Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Summary of Our Domestic and Foreign Income Before Income Taxes

The following table presents a summary of our domestic and foreign income before income taxes:

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Domestic	$	64	$	67	$	146
Foreign		87		172		176
Total	$	151	$	239	$	322

Summary of the Components of Our Provision for Income Taxes

The following table presents a summary of the components of our provision for income taxes:

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Current income tax expense:
Federal	$	38		$	48		$	93
State		2			8			14
Foreign		11			22			6
Current income tax expense		51			78			113
Deferred income tax (benefit) expense:
Federal		(12	)		(29	)		(12	)
State		(3	)		(2	)		(1	)
Foreign		(5	)		(6	)		(4	)
Deferred income tax (benefit) expense:		(20	)		(37	)		(17	)
Provision for income taxes	$	31		$	41		$	96

Summary of Deferred Tax Assets and Deferred Tax Liabilities

The Company reduced its current income tax payable by $21 million, $63 million and $32 million for the years ended December 31, 2016, 2015 and 2014, respectively, for tax deductions attributable to stock-based compensation.

The significant components of our deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2015 are as follows:

	December 31,
	2016			2015
	(in millions)
Deferred tax assets:
Stock-based compensation	$	52		$	40
Net operating loss carryforwards		46			31
Provision for accrued expenses		12			12
Deferred rent		5			5
Lease financing obligation		33			33
Foreign advertising spend		10			8
Deferred expense related to cost-sharing arrangement		30			20
Charitable contribution carryforward		20			24
Other		7			4
Total deferred tax assets	$	215		$	177
Less: valuation allowance		(27	)		(17	)
Net deferred tax assets	$	188		$	160
Deferred tax liabilities:
Intangible assets	$	(83	)	$	(81	)
Property and equipment		(28	)		(27	)
Prepaid expenses		(6	)		(4	)
Building – corporate headquarters		(31	)		(31	)
Deferred income related to cost-sharing arrangement		(10	)		(7	)
Total deferred tax liabilities	$	(158	)	$	(150	)
Net deferred tax asset (liability)	$	30		$	10

Reconciliation of the Provision for Income Taxes

A reconciliation of the provision for income taxes to the amounts computed by applying the statutory federal income tax rate to income before income taxes is as follows:

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Income tax expense at the federal statutory rate of 35%	$	53		$	84		$	113
Foreign rate differential		(35	)		(53	)		(49	)
State income taxes, net of effect of federal tax benefit		4			4			13
Unrecognized tax benefits and related interest		11			12			14
Change in cost-sharing treatment of stock-based compensation		(6	)		(13	)		—
Non-deductible transaction costs		—			1			1
Research tax credit		(10	)		(3	)		(2	)
Stock-based compensation		2			2			2
Change in valuation allowance		9			5			5
Other, net		3			2			(1	)
Provision for income taxes	$	31		$	41		$	96

Reconciliation of the Beginning and Ending Amount of Gross Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

	December 31,
	2016			2015		2014
	(in millions)
Balance, beginning of year	$	89		$	67	$	36
Increases to tax positions related to the current year		16			15		13
Increases to tax positions related to the prior year		1			7		18
Reductions due to lapsed statute of limitations		(1	)		—		—
Decreases to tax positions related to the prior year		—			—		—
Settlements during current year		—			—		—
Balance, end of year	$	105		$	89	$	67