XML 46 R24.htm IDEA: XBRL DOCUMENT v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
 
The composition of pre-tax income (loss) for the years ended December 31, 2022, 2021, and 2020 is as follows (in millions):
Year Ended December 31,
 202220212020
International$4,717 $1,937 $2,575 
U.S. (794)(472)(2,008)
Total$3,923 $1,465 $567 

Provision for Income Taxes

The composition of income tax expense for the years ended December 31, 2022, 2021, and 2020 is as follows (in millions): 
Year Ended December 31,
 202220212020
Current income tax expense (benefit):
International$1,145 $665 $320 
U.S. Federal(8)68 (9)
U.S. State(15)12 (16)
Current income tax expense (benefit):1,122 745 295 
Deferred income tax (benefit) expense:
International(61)(103)(62)
U.S. Federal(172)(323)296 
U.S. State(24)(19)(21)
Deferred income tax (benefit) expense(257)(445)213 
Income tax expense$865 $300 $508 
 
Income tax liabilities of $880 million and $181 million are included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets at December 31, 2022 and 2021, respectively. During the three months ended March 31, 2020, the Company made a prepayment of the Netherlands income taxes of 660 million Euros ($717 million) to earn prepayment discounts. The Company requested a refund of this amount from the Dutch tax authorities and it was received in April 2020. During the three months ended March 31, 2021, the Company prepaid Netherlands income taxes of 149 million Euros ($175 million). During the year ended December 31, 2022, the Company paid Netherlands income taxes of 348 million Euros ($363 million).

U.S. Tax Reform

In December 2017, the Tax Act was enacted into law in the United States. The Tax Act made significant changes to U.S. federal tax law, including a one-time deemed repatriation tax on accumulated unremitted international earnings, to be paid over eight years.

In 2020, the Company recorded an income tax benefit of $8 million to adjust its income tax expense that was recorded during the year ended December 31, 2017 relating to the federal one-time deemed repatriation liability. This benefit was primarily due to additional tax credits. The Company utilized $108 million of deferred tax assets related to U.S. federal net operating losses ("NOLs") and $115 million of other tax credit carryforwards to reduce its transition tax liability as of December 31, 2021.

Under the Tax Act, the Company's future cash generated by the Company's international operations can generally be repatriated without further U.S. federal income tax, but will be subject to U.S. state income taxes and international withholding taxes, which have been accrued by the Company.
The Tax Act also introduced in 2018 a tax on 50% of GILTI, which is income determined to be in excess of a specified routine rate of return, and a base erosion and anti-abuse tax ("BEAT") aimed at preventing the erosion of the U.S. tax base. The Company has adopted an accounting policy to treat taxes on GILTI as period costs.

Deferred Income Taxes

The Company utilized $309 million of its U.S. NOLs to reduce its U.S. federal tax liability for the deemed repatriation tax. After utilization of available NOLs, at December 31, 2022, the Company had U.S. federal NOLs of $315 million, the majority of which do not have an expiration date, and U.S. state NOLs of $465 million, which mainly begin to expire in years December 31, 2032 and forward. In addition, at December 31, 2022, the Company had $859 million of non-U.S. NOLs, the majority of which do not have an expiration date, and $42 million of U.S. research tax credit and foreign tax credit carryforwards available to reduce future tax liabilities.

The utilization of these NOLs and credits is dependent upon the Company's ability to generate sufficient future taxable income and the tax laws in the jurisdictions where the losses were generated. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of these deferred tax assets by a valuation allowance to the extent it believes a portion 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 tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2022 and 2021 are as follows (in millions):
December 31,
 20222021
Deferred tax assets:  
Net operating loss carryforward — U.S.$95 $88 
Net operating loss carryforward — International176 137 
Accrued expenses74 50 
Stock-based compensation and other stock based payments36 50 
Foreign currency translation adjustment83 48 
Tax credits35 19 
Operating lease liabilities29 38 
Property and equipment126 95 
Other7 11 
Total deferred tax assets661 536 
Valuation allowance on deferred tax assets(120)(37)
Deferred tax assets, net541 499 
Deferred tax liabilities:
Discount on convertible notes— (20)
Intangible assets and other(174)(192)
Euro-denominated debt(84)(20)
State income tax on accumulated unremitted international earnings(8)(8)
Unrealized gains on investments(202)(417)
Operating lease assets(26)(37)
Installment sale liability(119)(156)
Deferred tax liabilities(613)(850)
Net deferred tax liabilities (1)
$(72)$(351)
(1)    Includes deferred tax assets of $613 million and $554 million at December 31, 2022 and 2021, respectively, included in "Other assets, net" in the Consolidated Balance Sheets.

