examination by the IRS. We do not anticipate a significant impact to our gross unrecognized tax benefits within the next 12 months related to these years.