INCOME TAXES (Notes)

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income tax expense consists of U.S. and international income taxes, determined using an estimate of the Company's annual effective tax rate, which is based upon the applicable tax rates and tax laws of the countries in which the income is generated. A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences and operating loss and tax credit carryforwards. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future income, tax planning strategies, the carryforward periods available for tax reporting purposes and other relevant factors.

The Company's effective tax rates for the three and six months ended June 30, 2020 were 41.4% and (12.4)%, respectively, compared to 18.9% and 19.8% for the three and six months ended June 30, 2019, respectively. The Company's 2020 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the non-deductible goodwill impairment charge related to OpenTable and KAYAK, certain non-deductible expenses relative to lower worldwide earnings, and the valuation allowance recorded against the deferred tax assets generated from the impairment of certain long-term investments, partially offset by the benefit of the Netherlands Innovation Box Tax (discussed below) and U.S. state tax benefits. The Company's 2019 effective tax rates differ from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax, partially offset by the effect of higher international tax rates.

The Company's effective tax rate for the three months ended June 30, 2020 was higher than the three months ended June 30, 2019, primarily due to discrete U.S. tax charges related to unrealized gains on equity securities, as well as certain non-deductible expenses relative to lower worldwide earnings, partially offset by higher U.S. state tax benefits.

The Company incurred a pre-tax loss and recorded an income tax provision during the six months ended June 30, 2020, which resulted in a negative effective tax rate. The difference in the Company’s effective tax rate for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 is primarily due to the non-deductible goodwill impairment charge related to OpenTable and KAYAK, discrete U.S. tax charges related to unrealized gains on equity securities, certain non-deductible expenses relative to lower worldwide earnings, and the valuation allowance recorded against the deferred tax asset generated from the impairment of certain long-term investments.During the three and six months ended June 30, 2020, a portion of the Company's income, and during the three and six months ended June 30, 2019, a majority of the Company's income was reported in the Netherlands, where Booking.com is based. According to Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 7% ("Innovation Box Tax") rather than the Dutch statutory rate of 25%. A portion of Booking.com's earnings during the three and six months ended June 30, 2020 and June 30, 2019 qualified for Innovation Box Tax treatment, which had a beneficial impact on the Company's effective tax rate for these periods.