The valuation allowance on deferred tax assets at December 31, 2022 includes $29 million related to international operations and $91 million primarily related to certain unrealized losses on equity securities and Connecticut NOLs. The
valuation allowance on deferred tax assets at December 31, 2021 includes $26 million related to international operations and $11 million primarily related to certain U.S. federal capital loss carryforwards and Connecticut NOLs. The increase in the
valuation allowance is primarily related to deferred tax assets generated from certain unrealized losses on equity securities.

The Company does not intend to indefinitely reinvest its international earnings that were subject to U.S. taxation pursuant to the mandatory deemed repatriation or subject to U.S. taxation as GILTI.

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

A significant portion of the Company's taxable earnings is generated in the Netherlands. According to Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 9% ("Innovation Box Tax") for periods beginning on or after January 1, 2021 rather than the Dutch statutory rate of 25%. Previously, the Innovation Box Tax rate was 7%. Effective January 1, 2022, the Netherlands corporate income tax rate increased from 25% to 25.8%. A portion of Booking.com's earnings during the years ended December 31, 2022, 2021, and 2020 qualified for Innovation Box Tax treatment, which had a significant beneficial impact on the Company's effective tax rate for those years.
 
The effective income tax rate of the Company is different from the amount computed using the expected U.S. statutory federal rate of 21% for the years ended December 31, 2022, 2021, and 2020 as a result of the following items (in millions):
Year Ended December 31,
 202220212020
Income tax expense at U.S. federal statutory rate$824 $308 $119 
Adjustment due to:   
Foreign rate differential264 137 55 
Innovation Box Tax benefit(452)(230)(79)
Goodwill impairment— — 228 
Stock-based compensation42 37 32 
Federal GILTI10 17 73 
State income tax benefit(31)(6)(31)
Valuation allowance87 (19)36 
Uncertain tax positions72 39 64 
Tax Act - U.S. transition tax benefit and other transition impacts— — (8)
Other49 17 19 
Income tax expense$865 $300 $508 
 
Uncertain Tax Positions

The following is a reconciliation of the total beginning and ending amount of unrecognized tax benefits (in millions): 
Year Ended December 31,
 202220212020
Unrecognized tax benefit — January 1$120 $84 $56 
Gross increases — tax positions in current period3 14 2 
Gross increases — tax positions in prior periods94 44 48 
Gross decreases — tax positions in prior periods(33)(19)(11)
Reduction due to settlements during the current period— (3)(11)
Unrecognized tax benefit — December 31$184 $120 $84 
 
The increase in unrecognized tax benefits is principally related Booking.com’s French tax matters (see Note 16), the majority of which is included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet as of December 31, 2022. The remaining unrecognized tax benefits are primarily included in "Other assets, net" and "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet as of December 31, 2022. The unrecognized tax benefits, if recognized, would affect the effective tax rate. Due to resolution of Booking.com’s French tax matters, the Company expects that a significant change to the balance of the gross unrecognized tax benefits will occur over the next 12 months. As
of December 31, 2022 and 2021, total gross interest and penalties accrued was $43 million and $30 million, respectively. See Note 16 for more information regarding tax contingencies. The Company's major taxing jurisdictions include: the Netherlands, United States, Singapore, and United Kingdom. The statutes of limitations that remain open related to these major tax jurisdictions are: the Company's Netherlands returns for 2016 and forward, U.S. federal returns for 2017 and forward, Singapore returns from 2018 and forward, and U.K. returns for 2019 and forward. The Company’s 2017 and 2018 U.S. federal income tax returns are currently under audit by the Internal Revenue Service.