The following table presents a summary of our domestic and foreign income (loss) before income taxes for the periods presented:


	Year Ended December 31,
	2022		2021			2020
	(in millions)
Domestic	$	37	$	(127	)	$	(262	)
Foreign		30		(58	)		(107	)
Income (loss) before income taxes	$	67	$	(185	)	$	(369	)

The components of our provision (benefit) for income taxes consisted of the following for the periods presented:


	Year Ended December 31,
	2022			2021			2020
	(in millions)
Current income tax expense (benefit):
Federal	$	37		$	6		$	(73	)
State		3			(1	)		(3	)
Foreign		26			2			(3	)
Current income tax expense (benefit)		66			7			(79	)
Deferred income tax expense (benefit):
Federal		(19	)		(21	)		13
State		1			(5	)		(10	)
Foreign		(1	)		(18	)		(4	)
Deferred income tax expense (benefit)		(19	)		(44	)		(1	)
Provision (benefit) for income taxes	$	47		$	(37	)	$	(80	)

The significant components of our deferred tax assets and deferred tax liabilities consisted of the following for the periods presented:


	December 31,
	2022			2021
	(in millions)
Deferred tax assets:
Stock-based compensation	$	28		$	31
Net operating loss carryforwards		83			102
Provision for accrued expenses		6			4
Lease financing obligation		17			20
Foreign advertising spend		14			15
Tax credit carryforward		7			12
Capitalized research expenses (1)		39			—
Interest carryforward		53			71
Other		19			15
Total deferred tax assets	$	266		$	270
Less: valuation allowance		(114	)		(123	)
Net deferred tax assets	$	152		$	147
Deferred tax liabilities:
Intangible assets	$	(48	)	$	(51	)
Property and equipment		(6	)		(22	)
Prepaid expenses		(4	)		(3	)
Building - corporate headquarters		(16	)		(17	)
Other		(1	)		(1	)
Total deferred tax liabilities	$	(75	)	$	(94	)
Net deferred tax asset (liability)	$	77		$	53

(1)

As required by the 2017 tax Cuts and Jobs Act, effective January 1, 2022, our research and development expenditures were capitalized and amortized, which resulted in a deferred tax asset.

At December 31, 2022, we had federal, state, and foreign net operating loss carryforwards (“NOLs”) of approximately $2 million, $97 million, and $306 million, respectively. U.S. federal NOLs of $2 million expire at various times starting from 2029. State NOLs of $13 million may be carried forward indefinitely, while the remaining state NOLs of $84 million expire at various times starting from 2024. Foreign NOLs of $302 million may be carried forward indefinitely, while the remaining foreign NOLs of $4 million expire at various times starting from 2023.

As of December 31, 2022, we had a valuation allowance of approximately $114 million related to certain NOL carryforwards and other foreign deferred tax assets for which it is more likely than not, the tax benefit will not be realized. This amount represented a decrease of $9 million, as compared to the balance as of December 31, 2021. The decrease was primarily related to a change in a deferred tax asset in our U.K. subsidiaries.

Except for such foreign deferred tax assets, discussed above, we expect to realize all of our deferred tax assets. Due to the negative impact from COVID-19 in recent years and the continued risks and uncertainties that remain, in addition to economic uncertainty of a potential U.S. recession and global inflationary pressures, we will continue to monitor our financial performance to determine if the valuation allowance against our deferred tax assets may be necessary in the future.

A reconciliation of the provision (benefit) for income taxes to the amounts computed by applying the statutory federal income tax rate to income (loss) before income taxes is as follows for the periods presented:


	Year Ended December 31,
	2022			2021			2020
	(in millions)
Income tax expense at the federal statutory rate	$	14		$	(39	)	$	(77	)
Foreign rate differential (1)		—			(14	)		(9	)
State income taxes, net of effect of federal tax benefit		5			(2	)		(11	)
Unrecognized tax benefits and related interest		17			4			4
Rate differential on US NOL carryback (2)		—			—			(23	)
Research tax credit		(2	)		(7	)		(9	)
Stock-based compensation		11			(1	)		14
Change in valuation allowance		5			8			25
Local income tax on intercompany transaction		—			—			1
Executive compensation		1			6			6
Other, net		(4	)		8			(1	)
Provision (benefit) for income taxes	$	47		$	(37	)	$	(80	)

(1)

During 2021, we extinguished intercompany debt which resulted in a reduction of our overall foreign rate differential.

