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Income taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes Our subsidiaries are subject to income taxation in a number of tax jurisdictions, principally Ireland. Income before income taxes and income of investments accounted for under the equity method for 2024 includes income of $2.1 billion relating to Ireland and income of $0.2 billion relating to other jurisdictions. Income before income taxes and income of investments accounted for under the equity method for 2023 includes income of $3.2 billion relating to Ireland and income of $0.1 billion relating to other jurisdictions. Loss before income taxes and income of investments accounted for under the equity method for 2022 includes a loss of $1.1 billion relating to Ireland and income of $0.1 billion relating to other jurisdictions. The following table presents our income tax expense (benefit) by significant tax jurisdiction for the years ended December 31, 2024, 2023 and 2022:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
Deferred tax expense (benefit), excluding the net change in valuation allowance |  |  |  |  |
Ireland | $ | 261,669 |  |  | $ | 300,646 |  |  | $ | 25,648 |
Other | 3,691 |  |  | 28,572 |  |  | (3,118) |
| 265,360 |  |  | 329,218 |  |  | 22,530 |
Deferred tax (benefit) expense related to the net change in valuation allowance |  |  |  |  |
Ireland | 16,360 |  |  | 957 |  |  | 5,621 |
Other | (31,216) |  |  | (50,106) |  |  | (37,737) |
| (14,856) |  |  | (49,149) |  |  | (32,116) |
Current tax expense (benefit) |  |  |  |  |
Ireland | 41,838 |  |  | 13,147 |  |  | (159,730) |
Other | 31,362 |  |  | (2,160) |  |  | 5,219 |
| 73,200 |  |  | 10,987 |  |  | (154,511) |
Income tax expense (benefit) | $ | 323,704 |  |  | $ | 291,056 |  |  | $ | (164,097) |
16. Income taxes (Continued) The following table provides a reconciliation of income tax expense (benefit) at the domestic trading statutory income tax rate of 12.5% in Ireland, where the Company is tax resident, to income tax expense (benefit) for the years ended December 31, 2024, 2023 and 2022:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022 |
Income tax expense (benefit) at statutory income tax rate of 12.5% | $ | 282,922 |  | 12.5 | % |  | $ | 409,023 |  | 12.5 | % |  | $ | (125,303) |  | 12.5 | % |
Foreign rate differential | 14,412 |  | 0.6 | % |  | 6,025 |  | 0.2 | % |  | 13,701 |  | (1.3 | %) |
Pillar Two top-up taxes | 42,598 |  | 1.9 | % | (a) | — |  | — |  |  | — |  | — |  |
Withholding tax borne | 22,557 |  | 1.0 | % | (b) | 12,716 |  | 0.4 | % |  | — |  | — |  |
Entities taxable at a higher Irish rate | (16,321) |  | (0.7 | %) | (c) | (1,788) |  | (0.1 | %) |  | (2,862) |  | 0.3 | % |
Other reconciling items | (7,608) |  | (0.3 | %) | (d) | 3,347 |  | 0.1 | % | (f) | (17,518) |  | 1.7 | % | (i)
Remeasurement of deferred taxes | — |  | — |  |  | (43,806) |  | (1.3 | %) | (g) | — |  | — |  |
Gains not taxable | — |  | — |  |  | (45,312) |  | (1.4 | %) | (h) | — |  | — |  |
Valuation allowance | (14,856) |  | (0.7 | %) | (e) | (49,149) |  | (1.5 | %) |  | (32,115) |  | 3.2 | % |
| 40,782 |  | 1.8 | % |  | (117,967) |  | (3.6 | %) |  | (38,794) |  | 3.9 | % |
Income tax expense (benefit) | $ | 323,704 |  | 14.3 | % |  | $ | 291,056 |  | 8.9 | % |  | $ | (164,097) |  | 16.4 | % |
(a)This amount relates to 2024 top-up taxes arising in respect of Pillar Two in Ireland. (b)Withholding taxes relate to cross border payments made to group entities that are subject to withholding taxes. (c)A higher rate of taxation of 25% applies to certain Irish tax resident entities. Some of our entities with a 25% Irish tax rate incurred a loss during the year and therefore their losses have been valued at 25%. (d)The 2024 other reconciling items include the following tax-effected amounts: non-deductible interest expense of $10 million, unrecognized tax benefit release of $8 million which is discussed further below and other items of $10 million. (e)See note below table presenting the movements in the valuation allowance for deferred tax assets for further detail. (f)The 2023 other reconciling items included the following tax-effected amounts: non-deductible expenses of $6 million and other items of $3 million. (g)The 2023 remeasurement of deferred taxes relates to the reversal of a deferred tax liability for undistributed profits that may now be recovered in a tax-free manner. (h)The 2023 gains not taxable arises due to tax-exempt gains realized by group companies on the release of intra-group liabilities. (i)The 2022 other reconciling items included the following tax-effected amounts: non-deductible expenses of $8 million, a benefit relating to a consolidation of group of $22 million, and other items of $4 million. The calculation of income for income tax purposes differs significantly from financial statement income. Deferred tax is provided to reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and such amounts as measured under income tax law in the various jurisdictions. Operating loss carryforwards and accelerated tax depreciation on flight equipment give rise to our most significant deferred tax assets and liabilities. 16. Income taxes (Continued) The following tables provide details regarding the principal components of our deferred tax assets and liabilities by significant jurisdiction as of December 31, 2024 and 2023:
