v3.24.4
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Provision for (Benefit from) Income Taxes
The components of income before income taxes by U.S. and foreign jurisdictions were as follows (in millions):
 Year Ended December 31,
 202420232022
United States$1,055 $523 $173 
Foreign683 485 226 
Total$1,738 $1,008 $399 

The provision for (benefit from) income taxes consists of the following (in millions):
 Year Ended December 31,
 202420232022
Current provision:
Federal$36 $2 $— 
State49 31 13 
Foreign130 101 46 
215 134 59 
Deferred provision:
Federal51 (750)(1)
State(5)(135)(1)
Foreign52 28 17 
98 (857)15 
Provision for (benefit from) income taxes$313 $(723)$74 
The effective income tax rate differs from the federal statutory income tax rate applied to the income before income taxes due to the following (in millions):     
 Year Ended December 31,
 202420232022
Tax computed at U.S. federal statutory rate$365 $212 $84 
State taxes, net of federal benefit42 47 10 
U.S. tax on foreign earnings(7)42 96 
Tax rate differential for international subsidiaries24 29 18 
Stock-based compensation(78)25 7 
Executive compensation28 32 22 
Tax credits(98)(93)(70)
Other12 15 7 
Valuation allowance25 (1,032)(100)
Provision for (benefit from) income taxes$313 $(723)$74 

Significant components of our deferred tax assets are shown below (in millions). A valuation allowance has been recognized to offset our deferred tax assets, as necessary, by the amount of any tax benefits that, based on evidence, are not expected to be realized.
 December 31,
 20242023
Deferred tax assets:
Net operating loss carryforwards$138 $257 
Credit carryforwards458 476 
Lease liability171 184 
Capitalized research and development434 324 
Depreciation and amortization514 552 
Other168 167 
Total deferred tax assets1,883 1,960 
Less: valuation allowance
(220)(196)
1,663 1,764 
Deferred tax liabilities:
Right of use asset(150)(165)
Depreciation and amortization
(113)(90)
Other(61)(41)
Net deferred tax assets$1,339 $1,468 

As of December 31, 2024, we had no unremitted earnings when evaluating our outside basis difference relating to our U.S. investment in foreign subsidiaries. However, there could be local withholding taxes due to various foreign countries and/or U.S. state taxes if certain lower tier earnings are distributed. During 2024, a decision was made to change our indefinite reinvestment assertion such that we no longer permanently reinvest all foreign earnings. Foreign withholding taxes after U.S. foreign tax credit and/or state taxes that would be payable upon remittance of these lower tier earnings are currently estimated to be immaterial.
As of December 31, 2024, we had U.S. federal net operating loss and federal tax credit carryforwards of $46 million and $376 million, respectively, as reported on our tax returns. The federal tax credits will begin to expire in 2039 if not utilized. In addition, as of December 31, 2024, we had state net operating loss and state tax credit carryforwards of approximately $0.8 billion and $313 million, respectively, as reported on our tax returns. The state net operating loss will begin to expire in 2032 if not utilized. State tax credits and a portion of the federal net operating loss carryforwards can be carried forward indefinitely. Utilization of our net operating loss and credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization.

As of December 31, 2024, we had Canada net operating loss and tax credit carryforwards of $150 million and $12 million, respectively, as reported on our tax returns. The Canada net operating loss and tax credits will begin to expire in 2039 and 2037, respectively, if not utilized. In addition, as of December 31, 2024, we had United Kingdom net operating loss carryforwards of $147 million, as reported on our tax returns. The United Kingdom net operating loss can be carried forward indefinitely.
 
The increase in the 2024 valuation allowance of $24 million was primarily attributable to California tax credit generation. The decrease in the 2023 valuation allowance of $1.03 billion was primarily attributable to the $1.05 billion release of certain U.S. federal and state valuation allowances offset by approximately a $20 million increase in the California valuation allowance.

The income tax benefit was $723 million for the year ended December 31, 2023. The income tax benefit was primarily attributable to the release of the valuation allowance of certain U.S. federal and state deferred tax assets. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2023, we achieved cumulative U.S. income during the prior twelve quarters when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our U.S. federal and state deferred tax assets will be realizable, with the exception of California. We released $1.05 billion of our valuation allowance during the year ended December 31, 2023. As of December 31, 2024 and 2023, we maintained a valuation allowance of $220 million and $196 million, respectively, against our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criteria, particularly as we expect research and development tax credit generation to exceed our ability to use the credits in future years. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.

The $98 million decrease in the 2022 valuation allowance was primarily attributable to a decrease in deferred tax assets related to the utilization of net operating losses.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in millions):
 Year Ended December 31,
 202420232022
Balance, beginning period$221 $159 $124 
Tax positions taken in prior period:
Gross increases2 — — 
Gross decreases(2)— (1)
Tax positions taken in current period:
Gross increases73 63 38 
Settlements(3)(1)(2)
Balance, end of period$291 $221 $159 
 
As of December 31, 2024, we had gross unrecognized tax benefits of approximately $291 million, of which $210 million would impact the effective tax rate, if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. Accrued interest and penalties included in our liability related to unrecognized tax benefits were $9 million and $6 million as of December 31, 2024 and 2023, respectively. The amount of unrecognized tax benefits could be reduced upon expiration of the applicable statutes of limitations. The potential reduction in unrecognized tax benefits during the next 12 months is not expected to be material. Interest and penalties accrued on these uncertain tax positions are recognized as income tax expense and will be released upon the expiration of the statutes of limitations. These amounts are also not material for any periods presented. Further, $68 million and $51 million of unrecognized tax benefits have been recorded as liabilities as of December 31, 2024 and 2023, respectively.
 
We are subject to taxation in the United States and foreign jurisdictions. As of December 31, 2024, our tax years 2004 to 2024 remain subject to examination in most jurisdictions.
 
Due to differing interpretations of tax laws and regulations, tax authorities may dispute our tax filing positions. We periodically evaluate our exposures associated with our tax filing positions and believe that adequate amounts have been reserved for adjustments that may result from tax examinations.