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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 11 – Income Taxes
The U.S. and foreign components of income (loss) before provision for (benefit from) income taxes for the years ended December 31, 2021, 2022 and 2023 are as follows (in millions):
Year Ended December 31,
202120222023
U.S.$(340)$(8,523)$1,525 
Foreign(685)(903)796 
Income (loss) before income taxes and income from equity method investments$(1,025)$(9,426)$2,321 
The components of the provision for (benefit from) income taxes for the years ended December 31, 2021, 2022 and 2023 are as follows (in millions):
Year Ended December 31,
202120222023
Current
Federal$— $8 $1 
State4 15 16 
Foreign196 237 170 
Total current tax expense200 260 187 
Deferred
Federal(76)(251)11 
State19 (92)12 
Foreign(635)(98)3 
Total deferred tax expense (benefit)(692)(441)26 
Total provision for (benefit from) income taxes$(492)$(181)$213 
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2021, 2022 and 2023:
Year Ended December 31,
202120222023
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income tax expense(2.3)0.8 1.2 
Foreign rate differential10.3 2.0 (0.4)
Non-deductible expenses(5.2)(0.7)(0.2)
Stock-based compensation4.5 (1.4)(1.9)
Federal research and development credits7.8 0.6 (7.2)
Deferred tax on investments (1)
48.7 (1.1)(3.5)
Entity restructuring (2)
(2.0)(12.7)0.6 
Change in unrecognized tax benefits(27.8)(8.9)(6.8)
Valuation allowance(33.7)1.1 (2.8)
US tax on foreign income(10.8)0.6 4.1 
Withholding taxes (3)
(0.6)(0.3)9.5 
Tax rate change22.4 — — 
Other interest16.8 1.7 (4.1)
Other, net (3)
(1.1)(0.8)(0.3)
Effective income tax rate48.0 %1.9 %9.2 %
(1) The 2021 rate impact for “Deferred tax on investments” was primarily driven by the deferred China and U.S. tax impact related to our investment in Didi and the deferred U.S. tax impact related to our investments in Aurora, Grab, and Zomato.
The 2022 rate impact for “Deferred tax on investments” was primarily driven by the deferred U.S. tax impact related to our investments in Aurora, Grab, Zomato, and Didi.
The 2023 rate impact for “Deferred tax on investments” was primarily driven by the deferred U.S. tax impact related to our investments in Aurora and Didi.
(2) To align our structure to our evolving operations, in the second and fourth quarters of 2021, we completed intercompany transfers of certain intangible assets. These intercompany transfers did not have a material impact to the financial statements.
In the fourth quarter of 2022, we transferred certain intangible assets among our wholly-owned subsidiaries to align our structure to our evolving operations. The transfer resulted in a net reduction in deferred tax assets of $1.7 billion; however, there was no financial statement expense recognized since the deferred tax asset was offset by a full valuation allowance.
(3) 2021 and 2022 amounts have been conformed to the 2023 presentation.
The components of deferred tax assets and liabilities as of December 31, 2022 and 2023 are as follows (in millions):
As of December 31,
20222023
Deferred tax assets
Net operating loss carryforwards$6,325 $6,164 
Research and development credits1,200 1,275 
Stock-based compensation45 66 
Accruals and reserves402 440 
Accrued legal184 120 
Fixed assets and intangible assets4,425 4,135 
Lease liability478 436 
Interest limitation carryforwards858 876 
Capitalized research expenses304 771 
Other320 211 
Total deferred tax assets14,541 14,494 
Less: Valuation allowance(13,971)(13,945)
Total deferred tax assets, net of valuation allowance570 549 
Deferred tax liabilities
Indefinite lived deferred tax liability (1)
— 114 
ROU assets354 301 
Other77 18 
Total deferred tax liabilities431 433 
Net deferred tax assets (liabilities)$139 $116 
(1) As of December 31, 2022, the fair market value of our investments in Didi, Aurora, Grab, and Zomato decreased significantly, resulting in the reduction of indefinite-lived deferred tax liabilities.
As of December 31, 2023, the $114 million indefinite-lived deferred tax liability represents the deferred U.S. income tax expense, which will be incurred upon the eventual disposition of the shares underlying our investments in Aurora and Didi.