| As of December 31, 2024
| Ireland |  |  |  | Other |  | Total
Deferred tax assets |  |  |  |  |  |  |
Flight equipment | $ | 7,285 |  |  |  |  | $ | 3,639 |  |  | $ | 10,924 |
Other intangibles | — |  |  |  |  | 72,702 |  |  | 72,702 |
Deferred losses on sale of assets | — |  |  |  |  | 8,137 |  |  | 8,137 |
Operating loss and tax credit carryforwards | 1,713,394 |  |  |  |  | 108,108 |  |  | 1,821,502 |
Other | 1,332 |  |  |  |  | 16,056 |  |  | 17,388 |
Total deferred tax assets | 1,722,011 |  |  |  |  | 208,642 |  |  | 1,930,653 |
Valuation allowance | (33,601) |  |  |  |  | (22,355) |  |  | (55,956) |
Deferred tax assets, net of valuation allowance | $ | 1,688,410 |  |  |  |  | $ | 186,287 |  |  | $ | 1,874,697 |
Deferred tax liabilities |  |  |  |  |  |  |
Flight equipment | $ | (4,264,191) |  |  |  |  | $ | (86,207) |  |  | $ | (4,350,398) |
Other intangibles | (17,458) |  |  |  |  | — |  |  | (17,458) |
Other | (6,421) |  |  |  |  | (7,290) |  |  | (13,711) |
Total deferred tax liabilities | $ | (4,288,070) |  |  |  |  | $ | (93,497) |  |  | $ | (4,381,567) |
Total net deferred tax (liabilities) assets | $ | (2,599,660) |  |  |  |  | $ | 92,790 |  |  | $ | (2,506,870) |
| As of December 31, 2023
| Ireland |  |  |  | Other |  | Total
Deferred tax assets |  |  |  |  |  |  |
Flight equipment | $ | 8,690 |  |  |  |  | $ | 3,991 |  |  | $ | 12,681 |
Other intangibles | — |  |  |  |  | 77,344 |  |  | 77,344 |
Deferred losses on sale of assets | — |  |  |  |  | 11,937 |  |  | 11,937 |
Operating loss and tax credit carryforwards | 1,991,125 |  |  |  |  | 94,955 |  |  | 2,086,080 |
Other | 1,756 |  |  |  |  | 20,450 |  |  | 22,206 |
Total deferred tax assets | 2,001,571 |  |  |  |  | 208,677 |  |  | 2,210,248 |
Valuation allowance | (17,242) |  |  |  |  | (53,570) |  |  | (70,812) |
Deferred tax assets, net of valuation allowance | $ | 1,984,329 |  |  |  |  | $ | 155,107 |  |  | $ | 2,139,436 |
Deferred tax liabilities |  |  |  |  |  |  |
Flight equipment | $ | (4,274,880) |  |  |  |  | $ | (82,174) |  |  | $ | (4,357,054) |
Other intangibles | (20,193) |  |  |  |  | — |  |  | (20,193) |
Other | (6,325) |  |  |  |  | (6,228) |  |  | (12,553) |
Total deferred tax liabilities | $ | (4,301,398) |  |  |  |  | $ | (88,402) |  |  | $ | (4,389,800) |
Total net deferred tax (liabilities) assets | $ | (2,317,069) |  |  |  |  | $ | 66,705 |  |  | $ | (2,250,364) |
16. Income taxes (Continued) The net deferred tax liabilities as of December 31, 2024 of $2.5 billion were recognized in our Consolidated Balance Sheet as deferred tax assets of $261 million and as deferred tax liabilities of $2.8 billion. The net deferred tax liabilities as of December 31, 2023 of $2.3 billion were recognized in our Consolidated Balance Sheet as deferred tax assets of $276 million and as deferred tax liabilities of $2.5 billion. The following table presents the movements in the valuation allowance for deferred tax assets during the years ended December 31, 2024, and 2023:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022 |  |
Valuation allowance at beginning of period | $ | 70,812 |  |  | $ | 119,961 |  |  | $ | 152,077 |  |  |
Increase of allowance included in income tax expense | 21,396 |  |  | 2,035 |  |  | 5,810 |  |  |
Decrease of allowance included in income tax expense | (36,252) |  |  | (51,184) |  |  | (37,926) |  |  |
Net decrease in valuation allowance | (14,856) |  |  | (49,149) |  |  | (32,116) |  |  |
Valuation allowance at end of period | $ | 55,956 |  |  | $ | 70,812 |  |  | $ | 119,961 |  |  |
The Company has assessed, on a jurisdictional basis, the realization of its deferred tax assets, including the ability to carry back net operating losses, the existence of taxable temporary differences, the availability of tax-planning strategies and available sources of future taxable income. The Company has concluded that based on cumulative income and future taxable income that it will be able to realize a benefit for its deferred tax assets in certain jurisdictions. In addition, the Company has concluded that a valuation allowance on certain deferred tax assets in Ireland and certain other jurisdictions continues to be appropriate considering income projections and uncertainty with respect to future taxable income. During the year ended December 31, 2024, the Company released a net valuation allowance of $15 million as an income tax benefit. The Company determined that the positive evidence outweighed the negative evidence in certain tax-paying components of the business, resulting in valuation allowance releases. It is possible that within the next 12 months there may be sufficient positive evidence to release a portion of the remaining valuation allowance. Release of a portion of the remaining valuation allowance would result in a benefit to income tax expense for the period the release is recorded, which could have an impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in Ireland and certain foreign entities and jurisdictions. The income tax benefit included in the net change in valuation allowance primarily relates to a U.S. valuation allowance release. In relation to the U.S. valuation allowance release, $6 million relates to utilizing operating loss carryforwards during the current year that were offset by a valuation allowance at the beginning of the year and $26 million relates to adjustments to the beginning of the year valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the deferred tax asset in future years. During the year ended December 31, 2023, the Company released a net valuation allowance of $49 million as an income tax benefit. During the year ended December 31, 2022, the Company released a net valuation allowance of $32 million as an income tax benefit. 