Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

US and foreign component of income (loss) before income tax

The U.S. and foreign components of income (loss) before provision for (benefit from) income taxes for the years ended December 31, 2017, 2018 and 2019 are as follows (in millions):



	Year Ended December 31,
	2017			2018			2019
U.S.	$	(3,201	)	$	(2,726	)	$	(4,926	)
Foreign	(1,374		)	4,038			(3,507		)
Income (loss) before income taxes and loss from equity method investment	$	(4,575	)	$	1,312		$	(8,433	)

Components of income tax expense

The components of the provision for (benefit from) income taxes for the years ended December 31, 2017, 2018 and 2019 are as follows (in millions):



	Year Ended December 31,
	2017			2018			2019
Current
Federal	$	—		$	13		$	1
State	—			15			—
Foreign	220			220			132
Total current tax expense	$	220		$	248		$	133
Deferred
Federal	(728		)	(159		)	(77		)
State	(5		)	7			8
Foreign	(29		)	187			(19		)
Total deferred tax expense (benefit)	(762		)	35			(88		)
Total provision for (benefit from) income taxes	$	(542	)	$	283		$	45

Reconciliation of the statutory federal income tax rate

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2017, 2018 and 2019:



	Year Ended December 31,
	2017		2018		2019
Federal statutory income tax rate	35.0	%	21.0	%	21.0	%
State income tax expense	0.2		1.7		(0.1	)
Foreign rate differential	(14.4	)	29.6		(3.8	)
Foreign rate differential - gain on divestiture ⁽¹⁾	—		(83.1	)	—
Non-deductible expenses	(1.2	)	0.8		(1.3	)
Stock-based compensation	(0.2	)	(2.6	)	1.2
Interest on convertible notes	(2.8	)	15.1		(0.3	)
Gain on convertible notes	—		—		1.1
Federal research and development credits	2.0		(7.2	)	3.1
Deferred tax on foreign investments ⁽²⁾	—		51.4		—
Entity restructuring ⁽³⁾	—		(20.0	)	92.3
Change in unrecognized tax benefits	(0.9	)	9.9		(17.0	)
Valuation allowance	(21.8	)	4.9		(97.3	)
Impact of the Tax Act	15.8		—		—
Global Intangible Low-taxed Income	—		—		(1.6	)
Other interest	—		—		1.8
Other, net	0.1		0.1		0.4
Effective income tax rate	11.8	%	21.6	%	(0.5	)%

⁽¹⁾ The 2018 rate impact for “Foreign rate differential – gain on divestiture” was primarily driven by the gains on divestitures reported by subsidiaries in jurisdictions with statutory tax rates lower than the U.S. federal tax rate.

⁽²⁾The 2018 rate impact for “Deferred tax on foreign investments” was related to the following: a) deferred U.S. tax impact of income inclusion related to the gain on the eventual disposition of the shares underlying the Company’s investment in Didi and Grab, and b) deferred China tax impact on the eventual disposition of the shares underlying the Company’s investment in Didi.

⁽³⁾ The 2018 rate impact for “Entity restructuring” was related to a transaction that resulted in the repatriation of assets from a foreign subsidiary to a domestic subsidiary. As a result of the repatriation, the deferred tax assets were recalculated at the U.S. statutory tax rate, resulting in a total deferred tax benefit of $275 million. The rate differential between the foreign subsidiary and the United States resulted in this deferred tax benefit.

The 2019 rate impact for “Entity restructuring” is related to a series of transactions resulting in changes to the Company’s international legal structure, including a redomiciliation of a subsidiary to the Netherlands and a transfer of certain intellectual property rights among wholly owned subsidiaries, primarily to align its evolving operations. The redomiciliation resulted in a step-up in the tax basis of intellectual property rights and a correlated increase in foreign deferred tax assets in an amount of $6.4 billion, net of a reserve for uncertain tax positions of $1.4 billion (refer to the 2019 rate impact for “Change in unrecognized tax benefits”). Based on available objective evidence, management believes it is not more-likely-than-not that these additional foreign deferred tax assets will be realizable as of December 31, 2019 and, therefore, are offset by a full valuation allowance (refer to the 2019 rate impact for “Valuation allowance”) to the extent not offset by reserves for uncertain tax positions. The corresponding deferred tax asset and valuation allowance balance are included in the “Fixed assets and intangible assets” and “Valuation allowance” lines, respectively, in the table below.

Deferred tax assets and liabilities

The components of deferred tax assets and liabilities as of December 31, 2018 and 2019 are as follows (in millions):



	As of December 31,
	2018			2019
Deferred tax assets
Net operating loss carryforwards	$	1,147		$	2,789
Research and development credits	285			587
Stock-based compensation	24			241
Accruals and reserves	226			197
Accrued legal	102			65
Fixed assets and intangible assets	435			6,361
Investment in partnership	—			331
Lease liability	—			438
Other	22			221
Total deferred tax assets	2,241			11,230
Less: Valuation allowance	(1,294		)	(9,855		)
Total deferred tax assets, net of valuation allowance	947			1,375
Deferred tax liabilities
Indefinite lived deferred tax liability ⁽¹⁾	1,986			1,984
ROU assets	—			366
Other	3			2
Total deferred tax liabilities	1,989			2,352
Net deferred tax liabilities	$	1,042		$	977

⁽¹⁾ The $2.0 billion indefinite-lived deferred tax liability represents the deferred U.S. and foreign income tax expense, which will be incurred upon the eventual disposition of the shares underlying the Company’s investments in Didi and Grab. The current year tax expense and any subsequent changes in the recognition or measurement of this deferred tax liability will be recorded in continuing operations.

Changes in gross unrecognized tax benefits

The following table reflects changes in gross unrecognized tax benefits (in millions):



	Year Ended December 31,
	2017			2018			2019
Unrecognized tax benefits at beginning of year	$	179		$	221		$	394
Gross increases - current year tax positions	52			57			1,566
Gross increases - prior year tax positions	44			128			16
Gross decreases - prior year tax positions	(54		)	(12		)	(36		)
Gross decreases - settlements with tax authorities	—			—			(143		)
Unrecognized tax benefits at end of year	$	221		$	394		$	1,797

Schedule of open tax years for major tax jurisdictions

As of December 31, 2019, the open tax years for the Company’s major tax jurisdictions are as follows:



Jurisdiction		Tax Years
U.S. Federal		2011 - 2019
U.S. States		2010 - 2019
Brazil		2014 - 2019
Netherlands		2013 - 2019
United Kingdom		2014 - 2019
Australia		2015 - 2019
India		2012 - 2019