(7)  Income Taxes

Income tax benefit (expense) consists of:

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The following table presents a summary of our domestic and foreign earnings (losses) from continuing operations before income taxes:

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Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 21% as a result of the following:

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During 2024, the Company recognized tax expense instead of a benefit at the expected federal tax rate of 21% primarily due to goodwill impairments that are not deductible for tax purposes (see note 4) and Tripadvisor’s IRS settlement on its 2014 through 2016 transfer pricing audit.

During 2023, the Company recognized tax expense instead of a benefit at the expected federal tax rate of 21% primarily due to goodwill impairments that are not deductible for tax purposes, changes in unrecognized tax benefits and Tripadvisor’s IRS settlement on its 2009 through 2011 transfer pricing audit.

During 2022, the Company recognized tax expense greater than the expected federal tax rate of 21% primarily due to changes in unrecognized tax benefits and the recognition of excess tax benefits and shortfalls to stock based compensation.

The tax effects of temporary differences and tax attributes that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:

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As of December 31, 2024, we had a valuation allowance of approximately $141 million related to certain federal and state net operating loss (“NOL”) carryforwards, interest expense carryforwards and other foreign deferred tax assets for which it is more likely than not, the tax benefit will not be realized.  This amount represents an increase of $14 million, as compared to the balance as of December 31, 2023.

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At December 31, 2024, the Company has a deferred tax asset of $193 million for federal, state, and foreign NOLs, interest expense carryforwards and tax credit carryforwards.  Of this amount, $140 million is recorded at Tripadvisor. If not utilized to reduce income tax liabilities at Tripadvisor in future periods, $14 million of these loss carryforwards and tax credits will begin to expire at various times beginning with 2025. The remaining $126 million of NOLs, interest expense carryforwards and tax credits recorded at Tripadvisor may be carried forward indefinitely. The remaining deferred tax asset of $53 million relates to federal and state NOL carryforwards and interest expense carryforwards recorded at TripCo. If not utilized to reduce income tax liabilities at TripCo in future periods, $19 million of these NOL carryforwards will expire at various times between 2025 and 2044. The remaining $34 million of NOLs and interest expense carryforwards may be carried forward indefinitely. A portion of TripCo’s net operating loss carryforwards are subject to certain limitations and may not be currently utilized. Based on current projections, $141 million of NOLs, interest expense carryforwards, and tax credit carryforwards, recorded at Tripadvisor and TripCo are expected to expire unused.

Due to the one-time transition tax on the deemed repatriation of undistributed foreign subsidiary earnings and profits in 2017, as a result of the Tax Cuts and Jobs Act of 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, 2024. As of December 31, 2024, $582 million of Tripadvisor’s cumulative undistributed foreign earnings were no longer considered to be indefinitely reinvested.

A reconciliation of unrecognized tax benefits is as follows:

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As of December 31, 2024, the Company had recorded $78 million of unrecognized tax benefits, inclusive of interest, which are included in other liabilities on the consolidated balance sheets.  Tripadvisor also had $43 million of unrecognized tax benefits classified as long-term and included as an offset to deferred tax assets, which is included in other assets on the consolidated balance sheet as of December 31, 2024. The amount of unrecognized tax benefits, if recognized, would reduce income tax expense by $53 million, due to correlative adjustments in other tax jurisdictions. Tripadvisor recognizes interest and penalties related to unrecognized tax benefits in income tax expense on its consolidated statement of operations.

As of December 31, 2024 and 2023, Tripadvisor had total gross interest accrued related to uncertain tax positions of $22 million and $45 million, respectively, and recorded in other liabilities on the consolidated balance sheets.

As of December 31, 2024, TripCo’s tax years prior to 2021 are closed for federal income tax purposes. TripCo’s  2021, 2022, 2023, and 2024 tax years are not under IRS examination. Because TripCo’s ownership of Tripadvisor is less than the required 80%, Tripadvisor does not consolidate with TripCo for federal income tax purposes.