16. Income taxes (Continued) As of December 31, 2024, 2023 and 2022, we had $0.1 million, $17 million and $32 million, respectively, of unrecognized tax benefits. Of the movement between opening and closing in respect of 2024, $0.01 million relates to the increase in unrecognized tax benefits as a result of tax positions taken in a prior period, $8 million relates to a decrease in unrecognized tax benefits as a result of a position taken in a prior period and $9 million relates to a decrease in the unrecognized tax benefits due to a settlement with a taxing authority. Of the movement between opening and closing in respect of 2023, $0.1 million relates to the increase in unrecognized tax benefits as a result of tax positions taken in the current period, $9 million relates to a decrease in unrecognized tax benefits as a result of a lapse of the applicable statute of limitations and $6 million relates to a decrease in unrecognized tax benefits as a result of tax positions taken in a prior period. Of the movement between opening and closing in respect of 2022, $1 million relates to the increase in unrecognized tax benefits as a result of tax positions taken in a prior period and $6 million relates to a decrease in unrecognized tax benefits as a result of tax positions taken in a prior period. Substantially all of the unrecognized tax benefits as of December 31, 2024, if recognized, would affect our effective tax rate. Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial condition. Our major tax jurisdiction is Ireland, where our tax returns are open for examination from 2020 forward. Global Tax Reform In 2019, the OECD announced an initiative to create an international consensus on new rules (referred to as “BEPS 2.0”) for the framework governing international taxation, which was supported by the publication of the Pillar One and Pillar Two Blueprint Reports (the “Blueprints”) in 2020. In 2021, the European Commission published an EU Directive (the “EU Minimum Tax Directive”) to incorporate the Pillar Two minimum tax rate rules into EU law, which Ireland has enacted into domestic legislation. In Ireland, the EU Minimum Tax Directive has been implemented by means of a new top-up tax to achieve an effective rate of 15% that became effective on January 1, 2024. Further guidance from the OECD and the Irish tax authorities in relation to these rules is expected to be published in the future. It is also possible that the Irish tax authorities will seek to further refine or change the Irish tax rules regarding Pillar Two given that it is a new development in Irish tax law. It is difficult to determine the degree to which any future guidance or changes in law could alter the operation of this tax, and any such developments may have an adverse impact on our effective tax rate and cash tax liabilities in future periods. Ireland Since 2006, the enacted Irish trading corporate income tax rate has been 12.5%. Some of our Irish tax-resident operating subsidiaries have significant operating loss carryforwards as of December 31, 2024, which give rise to deferred tax assets. These operating loss carryforwards of $13.7 billion do not expire with time. In addition, the vast majority of our Irish tax-resident subsidiaries are entitled to accelerated aircraft depreciation for income tax purposes and to shelter net taxable income with the surrender of losses on a current year basis within the Irish tax group. Based on projected taxable profits in our Irish subsidiaries, we expect to recover the majority of the value of our Irish deferred tax assets and we have not recognized a valuation allowance against these assets, with the exception of $19 million, as of December 31, 2024. We also have $15 million of tax credit carryforwards, which do not expire with time, available in Ireland. A valuation allowance has been recognized in full against these tax credit carryforwards. United States As of December 31, 2024, we had U.S. federal net operating carryforwards of $388 million, of which $135 million expire between 2028 and 2036 and $253 million are available to offset future federal taxable income indefinitely. Additionally, of the $135 million of net operating loss carryforwards with defined expiration dates, $52 million are subject to annual limitations under Internal Revenue Code Section 382. As of December 31, 2024, we had net operating loss carryforwards for state income tax purposes of $66 million, of which $33 million expire between 2025 and 2044 and $33 million are available to offset future state taxable income indefinitely.

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