v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes and the income tax provision consisted of the following (in millions):
Year Ended December 31,
202420232022
Income before income taxes
Domestic$1,291 $1,016 $184 
Foreign2,337 1,878 1,624 
Total
$3,628 $2,894 $1,808 
Income tax provision
Current tax expense:
Federal$212 $287 $366 
State158 27 206 
Foreign598 471 331 
Total
$968 $785 $903 
Deferred tax benefit:
Federal$(47)$(124)$(413)
State(86)(197)(165)
Foreign(9)(8)(15)
Total
$(142)$(329)$(593)
Total income tax expense$826 $456 $310 
A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is as follows:
Year Ended December 31,
202420232022
Statutory federal income tax rate21 %21 %21 %
State and local income taxes, net of federal benefit3 2 5 
Foreign tax rate differential3 2 (1)
Current year tax benefit from foreign derived intangible income
(2)(2)(3)
Unrecognized tax benefits— (1)1 
State apportionment changes(1)(6)— 
State deferred benefit of Bakkt impairment— — (5)
Federal research tax credits(1)(1)(1)
Other— 1 — 
Total provision for income taxes23 %16 %17 %
The 23% effective tax rate in 2024 was above the statutory federal income tax rate primarily due to state and local income taxes, including the impacts of recording valuation allowances on certain state deferred tax assets, partially offset by favorable state apportionment changes and statutes of limitations expirations.
The 16% effective tax rate in 2023 was below the statutory federal income tax rate primarily due to favorable audit settlements for historical years, favorable state apportionment changes and the application of the high-tax exception to Global Intangible Low-Taxed Income. These tax benefits were partially offset by the impact of the U.K. corporate income tax increase from 19% to 25% effective April 1, 2023 and the tax impact of certain non-deductible Black Knight acquisition costs.
The 17% effective tax rate in 2022 was below the statutory federal income tax rate primarily due to the deferred income tax benefit from the impairment of equity investment in Bakkt in 2022.
The Organisation for Economic Cooperation and Development, or OECD, Global Anti-Base Erosion Pillar Two minimum tax rules, or Pillar Two, which generally provide for a minimum effective tax rate of 15%, are intended to apply to tax years beginning in 2024. The European Union member states and many other countries, including the U.K., our most significant non-U.S. jurisdiction, have committed to implement or have already enacted legislation adopting the Pillar Two rules. In July 2023, the U.K. enacted the U.K. Finance Act 2023, effective as of January 1, 2024, which included provisions to implement certain portions of the OECD Global Anti-Base Erosion Pillar Two minimum tax rules and included an election to apply a transitional safe harbor to extend certain effective dates to accounting periods commencing on or before
December 31, 2026 and ending on or before June 30, 2028. These Pillar Two rules, including those in the U.K., did not have a material impact on our income tax provision as of December 31, 2024 or 2023.
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Certain unrecognized tax benefits associated with our acquisition of Ellie Mae are presented as a reduction to related deferred tax assets in our consolidated balance sheets. The following table summarizes the significant components of our deferred tax assets and liabilities as of December 31, 2024 and 2023 (in millions):
As of December 31,
20242023
Deferred tax assets:
Deferred and stock-based compensation$93 $98 
Liability reserve74 60 
Tax credits
10 10 
Loss carryforward207 275 
Deferred revenue
23 25 
Lease liability66 64 
Property and equipment178 118 
Other6 81 
Total657 731 
Valuation allowance(200)(166)
Total deferred tax assets, net of valuation allowance$457 $565 
Deferred tax liabilities:
Acquired intangibles(4,239)(4,507)
Right of use asset(46)(48)
Equity investment(76)(90)
Total deferred tax liabilities$(4,361)$(4,645)
Net deferred tax liabilities$(3,904)$(4,080)
Reported as:
Net non-current deferred tax liabilities$(3,904)$(4,080)
A reconciliation of the beginning and ending amount of deferred income tax valuation allowance is as follows (in millions):
Year Ended December 31,
202420232022
Beginning balance of deferred income tax valuation allowance
$166 $92 $99 
Charges against goodwill
(27)102 — 
Increases/(decreases)61 (28)(7)
Ending balance of deferred income tax valuation allowance
$200 $166 $92 
We recognize valuation allowances on deferred tax assets if, based on the weight of the evidence, we believe that it is more likely than not that some or all of the deferred tax assets will not be realized. We recorded a valuation allowance for deferred tax assets of $200 million and $166 million as of December 31, 2024 and 2023, respectively. The net increase of our valuation allowance in 2024 is primarily due to certain tax attributes that are not more likely than not to be utilized prior to expiration in the future, partially offset by purchase accounting adjustments recorded through goodwill related to the Black Knight acquisition. The increase of valuation allowance charged against goodwill in 2023 is primarily related to certain deferred tax assets arising from the Black Knight acquisition that we believe are not more likely than not to be realized in the foreseeable future. The decrease of valuation allowance in 2023 is primarily due to certain foreign subsidiaries being liquidated in the current period with associated deferred tax assets being extinguished.
