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TAXES | 3 Months Ended
--- | ---
Mar. 31, 2025
Income Tax Disclosure [Abstract] |
TAXES | TAXES
| Three Months Ended March 31, |  |  |  |
| 2025 |  | 2024 |  |  |  |  |  |  |  |
Provision for income taxes | $ | 28 |  |  | $ | 19 |  |  |  |  |  |  |  |  |
The increase in the provision for income taxes during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily driven by an increase in uncertain tax positions in 2025 related to foreign tax filings, combined with a benefit related to employee compensation in 2024. We are subject to audits by federal, state, and foreign tax authorities. U.S. tax years 2018 through 2020 are currently under field exam. U.S. tax years 2009 through 2011 have been subject to a U.S. Tax Court case concerning the tax treatment of the loyalty program in which the Internal Revenue Service is asserting that loyalty program contributions are taxable income to the Company. U.S. tax years 2012 through 2017 are pending the outcome of the U.S. Tax Court. The Tax Court issued an opinion on October 2, 2023 related to the aforementioned case and determined that the Company must recognize approximately $12 million in net taxable income for the tax years 2009 through 2011, but that the Company need not recognize approximately $228 million in net taxable income related to tax years that preceded 2009. The Tax Court entered its decision on September 13, 2024. The Company filed a Notice of Appeal to the U.S. Court of Appeals on December 9, 2024. As part of the appeal, the Company will pay the tax liability and interest related to the 2009 through 2011 tax years as determined by the Tax Court, which is estimated to be $2 million. If the Tax Court's opinion is upheld on appeal, the estimated income tax payment due for the subsequent years 2012 through 2025 would be $301 million, including $49 million of estimated interest, net of federal benefit. We believe we have an adequate uncertain tax liability recorded in accordance with Accounting Standards Codification 740, Income Taxes, for this matter and believe that the ultimate outcome of this matter will not have a material effect on our consolidated financial position, results of operations, or liquidity. At March 31, 2025 and December 31, 2024, total unrecognized tax benefits recorded in other long-term liabilities on our condensed consolidated balance sheets were $388 million and $366 million, respectively, of which $143 million and $137 million, respectively, would impact the effective tax rate, if recognized. While it is reasonably possible that the amount of uncertain tax benefits associated with the U.S. treatment of the loyalty program could significantly change within the next 12 months, at this time, we are not able to estimate the range by which the reasonably possible outcomes of the pending litigation could impact our uncertain benefits within the next 12 months. Through a prior acquisition, we assumed an assessment of additional corporate income tax from the Mexican tax authorities, which was in the process of being appealed, primarily related to disallowed deductions taken on historical tax returns. Our request for appeal to a higher court for one of the tax years was denied on May 15, 2024, and the assessment was finalized. At both March 31, 2025 and December 31, 2024, we had an $18 million tax liability recorded in other long-term liabilities on our condensed consolidated balance sheets in connection with this matter. Our filing position for the additional tax years and matters assessed is more likely than not to be sustained. As the tax benefit that is more than 50% likely of being realized upon settlement is zero, we had a $13 million uncertain tax liability recorded in other long-term liabilities on our condensed consolidated balance sheets at both March 31, 2025 and December 31, 2024. Further, the Mexican tax authorities disallowed credits taken on historical tax returns and applied value added taxes to certain transactions. In accordance with A ccounting Standards Codification 450, Contingencies, we have not recorded a liability associated with the additional value added tax as we do not believe a loss is probable. At March 31, 2025, our maximum exposure is not expected to exceed $12 million. During the year ended December 31, 2018, we received a notice from the Indian tax authorities assessing additional service tax on our operations in India. We appealed this decision and do not believe a loss is probable, and therefore, i n accordance with A ccounting Standards Codification 450, Contingencies, we have not recorded a liability in connection with this matter. At March 31, 2025, our maximum exposure is not expected to exceed $19 million, including $14 million of estimated penalties and interest.

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