(2)

As a result of the CARES Act, an income tax benefit of $23 million was recorded during the year ended December 31, 2020 related to the income tax rate differential in tax years applicable to U.S. loss carryforwards that became eligible for carryback.

The CARES Act allowed the Company to carryback our U.S. federal NOLs incurred in 2020, generating an expected U.S. federal tax benefit of $76 million, of which $64 million was refunded during the year ended December 31, 2022. The remaining refund of $12 million is included in income taxes payable on our consolidated balance sheet as of December 31, 2022 and is expected to be received during the year ending December 31, 2023. In addition, $25 million of this refund received was recorded to long-term taxes payable on our consolidated balance sheet as of December 31, 2022, which reflects future transition tax payments to be made by the Company related to the 2017 Tax Act.

In addition, certain governments have passed legislation to assist businesses during the COVID-19 pandemic through loans, wage subsidies, wage tax relief or other financial aid. We participated in several of these programs, including the CARES Act in the U.S., the United Kingdom's job retention scheme, as well as similar programs in other global jurisdictions. In addition, in certain countries, such as within the European Union, Singapore, Australia, and other global jurisdictions, we also participated in programs where government assistance was in the form of wage subsidies and reductions in wage-related employer taxes paid by us. We recognize these government assistance benefits when there is a reasonable assurance of compliance with the conditions associated with the assistance and the amount is received. During the years ended December 31, 2022, 2021 and 2020, we recognized government grants and other assistance benefits of $12 million, $9 million and $12 million, respectively. These amounts are not income tax related and were recorded as a reduction of personnel and overhead costs within operating costs in the consolidated statements of operations. The Company does not expect any additional future benefits of this nature.

Due to the one-time transition tax on the deemed repatriation of 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 future distributions from these subsidiaries will be taxable, a deferred tax liability has been accrued which was not material as of December 31, 2022. As of December 31, 2022, $445 million of our cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.

For purposes of governing certain of the ongoing relationships between Tripadvisor and Expedia at and after the Spin-Off, and to provide for an orderly transition, Tripadvisor and Expedia entered into various agreements at the time of the Spin-Off, which Tripadvisor has satisfied its obligations. However, Tripadvisor continues to be subject to certain post Spin-Off obligations under the Tax Sharing Agreement. Under the Tax Sharing Agreement between Tripadvisor and Expedia, Tripadvisor is generally required to indemnify Expedia for any taxes resulting from the Spin-Off (and any related interest, penalties, legal and professional fees, and all costs and damages associated with related stockholder litigation or controversies) to the extent such amounts resulted from (i) any act or failure to act by Tripadvisor described in the covenants in the tax sharing agreement, (ii) any acquisition of Tripadvisor equity securities or assets or those of a member of the Tripadvisor group, or (iii) any failure of the representations with respect to Tripadvisor or any member of our group to be true or any breach by Tripadvisor or any member of the Tripadvisor group of any covenant, in each case, which is contained in the separation documents or in the documents relating to the IRS private letter ruling and/or the opinion of counsel. The full text of the Tax Sharing Agreement is incorporated by reference in this Annual Report on Form 10-K as Exhibit 10.2.

By virtue of consolidated income tax returns previously filed with Expedia, we are currently under an IRS audit for the 2009, 2010 and short-period 2011 tax years. We are separately under examination by the IRS for the 2014 through 2016, and 2018 tax years, and have various ongoing audits for foreign and state income tax returns. These audits include questioning the timing and amount of income and deductions and the allocation of income among various tax jurisdictions. These examinations may lead to proposed or ordinary course adjustments to our taxes. We are no longer subject to tax examinations by tax authorities for years prior to 2009. As of December 31, 2022, no material assessments have resulted, except as noted below regarding our 2009, 2010, and 2011 IRS audit with Expedia, our 2014 through 2016 standalone IRS audit, and our 2012 through 2016 HM Revenue & Customs (“HMRC”) audit.

