v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes is attributable to the following geographic locations for the years ended December 31 (in millions):
202420232022
Domestic $147 $278 $334 
Foreign 828 846 495 
Income before income taxes
$975 $1,124 $829 
The tax expenses for income taxes consisted of the following components for the years ended December 31 (in millions):
202420232022
Current:
Federal $1 $— $2 
State and local (3)— (1)
Foreign (189)(150)(83)
Subtotal
(191)(150)(82)
Deferred:
Federal — — (16)
State and local 2 — (5)
Foreign 28 (5)(21)
Subtotal
30 (5)(42)
Income tax expense
$(161)$(155)$(124)
State and foreign taxes not based on income are included in general and administrative expenses and the aggregate amounts were not significant for the years ended December 31, 2024, 2023 and 2022.
Income tax benefit (expenses) for the years ended December 31, 2024, 2023 and 2022 differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pre-tax income as a result of the following for the years ended December 31 (in millions):
2024
2023 (1)
2022 (1)
Federal tax at statutory rate $(205)$(236)$(174)
State and local tax expense(1)— (6)
Foreign income tax rate differential (12)(14)(12)
Non-deductible expenses (10)(6)(6)
Stock-based compensation expense (8)(9)(8)
Change in valuation allowance(72)(32)(59)
Foreign financing activities(2)(4)(6)
Uncertain tax positions reserve 11 21 45 
Tax adjustments related to REIT130 132 107 
Change in deferred tax adjustments1 (3)— 
Effect of tax rate change on deferred tax assets— (2)(3)
Other, net 7 (2)(2)
Total income tax expense
$(161)$(155)$(124)
(1)The prior year amounts presented in the table above have been reclassified to conform with the current year presentation, The rate reconciliation item 'Deferred tax assets generated in current year not benefited' has been grouped with 'Change in valuation allowance'.
Our accounting policy is to treat any tax on Global Intangible Low-Taxed Income ("GILTI") inclusions as a current period cost included in the tax expense in the year incurred. We estimate the GILTI inclusion provision will result in no material financial statement impact provided we satisfy our REIT distribution requirement with respect to the GILTI inclusions.
As a result of our conversion to a REIT effective January 1, 2015, it is no longer our intent to indefinitely reinvest undistributed foreign earnings. However, no deferred tax liability has been recognized to account for this change because the expected recovery of the basis difference will not result in material U.S. taxes in the post-REIT conversion periods due to the fact that the majority of our foreign subsidiaries are either QRSs or owned directly by our REIT and QRSs, and the foreign withholding tax effect would be immaterial. We continue to assess the foreign
withholding tax impact of our current policy and do not believe the distribution of our foreign earnings would trigger any significant foreign withholding taxes, as the majority of the foreign jurisdictions where we operate do not impose withholding taxes on dividend distributions to a corporate U.S. parent.
The types of temporary differences that give rise to significant portions of our deferred tax assets and liabilities are set out below as of December 31 (in millions):
20242023
Deferred tax assets:
Stock-based compensation expense $10 $9 
Net unrealized losses12 11 
Operating lease liabilities217 221 
Finance lease liabilities— 14 
Deferred revenue11 17 
Loss carryforwards and tax credits253 232 
Others, net25 7 
Gross deferred tax assets
528 511 
Valuation allowance (277)(221)
Total deferred tax assets, net 251 290 
Deferred tax liabilities:
Finance lease liabilities(13)— 
Property, plant and equipment(200)(253)
Right-of-use assets(220)(224)
Deferred income(5)(26)
Goodwill(17)(3)
Intangible assets (87)(116)
Total deferred tax liabilities
(542)(622)
Net deferred tax liabilities$(291)$(332)
The tax basis of REIT assets, excluding investments in TRSs, is greater than the amounts reported for such assets in the accompanying consolidated balance sheet by approximately $3.1 billion as of December 31, 2024.
Our accounting for deferred taxes involves weighing positive and negative evidence concerning the realizability of our deferred tax assets in each taxing jurisdiction. After considering evidence such as the nature, frequency and severity of current and cumulative financial reporting losses, the sources of future taxable income, taxable income in carryback years permitted by the tax laws and tax planning strategies, we concluded that valuation allowances were required in certain jurisdictions. The operations in most of the jurisdictions for which a valuation allowance has been established have a history of significant losses as of December 31, 2024. As such, we do not believe these operations have established a sustained history of profitability and that a valuation allowance is, therefore, necessary. We also provided a valuation allowance against certain gross deferred tax assets in certain taxing jurisdictions as these deferred tax assets are not expected to be realizable in the foreseeable future.
Changes in the valuation allowance for deferred tax assets for the years ended December 31 are as follows (in millions):
202420232022
Beginning balance $221 $167 $101 
Amounts from acquisitions
— 10 13 
Amounts recognized into income
6 (2)23 
Current increase57 44 37 
Impact of foreign currency exchange
(7)2 (7)
Ending balance $277 $221 $167 
Our net operating loss carryforwards for federal, state and foreign tax purposes which expire, if not utilized, at various intervals from 2025, are outlined below (in millions):
Expiration DateFederalState
Foreign (1) (2)
Total
2025$1 $— $8 $9 
2026 to 20282 — 50 52 
2029 to 2031— — 26 26 
2032 to 2034— — 49 49 
2035 to 20373 — 20 23 
2038 to 2040— 4 55 59 
Thereafter239 92 570 901 
$245 $96 $778 $1,119 
(1)In certain jurisdictions, the net operating loss carryforwards can only be used to offset a percentage of taxable income in a given year.
(2)If certain substantial changes in the entity's ownership occur, there may be a limitation on the amount of the carryforwards that can be utilized.
As of December 31, 2024, we had tax credit carryforwards of $6 million, which expire if not utilized, from 2025 to 2031. We also had capital losses of $7 million, which can be carried forward indefinitely.
The beginning and ending balances of our unrecognized tax benefits are reconciled below for the years ended December 31 (in millions):
202420232022
Beginning balance$70 $89 $148 
Gross increases related to prior year tax positions
— 3 1 
Gross decreases related to prior year tax positions
(12)(17)(43)
Gross increases related to current year tax positions
7 5 7 
Decreases resulting from expiration of statute of limitation
(7)(10)(12)
Decreases resulting from settlements
(1)— (12)
Ending balance$57 $70 $89 
We recognize interest and penalties related to unrecognized tax benefits within income tax expense in the consolidated statements of operations. We accrued $5 million, $7 million, and $7 million for interest and penalties as of December 31, 2024, 2023 and 2022, respectively.
The unrecognized tax benefits of $57 million as of December 31, 2024, if subsequently recognized, will affect our effective tax rate favorably at the time when such a benefit is recognized.
Due to various tax years open for examination and the ongoing tax audits and inquiries by the tax authorities in different jurisdictions, it is reasonably possible that the balance of unrecognized tax benefits could significantly
increase or decrease over the next 12 months as we may be subject to additional examinations by the tax authorities, conclude tax settlements or experience a lapse in a statute of limitations. We are currently unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits.
In general, our income tax returns for the years from 2021 through the current year remain open to examination by federal and state taxing authorities. In addition, our tax years of 2018 through the current year remain open and subject to examination by local tax authorities in certain foreign jurisdictions in which we have major operations.