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Income Taxes
 12 Months Ended
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,
202220232024
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,
202220232024
Current
Federal$8 $1 $22 
State15 16 42 
Foreign237 170 205 
Total current tax expense260 187 269 
Deferred
Federal(251)11 (5,154)
State(92)12 (857)
Foreign(98)3 (16)
Total deferred tax expense (benefit)(441)26 (6,027)
Total provision for (benefit from) income taxes$(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,
202220232024
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income tax expense (1)
0.8 1.2 (19.8)
Foreign rate differential2.0 (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 credits0.6 (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 operations0.6 4.1 (2.5)
Withholding taxes(0.3)9.5 (0.1)
Other interest1.7 (4.1)(2.8)
Other, net(0.8)(0.3)0.1 
Effective income tax rate1.9 %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,
20232024
Deferred tax assets
Net operating loss carryforwards$6,164 $4,319 
Research and development credits1,275 1,539 
Stock-based compensation66 71 
Accruals and reserves440 730 
Accrued legal120 221 
Fixed assets and intangible assets
4,135 3,500 
Lease liability436 391 
Interest limitation carryforwards876 760 
Capitalized research expenses771 1,317 
Other211 381 
Total deferred tax assets14,494 13,229 
Less: Valuation allowance(13,945)(6,267)
Total deferred tax assets, net of valuation allowance549 6,962 
Deferred tax liabilities
Investments114 515 
ROU assets301 270 
Other18 14 
Total deferred tax liabilities433 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,
202220232024
Unrecognized tax benefits at beginning of year$2,657 $3,513 $3,345 
Gross increases - current year tax positions814 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:
JurisdictionTax Years
U.S. Federal2011 - 2024
U.S. States2008 - 2024
Australia2019 - 2024
Netherlands2019 - 2024
United Kingdom2022 - 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.