On December 20, 2011, Expedia completed a spin-off of Tripadvisor into a separate publicly traded Delaware corporation (the “Spin-Off”). Tripadvisor continues to be subject to certain post Spin-Off obligations under the Tax Sharing Agreement, whereby Tripadvisor is generally required to indemnify Expedia for any taxes resulting from the Spin-Off 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 its 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.

Tripadvisor is currently under examination by the IRS for the 2018 tax year and has various ongoing audits for foreign and state income tax returns. These examinations may lead to proposed or ordinary course adjustments to Tripadvisor’s taxes. Tripadvisor is no longer subject to tax examinations by tax authorities for years prior to 2018. As of December 31, 2024, no material assessments have resulted, except as noted below regarding Tripadvisor’s 2009, 2010, and 2011 IRS audit with Expedia, its 2014 through 2016 standalone IRS audit, and its 2012 through 2016 HM Revenue & Customs (“HMRC”) audit.

As previously disclosed, Tripadvisor received Notices of Proposed Adjustments ("NOPA") for the 2014 through 2016 tax years relating to certain transfer pricing arrangements with its foreign subsidiaries. In response, 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. During the year ended December 31, 2024, Tripadvisor recorded an income tax expense of $42 million, inclusive of interest, related to this settlement on the consolidated statements of operations and during the first quarter of 2024, Tripadvisor reviewed the impact of the acceptance of this settlement to its existing transfer pricing income tax reserves for the subsequent open tax years, which resulted in an income tax benefit, inclusive of estimated interest, of $4 million. Additionally, in connection with this IRS audit settlement: (i) during the second quarter of 2024, Tripadvisor made a payment to the IRS of $141 million, inclusive of estimated interest, (ii) during the second half of 2024, Tripadvisor made various state tax payments totaling $26 million, inclusive of estimated interest, and (iii) during the fourth quarter of 2024, Tripadvisor received a competent authority refund of $42 million, inclusive of net interest income, from a foreign jurisdiction.  This IRS audit settlement resulted in total net operating cash outflow during 2024 of $105 million, which includes federal tax benefits from these payments of $20 million. As of December 31, 2024, there are no remaining outstanding payments or refunds due related to this IRS audit settlement.

As of December 31, 2023, Tripadvisor had recorded $153 million of unrecognized tax benefits, inclusive of interest, classified as other liabilities on the consolidated balance sheet. As a result of Tripadvisor’s acceptance of the MAP resolution agreement with the IRS for the 2014 through 2016 tax years, and its impact on other ongoing IRS audits, as described above, Tripadvisor reduced this unrecognized tax benefits liability by $79 million during the first quarter of 2024 by reclassifying the balance to current income taxes payable, representing a short-term payment obligation to the IRS, which was subsequently paid during the second quarter of 2024, as noted above.

In addition, as previously disclosed, Tripadvisor received a NOPA from the IRS for the 2009 through 2011 tax years relating to certain transfer pricing arrangements with its foreign subsidiaries. In response, Tripadvisor also requested competent authority assistance under MAP for the 2009 through 2011 tax years. In January 2023, Tripadvisor received notification of a MAP resolution agreement for the 2009 through 2011 tax years, which it accepted in February 2023. In the first quarter of 2023, Tripadvisor recorded additional income tax expense of $31 million, inclusive of interest. 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 open tax years, which resulted in incremental income tax expense, inclusive of estimated interest, of $24 million. The total impact of these two adjustments resulted in an incremental income tax expense of $55 million, recorded in the first quarter of 2023. Additionally, in connection with this IRS audit settlement: (i) during the second quarter of 2023, Tripadvisor made a U.S. federal tax payment of $113 million, inclusive of interest, to Expedia related to this IRS audit settlement, pursuant to the Tax Sharing Agreement with Expedia, and (ii) during the third quarter of 2023, Tripadvisor received a competent authority refund of $49 million, inclusive of interest income, from a foreign jurisdiction.