(8) Commitments and Contingencies

Litigation

In the ordinary course of business, the Company and its subsidiaries are parties to legal proceedings and claims arising out of our operations. These matters may relate to claims involving patent and intellectual property rights (including alleged privacy, infringement of third-party intellectual property rights), tax matters (including value-added, excise, transient occupancy and accommodation taxes), regulatory compliance (including competition and consumer matters), defamation

and other claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

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As of March 31, 2024, Tripadvisor established an accrual in the amount of $10 million for a potential regulatory matter within Tripadvisor’s alternative accommodation rentals offering. This accrual was recorded to selling, general and administrative, including stock-based compensation in the condensed consolidated statements of operations and accrued liabilities and other current liabilities in the condensed consolidated balance sheet. This accrual is based on Tripadvisor’s best estimate of probable loss; the ultimate resolution of this contingency may be greater or less than the liability recorded.

Income Tax Matters

Tripadvisor received Notices of Proposed Adjustments from the IRS with respect to income tax returns filed by Expedia when Tripadvisor was part of Expedia Group’s consolidated income tax return for the 2014, 2015, and 2016 tax years. The assessment was related to certain transfer pricing arrangements with foreign subsidiaries, for which Tripadvisor had requested competent authority assistance under the Mutual Agreement Procedure (“MAP”) for the 2014 through 2016 tax years. In January 2024, Tripadvisor  received notification of a MAP resolution agreement for the 2014 through 2016 tax years, which it accepted in February 2024. In the first quarter of 2024, Tripadvisor recorded additional income tax expense as a discrete item, inclusive of interest, of $46 million related to this settlement on the condensed consolidated statement of operations. Tripadvisor reviewed the impact of the acceptance of this settlement position against its existing transfer pricing income tax reserves for the subsequent open tax years during the first quarter of 2024, which resulted in an income tax benefit, inclusive of estimated interest, of $4 million. The net impact of these adjustments resulted in an incremental income tax expense on the condensed consolidated statement of operations of $42 million for the three months ended March 31, 2024. Tripadvisor anticipates this will result in an estimated net operating cash outflow of $110 million to $120 million, inclusive of related interest expense, to be substantially settled during the second quarter of 2024.

As of December 31, 2023, Tripadvisor had recorded $153 million of unrecognized tax benefits, inclusive of interest, which were primarily included in other liabilities on the condensed consolidated balance sheet. As a result of the Company's acceptance of MAP with the IRS for the years 2014 through 2016, and its impact on other ongoing IRS audits, as described above, Tripadvisor reduced this unrecognized tax benefits liability by $79 million during the three months ended March 31, 2024, by reclassifying this balance to accrued liabilities and other current liabilities on the consolidated balance sheet, representing a short-term payment obligation to the IRS, and increasing the current income taxes receivable balance by $40 million, representing anticipated short-term competent authority relief, or payment due from a foreign jurisdiction.

In addition, as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023, Tripadvisor received a NOPA from the IRS for the 2009, 2010, and 2011 tax years relating to certain transfer pricing arrangements with its foreign subsidiaries. In response, Tripadvisor requested competent authority assistance under MAP for the 2009 through 2011 tax years. In January 2023, Tripadvisor received a final notice from the IRS regarding a MAP resolution agreement for the 2009 through 2011 tax years, which Tripadvisor accepted in February 2023. In the first quarter of 2023, Tripadvisor recorded additional income tax expense as a discrete item, inclusive of interest, of $31 million specifically related to this settlement on the condensed consolidated statement of operations. During the first quarter of 2023, Tripadvisor reviewed the impact of the acceptance of this settlement position against its existing transfer pricing income tax reserves for the subsequent tax years, which resulted in incremental income tax expense, inclusive of estimated interest, of $24 million. The net impact of these adjustments resulted in an incremental income tax expense of $55 million, which was recognized during the three months ended March 31, 2023.

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