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Income Taxes | 12 Months Ended
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Dec. 31, 2024
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, 2022, 2023 and 2024 are as follows (in millions):
|  | Year Ended December 31,
|  | 2022 |  | 2023 |  | 2024
U.S. |  | $ | (8,523) |  |  | $ | 1,525 |  |  | $ | 3,455 |
Foreign |  | (903) |  |  | 796 |  |  | 670 |
Income (loss) before income taxes and income (loss) from equity method investments |  | $ | (9,426) |  |  | $ | 2,321 |  |  | $ | 4,125 |
The components of the provision for (benefit from) income taxes for the years ended December 31, 2022, 2023 and 2024 are as follows (in millions):
|  | Year Ended December 31,
|  | 2022 |  | 2023 |  | 2024
Current |  |  |  |  |  |
Federal |  | $ | 8 |  |  | $ | 1 |  |  | $ | 22 |
State |  | 15 |  |  | 16 |  |  | 42 |
Foreign |  | 237 |  |  | 170 |  |  | 205 |
Total current tax expense |  | 260 |  |  | 187 |  |  | 269 |
Deferred |  |  |  |  |  |
Federal |  | (251) |  |  | 11 |  |  | (5,154) |
State |  | (92) |  |  | 12 |  |  | (857) |
Foreign |  | (98) |  |  | 3 |  |  | (16) |
Total deferred tax expense (benefit) |  | (441) |  |  | 26 |  |  | (6,027) |
Total provision for (benefit from) income taxes |  | $ | (181) |  |  | $ | 213 |  |  | $ | (5,758) |
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2022, 2023 and 2024:
|  | Year Ended December 31,
|  | 2022 |  | 2023 |  | 2024
Federal statutory income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income tax expense (1) |  | 0.8 |  |  | 1.2 |  |  | (19.8) |
Foreign rate differential |  | 2.0 |  |  | (0.4) |  |  | (0.4) |
Non-deductible expenses |  | (0.7) |  |  | (0.2) |  |  | 2.2 |
Stock-based compensation |  | (1.4) |  |  | (1.9) |  |  | (5.2) |
Federal research and development credits |  | 0.6 |  |  | (7.2) |  |  | (5.1) |
Deferred tax on investments |  | (1.1) |  |  | (3.5) |  |  | — |
Entity restructuring (2) |  | (12.7) |  |  | 0.6 |  |  | (0.5) |
Change in unrecognized tax benefits |  | (8.9) |  |  | (6.8) |  |  | 37.8 |
Valuation allowance (3) |  | 1.1 |  |  | (2.8) |  |  | (164.3) |
US effects on foreign operations |  | 0.6 |  |  | 4.1 |  |  | (2.5) |
Withholding taxes |  | (0.3) |  |  | 9.5 |  |  | (0.1) |
Other interest |  | 1.7 |  |  | (4.1) |  |  | (2.8) |
Other, net |  | (0.8) |  |  | (0.3) |  |  | 0.1 |
Effective income tax rate |  | 1.9 | % |  | 9.2 | % |  | (139.6) | %
(1) We consistently report the effects of the state valuation allowance on the state income tax expense line-item within our effective tax rate. In 2024, we released $1.2 billion of our valuation allowance on our U.S. state deferred tax assets, with the exception of our California R&D credits. (2) 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) In 2024, we released $5.2 billion of our valuation allowance on our U.S. federal deferred tax assets. This is included on the change in valuation allowance line-item. The components of deferred tax assets and liabilities as of December 31, 2023 and 2024 are as follows (in millions):
|  | As of December 31,
|  | 2023 |  | 2024
Deferred tax assets |  |  |  |
Net operating loss carryforwards |  | $ | 6,164 |  |  | $ | 4,319 |
Research and development credits |  | 1,275 |  |  | 1,539 |
Stock-based compensation |  | 66 |  |  | 71 |
Accruals and reserves |  | 440 |  |  | 730 |
Accrued legal |  | 120 |  |  | 221 |
Fixed assets and intangible assets |  | 4,135 |  |  | 3,500 |
Lease liability |  | 436 |  |  | 391 |
Interest limitation carryforwards |  | 876 |  |  | 760 |
Capitalized research expenses |  | 771 |  |  | 1,317 |
Other |  | 211 |  |  | 381 |
Total deferred tax assets |  | 14,494 |  |  | 13,229 |
Less: Valuation allowance |  | (13,945) |  |  | (6,267) |
Total deferred tax assets, net of valuation allowance |  | 549 |  |  | 6,962 |
Deferred tax liabilities |  |  |  |
Investments |  | 114 |  |  | 515 |
ROU assets |  | 301 |  |  | 270 |
Other |  | 18 |  |  | 14 |
Total deferred tax liabilities |  | 433 |  |  | 799 |
Net deferred tax assets (liabilities) |  | $ | 116 |  |  | $ | 6,163 |