The majority of our undistributed earnings of our non-U.S. subsidiaries for the period from January 1, 2018 through December 31, 2022 were subject to the Global Intangible Low-Taxed Income provisions and, as such, were subject to immediate U.S. income taxation and can be distributed to the U.S. with no material additional income tax consequences in the future. Due to the application of the high-tax exception to Global Intangible Low-Taxed Income, the majority of the earnings of our non-U.S. subsidiaries in 2024 and 2023 are not subject to U.S. income taxation. However, the majority of
these 2024 and 2023 foreign earnings can also be distributed to the U.S. with no material additional U.S. income tax consequences due to the availability of full dividends received deductions.
We remain indefinitely reinvested in our non-U.S. subsidiaries’ cumulative undistributed earnings as of December 31, 2024 that are not subject to the Global Intangible Low-Taxed Income provisions and would be subject to additional U.S. income tax consequences upon distribution to the U.S. Accordingly, no provision for U.S. federal and state income taxes has been made in the accompanying consolidated financial statements. Further, a determination of the unrecognized deferred tax liability is not practicable. An estimate of these indefinitely reinvested undistributed earnings as of December 31, 2024, based on post-income tax earnings under U.S. GAAP, is $5.8 billion.
As of December 31, 2024 and 2023, we have gross U.S. federal net operating loss carryforwards of $92 million and $88 million, respectively, and gross state and local net operating loss carryforwards of $251 million and $76 million for 2024 and 2023, respectively. In addition, we had $127 million and $204 million of deferred tax assets related to federal and state capital losses as of December 31, 2024 and 2023, respectively. The net operating loss carryforwards and credit carryforwards are available to offset future taxable income until they begin to expire in 2027. In addition, as of December 31, 2024 and 2023, we have gross foreign net operating loss carryforwards of $219 million and $214 million, respectively. The majority of the remaining gross foreign net operating losses are not expected to be realizable in future periods and have related valuation allowances.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
Year Ended December 31,
202420232022
Beginning balance of unrecognized tax benefits268 247 $229 
Additions related to acquisitions9 25 — 
Additions based on tax positions taken in current year32 31 30 
Additions based on tax positions taken in prior years1 33 — 
Reductions based on tax positions taken in prior years(9)(18)(3)
Reductions resulting from statutes of limitations lapses(27)(7)(9)
Reductions related to settlements with taxing authorities— (43)— 
Ending balance of unrecognized tax benefits274 $268 $247 
As of December 31, 2024 and 2023, the balance of unrecognized tax benefits which would, if recognized, affect our effective tax rate was $228 million for both years. It is reasonably possible, as a result of settlements of ongoing audits or statutes of limitations expirations, that unrecognized tax benefits could increase as much as $32 million and decrease as much as $81 million within the next 12 months. Of the $274 million in unrecognized tax benefits as of December 31, 2024, $196 million is recorded within other non-current liabilities and $78 million is recorded within other current liabilities.
We recognize interest and penalties accrued on income tax uncertainties as a component of income tax expense/benefit. In 2024, 2023 and 2022, we recognized an expense of $14 million, a benefit of $30 million and an expense of $12 million, respectively, for interest and penalties. As of December 31, 2024 and 2023, accrued interest and penalties were $47 million and $32 million, respectively. Of the $47 million in accrued interest and penalties as of December 31, 2024, $29 million is recorded within other non-current liabilities and $18 million is recorded within other current liabilities in the accompanying consolidated balance sheet.
We or one of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The following table summarizes open tax years by major jurisdiction:
JurisdictionOpen Tax Years
U.S. Federal
2021 - 2024
U.S. States
2013 - 2024
U.K.
2023 - 2024
We have filed amended U.S. federal returns for the years prior to 2021 to claim additional credits and deductions and the associated refund claims are subject to review by the U.S. taxing authorities. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, including interest and penalties, have been provided for any adjustments expected to result from open tax years.