Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Provision for (Benefit From) Income Taxes

The provision for (benefit from) income taxes consists of the following:



		Year Ended December 31,
		2013			2012			2011
Current
	Federal	$	(4	)	$	(109	)	$	—
	State	12			(16		)	(3		)
	Foreign	36			7			36
	Current income tax provision (benefit)	44			(118		)	33

Deferred
	Federal	28			93			36
	State	8			20			10
	Foreign	1			15			(14		)
	Deferred income tax provision	37			128			32
Provision for income taxes		$	81		$	10		$	65

Pretax Income (Loss) for Domestic and Foreign Operations

Pretax income (loss) for domestic and foreign operations consists of the following:



	Year Ended December 31,
	2013		2012		2011
United States ^(a)	$	4	$	233	$	74
Foreign ^(b)	93		67		(38		)
Pretax income	$	97	$	300	$	36

__________


^(a)	For the years ended December 31, 2013 and 2012, includes debt extinguishment costs of $147 million and $75 million, respectively.


^(b)	For the year ended December 31, 2011, includes $128 million of transaction-related costs

Deferred Income Tax Assets and Liabilities

Current and non-current deferred income tax assets and liabilities are comprised of the following:



		As of December 31,
		2013			2012
Current deferred income tax assets:
	Accrued liabilities and deferred revenue	$	209		$	179
	Provision for doubtful accounts	12			10
	Acquisition and integration-related liabilities	10			8
	Convertible note hedge	1			3
	Valuation allowance ^(a)	(28		)	(22		)
Current deferred income tax assets		204			178

Current deferred income tax liabilities:
	Accrued liabilities and deferred revenue	5			6
	Prepaid expenses	22			26
Current deferred income tax liabilities		27			32
Current deferred income tax assets, net		$	177		$	146

Non-current deferred income tax assets:
	Net tax loss carryforwards	$	1,431		$	1,454
	Accrued liabilities and deferred revenue	137			151
	Depreciation and amortization	15			54
	Tax credits	75			62
	Convertible note hedge	—			2
	Acquisition and integration-related liabilities	16			16
	Other	46			36
	Valuation allowance ^(a)	(319		)	(276		)
Non-current deferred income tax assets		1,401			1,499

Non-current deferred income tax liabilities:
	Depreciation and amortization	101			42
	Other	1			3
Non-current deferred income tax liabilities		102			45
Non-current deferred income tax assets, net		$	1,299		$	1,454

__________

^(a)

The valuation allowance of $347 million at December 31, 2013 relates to tax loss carryforwards, foreign tax credits and certain state deferred tax assets of $279 million, $46 million and $22 million, respectively. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized. The valuation allowance of $298 million at December 31, 2012 relates to tax loss carryforwards, foreign tax credits and certain state deferred tax assets of $227 million, $53 million and $18 million, respectively.

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

The reconciliation between the U.S. federal income tax statutory rate and the Company’s effective income tax rate is as follows:



		Year Ended December 31,
		2013		2012		2011
U.S. federal statutory rate		35.0	%	35.0	%	35.0	%
Adjustments to reconcile to the effective rate:
	State and local income taxes, net of federal tax benefits	4.1		4.9		4.2
	Changes in valuation allowances ^(a)	15.5		0.9		(1.3	)
	Taxes on foreign operations at rates different than statutory U.S. federal rates	5.9		—		(13.2	)
	Resolution of prior years’ examination issues	—		(42.5	)	—
	Non-deductible debt extinguishment costs	18.8		4.7		—
	Non-deductible transaction-related costs	3.2		0.3		146.5
	Other non-deductible expenses	2.3		0.6		10.1
	Other	(1.3	)	(0.6	)	(0.7	)
		83.5	%	3.3	%	180.6	%

__________


^(a)	For the year ended December 31, 2013, includes 13.1% related to our impairment expense.

Changes in Gross Unrecognized Tax Benefits

The following is a tabular reconciliation of the gross amount of unrecognized tax benefits for the year:



		2013			2012			2011
Balance at January 1		$	54		$	186		$	40
	Additions for tax positions related to current year	4			4			—
	Additions for tax positions for prior years	9			5			143
	Additions associated with the acquisition of Avis Europe	—			—			34
	Reductions for tax positions for prior years	—			(140		)	(3		)
	Settlements	—			(1		)	—
	Statute of limitations	(4		)	—			(28		)
Balance at December 31		$	63		$	54		$	186

Unrecognized Tax Benefits

The following table presents unrecognized tax benefits:



	As of December 31,
	2013		2012
Unrecognized tax benefit in non-current income taxes payable ^(a)	$	44	$	39
Accrued interest payable on potential tax liabilities ^(b)	28		22

__________


^(a)	Pursuant to the agreements governing the disposition of certain subsidiaries in 2006, the Company is entitled to indemnification for certain pre-disposition tax contingencies. As of December 31, 2013, $15 million of unrecognized tax benefits are related to tax contingencies for which the Company believes it is entitled to indemnification.


^(b)	The Company recognizes potential interest related to unrecognized tax benefits within interest expense related to corporate debt, net on the accompanying Consolidated Statements of Operations. Penalties incurred during the twelve months ended December 31, 2013, 2012 and 2011, were not significant and were recognized as a component of income taxes.

Vehicle Programs

Income Taxes [Line Items]

Deferred Income Tax Assets and Liabilities

Deferred income tax assets and liabilities related to vehicle programs are comprised of the following:



	As of December 31,
	2013		2012
Deferred income tax assets:
Depreciation and amortization	$	51	$	49
	51		49
Deferred income tax liabilities:
Depreciation and amortization	2,228		2,212
	2,228		2,212
Deferred income tax liabilities under vehicle programs, net	$	2,177	$	2,163

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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