Note 12.

Income Taxes

For the three and six months ended June 30, 2016, our effective income tax rate was 167.3% and 75.6%, respectively. Our effective tax rate differed significantly from the statutory tax rate primarily due to non-deductible pretax losses as a result of both the substantial liquidation of our investments in Italy (see Note 5) and the impairment charge recorded upon classifying our leasehold interest in a hotel in France as assets held for sale (see Note 6). Our effective income tax rate, excluding the impacts of these non-deductible losses, would be 30.0% and 29.7% for the three and six months ended June 30, 2016, respectively.

The total amount of unrecognized tax benefits as of June 30, 2016 was $309 million, of which $101 million would affect our effective tax rate if recognized. It is reasonably possible that approximately $9 million of our unrecognized tax benefits as of June 30, 2016, will reverse within the next twelve months.

We recognize interest and penalties related to unrecognized tax benefits through income tax expense. As of June 30, 2016, we had $24 million accrued for the payment of interest and $2 million accrued for the payment of penalties.

During the six months ended June 30, 2016, we resolved a previous dispute related to a foreign tax audit, which resulted in a tax benefit of $2 million due to the reversal of reserves in excess of the settlement amount.

We are subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. As of June 30, 2016, we are no longer subject to examination by U.S. federal taxing authorities for years prior to 2007 or to examination by any U.S. state taxing authority prior to 2006. All subsequent periods remain eligible for examination. In the significant foreign jurisdictions in which we operate, we are no longer subject to examination by the relevant taxing authorities for any years prior to 2009.

We are under regular audit by the Internal Revenue Service (IRS). We have received certain Notices of Proposed Adjustment from the IRS for years 2007 through 2009; however, we disagree with the IRS on certain of these adjustments and have filed a formal appeals protest to dispute them. We intend to vigorously contest these adjustments, including pursuing litigation, if necessary. If upheld or settled, these unagreed adjustments could result in a significant cash tax and interest payment. More than half of this amount would not affect the effective tax rate due to the timing nature of certain issues.