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Income Taxes
 12 Months Ended
Dec. 31, 2023
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,
 202320222021
 (In millions)
U.S.$935 $67 $(274)
Foreign83 471 236 
Total$1,018 $538 $(38)
Provision for Income Taxes
The following table summarizes our provision for income taxes:
 Year Ended December 31,
 202320222021
  (In millions) 
Current income tax expense:
U.S. federal$128 $17 $17 
State36 6 7 
Foreign104 102 68 
Current income tax expense268 125 92 
Deferred income tax (benefit) expense:
U.S. federal75 (4)(137)
State(4)(2)(19)
Foreign(9)76 11 
Deferred income tax (benefit) expense62 70 (145)
Income tax (benefit) expense$330 $195 $(53)
We reduced our current income tax payable by $17 million, $17 million, and $28 million for the years ended December 31, 2023, 2022 and 2021 for tax deductions attributable to stock-based compensation.
Deferred Income Taxes
As of December 31, 2023 and 2022, the significant components of our deferred tax assets and deferred tax liabilities were as follows:
 December 31,
 20232022
 (In millions)
Deferred tax assets:
Provision for accrued expenses$42 $51 
Deferred loyalty rewards204 225 
Net operating loss and tax credit carryforwards314 520 
Stock-based compensation14 22 
Property and equipment23 24 
Capitalized research and development325 154 
Operating lease liabilities130 86 
Long-term investments168 194 
Other65 59 
Total deferred tax assets1,285 1,335 
Less valuation allowance(244)(242)
Net deferred tax assets$1,041 $1,093 
Deferred tax liabilities:
Goodwill and intangible assets(345)(387)
Anticipatory foreign tax credits(16)— 
Operating lease ROU assets(127)(83)
Other— (14)
Total deferred tax liabilities$(488)$(484)
Net deferred tax assets$553 $609 
As of December 31, 2023, we had state and foreign net operating loss carryforwards (“NOLs”) of approximately $283 million and $268 million. State NOLs of $85 million may be carried forward indefinitely, and state NOLs of $198 million expire at various times starting from 2025. Foreign NOLs of $178 million may be carried forward indefinitely, and foreign NOLs of $90 million expire at various times starting from 2024.
As of December 31, 2023, we had a valuation allowance of approximately $244 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 $2 million from the amount recorded as of December 31, 2022, primarily due to the unrealized capital losses on minority investments. 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.
Most of our foreign undistributed earnings have already been subject to U.S. federal income tax. We do not assert indefinite reinvestment on the undistributed earnings of our foreign subsidiaries.
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,
 202320222021
  (In millions) 
Income tax (benefit) expense at the U.S. federal statutory rate of 21%$214 $113 $(8)
Foreign tax rate differential(27)(75)3 
U.S. federal research and development credit(52)(40)(27)
Excess tax benefits related to stock-based compensation9 (17)(56)
Nondeductible compensation28 37 45 
Unrecognized tax benefits and related interest39 27 6 
Change in valuation allowances— 77 (24)
Return to provision true-ups(44)(11)4 
State taxes22 3 (9)
Non-creditable foreign withholding tax3 21 1 
Non-deductible goodwill impairment92 — — 
Divestitures and entity restructuring67 65 (6)
Foreign-derived intangible income(25)(15)— 
Other, net4 10 18 
Income tax (benefit) expense$330 $195 $(53)
Our effective tax rate for 2023 was higher than the 21% U.S. federal statutory income tax rate due to a non-deductible goodwill impairment and the TripAdvisor audit assessment discussed below, partially offset by research and experimentation credits. Our effective tax rate for 2022 was higher than the 21% U.S. federal statutory income tax rate due to valuation allowances 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 allowances and research and experimentation credits, partially offset by nondeductible compensation, 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:
202320222021
  (In millions) 
Balance, beginning of year$379 $349 $345 
Increases to tax positions related to the current year19 23 11 
Increases to tax positions related to prior years4 5 3 
Decreases to tax positions related to prior years— — (11)
Settlements during current year(1)(8)(6)
Interest and penalties24 10 7 
Balance, end of year$425 $379 $349 
As of December 31, 2023, we had $425 million of gross unrecognized tax benefits, $223 million of which, if recognized, would affect the effective tax rate. 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.
We recognize interest and penalties related to unrecognized tax benefits in provision for income taxes in our consolidated statement of operations. Accrued interest and penalties of $90 million and $66 million were reflected in our consolidated balance sheets as of December 31, 2023 and 2022.
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 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 December 31, 2024 for the 2011 through 2013 tax years, until March 31, 2025 for the 2014 through 2016 tax years, and until June 30, 2025 for the 2017 through 2020 tax years. As of December 31, 2023, for the Expedia Group, Inc. and Subsidiaries group, statutes of limitations for tax years 2011 through 2022 remain open to examination in the U.S. federal jurisdiction and most state jurisdictions. For the HomeAway and Orbitz groups, statutes of limitations for tax years 2001 through 2015 remain open 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 federal income 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 is currently in Appeals. During the third quarter of 2023, the IRS issued final 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 $1.232 billion, which would result in federal income tax of approximately $431 million, subject to interest. We do not agree with the position of the IRS and intend to formally file a protest. We are also under examination by the IRS for our 2017 to 2020 tax years. We believe it is reasonably possible that the audit of the 2011 to 2013 tax years will conclude within the next 12 months.
On December 20, 2011, we completed a spin-off of TripAdvisor into a separate publicly-traded corporation. Pursuant to the tax sharing agreement between Expedia Group and TripAdvisor, TripAdvisor is responsible for its potential income tax liabilities in connection with any consolidated income tax returns filed as a part of Expedia Group’s consolidated income tax return prior to or in connection with the spin-off. TripAdvisor is required to indemnify Expedia Group for any such taxes, including interest, penalties, legal, and professional fees.
In 2023, TripAdvisor agreed in principle with the IRS to an assessed amount of $120 million, inclusive of interest and state tax effects, for transfer pricing adjustments with its foreign subsidiaries for the 2009 through 2011 tax years. The assessment is a tax liability for tax years when TripAdvisor was part of Expedia Group's consolidated income tax return and is covered by the indemnification pursuant to the tax sharing agreement. In May 2023, Expedia Group received from the IRS the final assessment for the 2009 through 2011 tax years related to the TripAdvisor matter. Expedia Group remitted $113 million in settlement payments to the IRS, as the primary obligor for this assessment, and received the reimbursement required from TripAdvisor in settlement of the indemnification receivable for this matter. During 2023, we recorded $67 million of additional income tax expense and a corresponding tax indemnification adjustment in other, net in our consolidated statements of operations representing the estimate of the incremental assessed payment to the IRS, including state tax effects.