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Income Taxes
 12 Months Ended
Dec. 31, 2022
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,
 202220212020
 (In millions)
U.S.$67 $(274)$(2,354)
Foreign471 236 (797)
Total$538 $(38)$(3,151)
Provision for Income Taxes
The following table summarizes our provision for income taxes:
 Year Ended December 31,
 202220212020
  (In millions) 
Current income tax (benefit) expense:
U.S. federal$17 $17 $(31)
State6 7 — 
Foreign102 68 96 
Current income tax expense125 92 65 
Deferred income tax (benefit) expense:
U.S. federal(4)(137)(315)
State(2)(19)(65)
Foreign76 11 (108)
Deferred income tax (benefit) expense70 (145)(488)
Income tax (benefit) expense$195 $(53)$(423)

We reduced our current income tax payable by $17 million, $28 million and $1 million for the years ended December 31, 2022, 2021 and 2020 for tax deductions attributable to stock-based compensation.
Deferred Income Taxes
As of December 31, 2022 and 2021, the significant components of our deferred tax assets and deferred tax liabilities were as follows:
 December 31,
 20222021
 (In millions)
Deferred tax assets:
Provision for accrued expenses$51 $85 
Deferred loyalty rewards225 186 
Net operating loss and tax credit carryforwards548 939 
Stock-based compensation22 25 
Property and equipment24 17 
Capitalized research and development154 2 
Operating lease liabilities86 96 
Long-term investments194 106 
Other39 62 
Total deferred tax assets1,343 1,518 
Less valuation allowance(242)(171)
Net deferred tax assets$1,101 $1,347 
Deferred tax liabilities:
Goodwill and intangible assets(387)(418)
Anticipatory foreign tax credits— (113)
Operating lease ROU assets(83)(93)
Other(22)(15)
Total deferred tax liabilities$(492)$(639)
Net deferred tax assets$609 $708 
As of December 31, 2022, we had U.S. federal, state, and foreign net operating loss carryforwards (“NOLs”) of approximately $1.1 billion, $465 million and $268 million. U.S. federal NOLs of $1.1 billion may be carried forward indefinitely. State NOLs of $103 million may be carried forward indefinitely, and state NOLs of $362 million expire at various times starting from 2025. Foreign NOLs of $188 million may be carried forward indefinitely, and foreign NOLs of $80 million expire at various times starting from 2023.
As of December 31, 2022, we had a valuation allowance of approximately $242 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 increased by $71 million from the amount recorded as of December 31, 2021 primarily due to the unrealized capital losses on minority investments, offset by use of net operating losses. The amount of the deferred tax asset considered realizable may be adjusted if capital gains are realized or if, in certain jurisdictions, 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.
The majority of our foreign undistributed earnings have already been subject to U.S. federal income tax. As of December 31, 2022, we have undistributed earnings of certain foreign subsidiaries of approximately $65 million that are considered indefinitely reinvested and we estimate that the unrecognized deferred tax liability related to the U.S. federal, state and foreign income tax consequences of these earnings was $17 million. 
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,
 202220212020
  (In millions) 
Income tax (benefit) expense at the U.S. federal statutory rate of 21%$113 $(8)$(662)
Foreign tax rate differential(75)3 16 
U.S. federal research and development credit(40)(27)(24)
Excess tax benefits related to stock-based compensation(17)(56)4 
Nondeductible compensation37 45 17 
Unrecognized tax benefits and related interest27 6 36 
Change in valuation allowance77 (24)139 
Return to provision true-ups(11)4 (20)
State taxes3 (9)(48)
Non-creditable foreign withholding tax21 1 — 
Non-deductible goodwill impairment— — 170 
Divestitures and entity restructuring65 (6)(53)
Foreign-derived intangible income(15)— — 
Other, net10 18 2 
Income tax (benefit) expense$195 $(53)$(423)
Our effective tax rate for 2022 was higher than the 21% U.S. federal statutory income tax rate due to a valuation allowance on minority investments and nondeductible compensation, partially offset by research and experimentation credits. 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.
Unrecognized Tax Benefits and Interest
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits and interest is as follows:
202220212020
  (In millions) 
Balance, beginning of year$349 $345 $305 
Increases to tax positions related to the current year23 11 16 
Increases to tax positions related to prior years5 3 18 
Decreases to tax positions related to prior years— (11)(2)
Reductions due to lapsed statute of limitations— — (4)
Settlements during current year(8)(6)— 
Interest and penalties10 7 12 
Balance, end of year$379 $349 $345 
As of December 31, 2022, we had $379 million of gross unrecognized tax benefits, $213 million of which, if recognized, would affect the effective tax rate. As of December 31, 2021, we had $349 million of gross unrecognized tax benefits, $207 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, 2022 and 2021, total gross interest and penalties accrued was $66 million and $56 million, respectively. We recognized interest expense of $10 million in 2022, $7 million in 2021 and $12 million in 2020 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 U.S. consolidated federal income tax returns for the periods ended December 31, 2011 through December 31, 2020. The Company has consented to an extension of the statute of limitations, until June 30, 2024 related to the 2011 through 2013 tax years, and until March 31, 2024 related to the 2014 through 2019 tax years. As of December 31, 2022, for the Expedia Group, Inc. and Subsidiaries group, statute of limitations for tax years 2011 through 2021 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 IRS issued final adjustments related to transfer pricing with our foreign subsidiaries for our 2011 to 2013 tax years. The 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 have formally filed a protest for our 2011 to 2013 tax years and the case has been transferred to Appeals. During the fourth quarter of 2022, the IRS issued similar proposed adjustments related to transfer pricing with our foreign subsidiaries for our 2014 to 2016 tax years. The adjustments would increase our U.S. taxable income by $1.413 billion, which would result in federal tax of approximately $494 million, subject to interest. The proposed adjustments provided by the IRS exclude any offsetting adjustments that may reduce the amount of federal tax. We do not agree with the position of the IRS and intend to formally protest. We believe it is reasonably possible that audit of the 2011 and 2013 tax years will conclude within the next 12 months.