Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

4.    Income Taxes

The provision for income taxes consisted of:

(in $ millions)	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Current
US Federal		(2	)		—			—
US State		(2	)		—			—
Non-US		(17	)		(23	)		(24	)
		(21	)		(23	)		(24	)
Deferred
US Federal		(3	)		(3	)		(19	)
Non-US		(1	)		—			(2	)
		(4	)		(3	)		(21	)
Non-current
Liabilities for uncertain tax positions		2			(3	)		(2	)
Provision for income taxes		(23	)		(29	)		(47	)

(Loss) income from continuing operations before income taxes and equity in losses of investment in Orbitz Worldwide for US and non-US operations consisted of:

(in $ millions)	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
US		(59	)		46			5
Non-US		(87	)		(133	)		(1	)
(Loss) income from continuing operations before income taxes and equity in losses of investment in Orbitz Worldwide		(146	)		(87	)		4

Deferred income tax assets and liabilities were comprised of:

(in $ millions)	December 31, 2012			December 31, 2011
Deferred tax assets:
Accrued liabilities and deferred income		12			18
Allowance for doubtful accounts		3			6
Net operating loss carry forwards and tax credit carry forwards		202			231
Pension liability		62			61
Other assets		31			16
Less: Valuation allowance		(302	)		(323	)
Total deferred tax assets		8			9
Deferred tax liabilities
Depreciation and amortization		(41	)		(40	)
Other		(4	)		(2	)
Total deferred tax liabilities		(45	)		(42	)
Net deferred tax liability		(37	)		(33	)

The Company believes that it is more likely than not that the benefit from certain US federal, US State and non-US net operating loss carry forwards and other deferred tax assets will not be realized. A valuation allowance of $302 million has been recorded against deferred tax assets as of December 31, 2012. If the assumptions change and it is determined that the Company will be able to realize the net operating losses, the valuation allowance will be recognized as a reduction of income tax expense. As of December 31, 2012, the Company had federal net operating loss carry forwards of approximately $202 million, which expire between 2026 and 2031, and other non-US net operating losses of $400 million that expire between three years and indefinitely.

As a result of certain realization requirements of accounting for equity-based compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2012 that arose directly from tax deductions related to equity-based compensation in excess of compensation recognized for financial reporting. Equity will be increased by $8 million if such deferred tax assets are ultimately realized. The Company uses tax law ordering for purposes of determining when excess tax benefits have been realized.

As of December 31, 2012, the Company did not record a provision for withholding tax on approximately $1,144 million of the excess of the amount for financial reporting over the tax basis of investments in subsidiaries that can be repatriated to Travelport Limited in a tax free manner. Additionally, as of December 31, 2012, the Company did not record a provision for withholding tax on approximately $51 million of the excess of the amount for financial reporting over the tax basis of investments in subsidiaries that are essentially permanent in duration. As of December 31, 2012, the Company has recorded a deferred tax liability of $1million relating to its US subsidiaries, whereby an element of its $34 million of unremitted earnings are not considered to be permanent in duration.

The Company’s provision for income taxes differs from the benefit (provision) at the US Federal statutory rate of 35% as follows:

(in $ millions)	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Tax benefit (provision) at US federal statutory rate of 35%		51			30			(1	)
Taxes on non-US operations at alternative rates		(29	)		(55	)		(24	)
Liability for uncertain tax positions		2			(3	)		(2	)
Effect of valuation allowance		(44	)		(1	)		(10	)
Non-deductible expenses		(4	)		(5	)		(9	)
Other		1			5			(1	)
Provision for income taxes		(23	)		(29	)		(47	)

The Company is subject to income taxes in the United States and numerous non-US jurisdictions. The Company’s provision for income taxes is likely to vary materially both from the benefit (provision) at the US federal statutory tax rate and from year to year. While within a period there may be discrete items that impact the Company’s provision for income taxes, the following items consistently have an impact: (a) the Company is subject to income tax in numerous non-US jurisdictions with varying tax rates, (b) the Company’s earnings outside of the US are taxed at an effective rate that is lower than the US federal rate and at a relatively consistent level of charge, (c) the location of the Company’s debt in countries with no or low rates of federal tax implies limited deductions for interest and (d) a valuation allowance is established against the Company’s historical losses. Significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain.

Although the Company believes there is appropriate support for the positions taken on its tax returns, the Company has recorded liabilities representing the best estimates of the probable loss on certain positions. The Company believes the accruals for tax liabilities are adequate for all open years, based on assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. Although the Company believes the recorded assets and liabilities are reasonable, tax regulations are subject to interpretation and tax litigation is inherently uncertain; therefore, the Company’s assessments can involve both a series of complex judgments about future events and reliance on significant estimates and assumptions. While the Company believes the estimates and assumptions supporting the assessments are reasonable, the final determination of tax audits and any other related litigation could be materially different from that which is reflected in historical income tax provisions and recorded assets and liabilities.

Pursuant to the purchase agreement governing the acquisition of the Travelport business of Avis Budget Group, Inc. (“Avis Budget”) on August 23, 2006, the Company is indemnified by Avis Budget for all income tax liabilities relating to periods prior to the sale of the Company. The Company believes its accruals for the indemnified tax liabilities are adequate for all remaining open years, based on its assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. The results of an audit or litigation related to these matters include a range of potential outcomes, which may involve material amounts. However, as discussed above, the Company is indemnified by Avis Budget for all income taxes relating to periods prior to the sale of the Company and, therefore, does not expect any such resolution to have a significant impact on its earnings, financial position or cash flows.

With limited exceptions, the Company is no longer subject to US federal tax, state and local, or non-US income tax examinations by tax authorities for tax years before 1995. The Company has undertaken an analysis of material tax positions in its tax accruals for all open years and has identified all outstanding tax positions. The Company only expects a significant increase to unrecognized tax benefits within the next twelve months for the uncertain tax positions relating to certain interest exposures. The Company does not expect a reduction in the total amount of unrecognized tax benefits within the next twelve months as a result of payments. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $23 million, $25 million and $57 million as of December 31, 2012, 2011 and 2010, respectively.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(in $ millions)	December 31, 2012			December 31, 2011			December 31, 2010
Unrecognized tax benefit — opening balance		25			57			57
Gross increases — tax positions in prior periods		6			—			2
Gross decreases — tax positions in prior periods		(6	)		(3	)		—
Gross increases — tax positions in current period		—			6			1
Decrease related to lapsing of statute of limitations		(2	)		—			(1	)
Decrease due to disposals		—			(32	)		—
Settlements		—			(3	)		(2	)
Unrecognized tax benefit — ending balance		23			25			57

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as part of the provision for income taxes. In 2012, 2011 and 2010, the Company accrued approximately $1 million, nil and $1 million, respectively, for interest and penalties. The total interest and penalties included in the ending balance of unrecognized tax benefits above was $4 million and $5 million as of December 31, 2012 and 2011, respectively.