In January 2017 and April 2019, as part of the IRS audit of Expedia, we received Notices of Proposed Adjustment from the IRS for the 2009, 2010, and 2011 tax years. Subsequently, in August 2020, we received Notices of Proposed Adjustment from the IRS for the 2014, 2015, and 2016 tax years. The statute of limitation of assessment for all years subject to the Notices of Proposed Adjustment outlined above remain open. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries and would result in an increase to our worldwide income tax expense, for the open tax years, in an estimated range of $85 million to $95 million at the close of the audit if the IRS prevails, which includes $20 million to $30 million related to the 2009 through 2011 pre Spin-Off tax years. The estimated ranges take into consideration competent authority relief and transition tax regulations and is exclusive of deferred tax consequences and interest expense, which would be significant. We disagree with the proposed adjustments, and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable. In addition to the risk of additional tax for the open years outlined above, if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, we would be subject to significant additional tax liabilities. We have previously requested competent authority assistance under the Mutual Agreement Procedure (“MAP”) for open tax years 2009 through 2011 and 2014 through 2016. We evaluated our transfer pricing reserves as of December 31, 2022, based on the facts and circumstances that existed as of the reporting date and consider them to be the Company’s best estimate as of December 31, 2022. In January 2023, we received a final notice regarding a MAP settlement for the 2009 through 2011 tax years, which we accepted in February 2023. In the first quarter of 2023, we will record additional income tax expense as a discrete item, inclusive of interest, in an estimated range of $25 million to $35 million specifically related to this settlement. This MAP settlement supersedes the Notices of Proposed Adjustment for 2009 through 2011 from the IRS, described above. We will review the impact of the acceptance of this settlement position to our transfer pricing income tax reserves for the subsequent tax years during the first quarter of 2023. Based on this new information received subsequent to year end, adjustments may occur, which could be material.

In January 2021, we received from HMRC an issue closure notice relating to adjustments for 2012 through 2016 tax years. These proposed adjustments are related to certain transfer pricing arrangements with our foreign subsidiaries and would result in an increase to our worldwide income tax expense in an estimated range of $25 million to $35 million, exclusive of interest expense, at the close of the audit if HMRC prevails. We disagree with the proposed adjustments and we intend to defend our position through applicable administrative and, if necessary, judicial remedies. Our policy is to review and update tax reserves as facts and circumstances change. Based on our interpretation of the regulations and available case law, we believe the position we have taken with regard to transfer pricing with our foreign subsidiaries is sustainable.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (excluding interest and penalties) is as follows during the periods presented:


	December 31,
	2022			2021			2020
	(in millions)
Balance, beginning of year	$	144		$	144		$	140
Increases to tax positions related to the current year		5			5			3
Increases to tax positions related to the prior year		29			1			1
Decreases due to lapsed statute of limitations		(20	)		—			—
Decreases due to tax positions related to the prior year		(1	)		—			—
Settlements during current year		—			(6	)		—
Balance, end of year	$	157		$	144		$	144

As of December 31, 2022, we had $204 million of unrecognized tax benefits, inclusive of interest, which is classified as long-term and primarily included in other long-term liabilities on our consolidated balance sheet. The amount of unrecognized tax benefits, if recognized, would reduce income tax expense by $74 million, due to correlative adjustments in other tax jurisdictions. We recognize interest and penalties related to unrecognized tax benefits in income tax expense on our consolidated statement of operations. As of December 31, 2022 and 2021, total gross interest accrued was $47 million and $39 million, respectively, and was recorded in unrecognized tax benefits in other long-term liabilities on the consolidated balance sheets. As a result of the impact of the IRS audit described above, we anticipate a material adjustment to these reserves in 2023.