The income tax benefit was $5.8 billion for the year ended December 31, 2024, which includes a $6.4 billion benefit related to the release of our valuation allowance on the U.S. federal and state deferred tax assets, with the exception of our California R&D credits and other non-material 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 all available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will be realized. As of December 31, 2024, we demonstrated sustained profitability in the U.S. based on U.S. pre-tax book income adjusted for permanent book-to-tax differences. Further, given our taxable income position for the annual period ended on December 31, 2024, we utilized more attributes than we generated, which reduces our U.S. federal and state net deferred tax assets. This information is both objective and verifiable; thereby, representing strong positive evidence that carries significant weight. Based on all available positive and negative evidence, including the objective and verifiable positive evidence as described above and anticipated future earnings, we concluded it is more-likely-than-not that a majority of our U.S. federal and state deferred tax assets will be realizable. We continue to maintain a valuation allowance against the California R&D credits, as we believe it is not more-likely-than-not to be realized, as we expect R&D tax credit generation to exceed our ability to use these credits in future periods. Furthermore, based on available evidence, we believe it is more-likely-than-not that the Netherlands’ net deferred tax assets will not be fully realizable. We will continue to maintain a valuation allowance against these net deferred tax assets. We regularly review the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences and tax planning strategies by jurisdiction. 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 Netherlands 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 and the ability to successfully execute our business plans and/or tax planning strategies. Release of the valuation allowance would result in the recognition of net deferred tax assets on our consolidated balance sheet and would result in an income tax benefit in the period the release is recorded. As of December 31, 2024, we had U.S. federal NOL carryforwards of $176 million that begin to expire in 2031 and $8.2 billion that have an unlimited carryover period. As of December 31, 2024, we had U.S. state NOL carryforwards of $7.5 billion that started expiring in 2024 and $1.6 billion that have an unlimited carryover period. As of December 31, 2024, we had foreign NOL carryforwards of $759 million that begin to expire in 2024 and $19.2 billion that have an unlimited carryover period. As of December 31, 2024, we had U.S. federal research tax credit carryforwards of $1.2 billion that begin to expire in 2028. We had U.S. state research tax credit carryforwards of $798 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, 2024. 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,
|  | 2022 |  | 2023 |  | 2024
Unrecognized tax benefits at beginning of year |  | $ | 2,657 |  |  | $ | 3,513 |  |  | $ | 3,345 |
Gross increases - current year tax positions |  | 814 |  |  | 177 |  |  | 201 |
Gross increases - prior year tax positions (1) |  | 93 |  |  | 42 |  |  | 1,437 |
Gross decreases - prior year tax positions |  | (51) |  |  | (315) |  |  | (37) |
Gross decreases - settlements with tax authorities |  | — |  |  | — |  |  | (6) |
Gross decreases - lapse of statute of limitations |  | — |  |  | (72) |  |  | (3) |
Unrecognized tax benefits at end of year |  | $ | 3,513 |  |  | $ | 3,345 |  |  | $ | 4,937 |
(1) In 2024, new information became available that required a remeasurement of a prior year transfer pricing tax position resulting in an overall reduction in our net deferred tax assets of $1.2 billion, which is fully offset by a change in the valuation allowance. This is reflected in the increases to prior year uncertain tax positions above. As of December 31, 2024, approximately $421 million of unrecognized tax benefits, if recognized, would impact the effective tax rate. The remaining $4.5 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. As of December 31, 2023 and 2024, the amount of interest and penalties accrued was $17 million and $17 million, respectively. 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. An estimate of changes to unrecognized tax benefits recorded as of December 31, 2024, that are reasonably possible to occur within the next 12 months cannot be made. 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, 2024, the open tax years for our major tax jurisdictions are as follows:
Jurisdiction |  | Tax Years
U.S. Federal |  | 2011 - 2024
U.S. States |  | 2008 - 2024
Australia |  | 2019 - 2024
Netherlands |  | 2019 - 2024
United Kingdom |  | 2022 - 2024
As of December 31, 2024, the amount of unrecognized deferred tax liability on the undistributed earnings from certain foreign subsidiaries that we intend to indefinitely reinvest is not material.

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