Based on available evidence, management believes it is not more-likely-than-not that the net U.S., Netherlands, and other non-material jurisdictions’ deferred tax assets will be fully realizable. In these jurisdictions, we have recorded a valuation allowance against net deferred tax assets. We regularly review the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, excess tax benefits related to stock-based compensation, the expected timing of the reversals of existing taxable temporary differences and tax planning strategies by jurisdiction. Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute our business plans and/or tax planning strategies. We had a valuation allowance against net deferred tax assets of $14.0 billion and $13.9 billion as of December 31, 2022 and 2023, respectively. In 2023, the decrease in the valuation allowance was primarily attributable to a decrease in deferred tax assets due to the utilization of net operating losses in the U.S., offset with an increase in deferred tax assets due to the generation of tax attributes in the Netherlands.
Based on our assessment of current income and anticipated future earnings, there is a reasonable possibility that we will have sufficient evidence to release a significant portion of the valuation allowance in the U.S. within the next 12 months. However, our
judgment regarding future earnings and the exact timing and amount of any valuation allowance release are subject to change due to many factors, including future market conditions, the ability to successfully execute our business plans, and the amount of stock-based compensation tax deductions available in the future.
Release of the valuation allowance would result in the recognition of net deferred tax assets on our consolidated balance sheet and would decrease income tax expense in the period the release is recorded.
The indefinite carryforward period for net operating losses ("NOLs") means that indefinite-lived deferred tax liabilities can be considered as support for realization of deferred tax assets, which can affect the need to record or maintain a valuation allowance for deferred tax assets. As of December 31, 2022, we realized an immaterial amount of our U.S. federal and state deferred tax assets as a result of our indefinite-lived deferred tax liabilities being used as a source of income. As of December 31, 2023, we realized approximately $95 million of our U.S. federal and state deferred tax assets as a result of our indefinite-lived deferred tax liabilities being used as a source of income.
As of December 31, 2023, we had U.S. federal NOL carryforwards of $296 million that begin to expire in 2031 and $12.2 billion that have an unlimited carryover period. As of December 31, 2023, we had U.S. state NOL carryforwards of $8.8 billion that started expiring in 2023 and $1.9 billion that have an unlimited carryover period. As of December 31, 2023, we had foreign NOL carryforwards of $872 million that begin to expire in 2024 and $18.6 billion that have an unlimited carryover period.
As of December 31, 2023, we had U.S. federal research tax credit carryforwards of $1.0 billion that begin to expire in 2028. We had U.S. state research tax credit carryforwards of $4 million that begin to expire in 2033 and $696 million that have an unlimited carryover period.
In the event we experience an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”), our ability to utilize net operating losses, tax credits and other tax attributes may be limited. The most recent analysis of our historical ownership changes was completed through December 31, 2023. Based on the analysis, we do not anticipate a current limitation on the tax attributes.
The following table reflects changes in gross unrecognized tax benefits (in millions):
Year Ended December 31,
202120222023
Unrecognized tax benefits at beginning of year$2,293 $2,657 $3,513 
Gross increases - current year tax positions239 814 177 
Gross increases - prior year tax positions134 93 42 
Gross decreases - prior year tax positions(9)(51)(315)
Gross decreases - lapse of statute of limitations— — (72)
Unrecognized tax benefits at end of year$2,657 $3,513 $3,345 
As of December 31, 2023, approximately $94 million of unrecognized tax benefits, if recognized, would impact the effective tax rate. The remaining $3.3 billion of the unrecognized tax benefits would not impact the effective tax rate due to the valuation allowance against certain deferred tax assets.
We recognize accrued interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statements of operations. The amount of interest and penalties accrued as of December 31, 2022 and 2023 was $21 million and $17 million, respectively.
Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. Given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits. Any changes to unrecognized tax benefits recorded as of December 31, 2023 that are reasonably possible to occur within the next 12 months are not expected to be material.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. We are also under various state and other foreign income tax examinations. We believe that adequate amounts have been reserved in these jurisdictions. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state or foreign tax authorities to the extent utilized in a future period.
As of December 31, 2023, the open tax years for our major tax jurisdictions are as follows:
JurisdictionTax Years
U.S. Federal2011 - 2023
U.S. States2005 - 2023
Brazil2017 - 2023
Netherlands2019 - 2023
United Kingdom2013 - 2023
As of December 31, 2023, the amount of unrecognized deferred tax liability on the undistributed earnings from certain foreign subsidiaries that we intend to indefinitely reinvest is not material.