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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Deferred income taxes

Deferred income taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and such amounts for tax purposes. The Company has a net deferred tax liability, primarily due to differences in depreciation rates for federal income tax purposes and for financial reporting purposes.

Deferred tax assets and (liabilities) comprise the following:
(in millions)
20252024
Loyalty program$611 $577 
Employee benefits208 240 
Net operating losses501 320 
Operating lease liabilities327 345 
Leasehold maintenance 16 31 
Other - assets173 217 
Deferred tax assets1,836 1,730 
Excess of book basis over tax basis on fixed assets(2,209)(2,017)
Intangibles - net(190)(208)
Operating lease assets(306)(320)
Other - liabilities(89)(79)
Deferred tax liabilities(2,794)(2,624)
Valuation allowance(46)(40)
Net deferred tax liabilities$(1,004)$(934)

The Company has gross state and local NOLs of approximately $1.7 billion, which will be carried forward. Certain state NOLs expire beginning in 2026 through 2045. The Company also has federal NOLs of approximately $2 billion, which will be carried forward and have an indefinite life.
Valuation allowances are provided to reduce deferred tax assets to an amount which will, more likely than not, be realized. The Company has determined it is more likely than not that a portion of the federal capital loss carryforward, and state NOL carryforward will not be realized and, therefore has recorded a valuation allowance of $46 million as of December 31, 2025. The Company has likewise concluded it is more likely than not that all of its federal and the remaining state deferred income tax assets will be realized and no valuation allowance has been recorded. The Company assesses valuation allowances each reporting period.

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S. law. Provisions applicable to the Company beginning in 2025 include the permanent allowance of full bonus depreciation, immediate expensing of domestic research and experimental costs, and changes to the calculation of adjusted taxable income under Section 163(j). In accordance with ASC 740, the Company recorded the effects of OBBBA in the year of enactment, resulting in an increase to the Company's net deferred tax liabilities and a decrease in income tax payable for the year ended December 31, 2025. Future provisions that have potential impact to the Company include limitations on the deductibility of executive compensation, and modifications to certain international tax rules.

Components of income tax expense (benefit)

The components of income tax expense (benefit) are as follows: 
(in millions)
202520242023
Current income tax (benefit) expense:
   
Federal$2 $8 $(3)
State(5)13 (4)
Foreign1 — — 
Total current income tax (benefit) expense
$(2)$21 $(7)
Deferred income tax expense:
   
Federal$49 $120 $82 
State(1)9 13 
Foreign— — — 
Total deferred income tax expense
48 129 95 
Income tax expense
$46 $150 $88 
Income tax rate reconciliation

The Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures, or ASU 2023-09. The following table reconciles income tax expense calculated at the U.S. federal statutory rate of 21% to the Company's effective tax rate:
2025
(in millions)RateTax
US federal statutory tax rate21.00 %$31 
State and local income taxes, net of federal income tax effect(1)
(3.28)%(5)
Foreign tax effects0.78 %1 
Tax credits
R&D credits(4.37)%(6)
Changes in valuation allowances2.67 %4 
Nontaxable or nondeductible items
Meals and entertainment2.60 %4 
Parking fees2.88 %4 
Stock based compensation6.30 %9 
Other nondeductible items1.04 %2 
Changes in unrecognized tax benefits(1.95)%(3)
Other reconciling items
2024 stub return true-up1.89 %3 
Other - other reconciling items1.84 %2 
Effective income tax rate31.40 %$46 
(1) The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category are Alaska, California, Hawai'i, Portland/Multnomah County, New York, and Oregon.
The following table reconciles income tax expense calculated at the U.S. federal statutory rate of 21% to the Company's effective tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09.

 
(in millions)
20242023
Income before income tax
$545 $323 
Expected tax expense
114 68 
Nondeductible expenses24 14 
State income tax expense
24 17 
State income sourcing
(5)(5)
Valuation allowance1 (1)
Tax credits(7)(3)
Uncertain tax positions
5 (5)
Other - net(6)3 
Actual tax expense
$150 $88 
Effective tax rate(a)
27.50 %27.10 %
(a) Figures in the table above are rounded to the nearest million. As a result, a manual recalculation of the effective tax rate using these rounded figures may not agree directly to the Company's actual effective tax rate shown in the table.
Income Taxes Paid

The amounts of cash taxes paid by the Company are as follows:
(in millions)202520242023
Federal$(5)$17 $— 
State7 5 15 
Foreign1 — — 
Current income taxes paid (refunded)$3 $22 $15 

Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
(in millions)202520242023
States
California$7 $2 (a)
Hawai'i(1)2 (a)
Oregon(a)(a)14 
Foreign
Guatemala$1 (a)(a)
(a) The amount of income taxes paid during the years ended December 31, 2025, 2024, and 2023 does not meet the 5% disaggregation threshold.

Uncertain tax positions

The Company has identified its federal tax return and its state tax returns in Alaska, California, and Oregon as “major” tax jurisdictions. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:
JurisdictionPeriod
Federal2022 to 2024
Alaska2022 to 2024
California2010 to 2024
Oregon2015 to 2024

Certain tax years are subject to examination to the extent of net operating loss carryforwards.

Changes in the liability for gross unrecognized tax benefits, exclusive of related interest and penalties, during 2025, 2024 and 2023 are as follows:
(in millions)
202520242023
Balance at January 1$36 $25 $21 
Additions related to prior years— 1 — 
Additions related to current year activity2 5 9 
Releases due to settlements(1)— (3)
Additions from acquisition— 5 — 
Releases due to lapse of statute of limitations(4)— (2)
Balance at December 31$33 $36 $25 

As of December 31, 2025, the Company had $33 million of accrued tax contingencies, of which $27 million, if fully recognized, would decrease the effective tax rate. As of December 31, 2025, 2024 and 2023, the Company has accrued interest and penalties, net of federal income tax benefit, of $4 million, $4 million, and $2 million, respectively. These uncertain tax positions could change because of the Company's ongoing audits, settlement of issues, new audits, and status of other taxpayer court cases. The Company cannot predict the timing of these actions.