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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income Tax Provision The following table presents the components of our Income before income taxes and noncontrolling interests for the last three fiscal years:
($ in millions) | 2024 |  | 2023 |  | 2022
United States | $ | 281 |  |  | $ | 419 |  |  | $ | 508 |
Non-U.S. jurisdictions | 25 |  |  | (21) |  |  | 74 |
| $ | 306 |  |  | $ | 398 |  |  | $ | 582 |
Our (provision for) benefit from income taxes consisted of:
($ in millions) | 2024 |  | 2023 |  | 2022
Current | – U.S. Federal | $ | (28) |  |  | $ | (123) |  |  | $ | (91) |
| – U.S. State | (20) |  |  | (21) |  |  | (23) |
| – Non-U.S. | (7) |  |  | (62) |  |  | 5 |
|  | (55) |  |  | (206) |  |  | (109) |
Deferred | – U.S. Federal | (23) |  |  | 27 |  |  | (13) |
| – U.S. State | (15) |  |  | 12 |  |  | (26) |
| – Non-U.S. | 4 |  |  | 21 |  |  | (43) |
|  | (34) |  |  | 60 |  |  | (82) |
|  | $ | (89) |  |  | $ | (146) |  |  | $ | (191) |
Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate The following table reconciles the U.S. statutory income tax rate to our effective income tax rate:
| 2024 |  | 2023 |  | 2022
U.S. statutory income tax rate | 21.0% |  | 21.0% |  | 21.0%
U.S. state income taxes, net of U.S. federal tax benefit | 4.6 |  | 4.5 |  | 5.0
Share-based compensation, net of Section 162(m) limitation | 0.8 |  | 0.3 |  | (0.2)
Other permanent differences(1) | 1.0 |  | (3.0) |  | 1.5
Tax rate changes | 0.3 |  | (0.8) |  | 2.8
Non-U.S. income | 9.4 |  | 2.7 |  | 5.5
Tax credits | (0.8) |  | (0.6) |  | (0.2)
Unrecognized tax benefits | (6.3) |  | 5.5 |  | (2.7)
Change in valuation allowance | (2.6) |  | 7.1 |  | 1.0
Other items | 1.6 |  | (0.2) |  | (0.8)
Effective rate | 29.0% |  | 36.5% |  | 32.9%
(1)The 2024 permanent differences are primarily related to non-deductible interest, other expenses and foreign taxes partially offset by non-taxable income. The 2023 permanent differences are primarily related to non-taxable income and foreign taxes deducted in the U.S. The 2022 permanent differences primarily relate to non-deductible interest. We conduct business in countries that grant “holidays” from income taxes for ten to thirty-year periods. These holidays expire through 2034 and may be impacted by the global minimum tax rules (Pillar 2) set forth for large multinational corporations. Deferred Income Taxes The following table presents the significant components of our deferred tax assets and liabilities:
($ in millions) | At Year-End 2024 |  | At Year-End 2023
Deferred Tax Assets |  |  |
Inventory | $ | 74 |  |  | $ | 193 |
Reserves | 166 |  |  | 139 |
Convertible debt | 24 |  |  | 34 |
Deferred compensation | 42 |  |  | 35 |
Property and equipment | 73 |  |  | 56 |
Non-cash compensation | 15 |  |  | 15 |
Net operating loss and capital loss carryforwards | 143 |  |  | 153 |
Accrued expenses | 30 |  |  | 21 |
Tax credits | 30 |  |  | 27 |
Right-of-use asset | 50 |  |  | 50 |
Other, net | 31 |  |  | 25 |
Deferred tax assets | 678 |  |  | 748 |
Less valuation allowance | (163) |  |  | (179) |
Net deferred tax assets | 515 |  |  | 569 |
Deferred Tax Liabilities |  |  |
Long lived intangible assets | (189) |  |  | (199) |
Deferred sales of VOIs | (549) |  |  | (578) |
Right-of-use liability | (43) |  |  | (44) |
Other, net | (41) |  |  | (14) |
Deferred tax liabilities | (822) |  |  | (835) |
Total net deferred tax liabilities | $ | (307) |  |  | $ | (266) |
In 2024, the change in our valuation allowance is primarily related to realization of non-U.S. loss carryforwards. We have $6 million in foreign capital loss carryforwards and $126 million of foreign net operating loss carryforwards, some of which begin expiring in 2025; however, a significant portion of the net operating loss carryforwards have indefinite carryforward periods. We have $8 million of state net operating loss carryforwards, the majority of which will not expire within the next five years, $3 million of business interest deduction carryforwards and $7 million of state tax credit carryforwards, both of which have an indefinite carryforward period. In 2024, we elected to remove our permanent reinvestment assertion related to the undistributed earnings of certain foreign subsidiaries and accrued the applicable taxes of $20 million related to this decision. Subsequent to this change, we no longer have any subsidiaries for which undistributed earnings are treated as permanently reinvested. Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) is as follows:
($ in millions) | 2024 |  | 2023 |  | 2022
Unrecognized tax benefits at beginning of year | $ | 106 |  |  | $ | 25 |  |  | $ | 26 |
Increases related to tax positions taken during a prior period | 8 |  |  | 87 |  |  | 3 |
Decreases related to tax positions taken during a prior period | (82) |  |  | (6) |  |  | (4) |
Decreases as a result of a lapse of the applicable statute of limitations | (9) |  |  | — |  |  | — |
Unrecognized tax benefits at end of year | $ | 23 |  |  | $ | 106 |  |  | $ | 25 |
The increase in the unrecognized tax benefits during 2023 and subsequent decrease during 2024 is primarily related to an $80 million proposed tax method change in 2023, which was filed with the IRS in 2024. The total amount of gross interest and penalties accrued relating to unrecognized tax benefits was $37 million at December 31, 2024 and $48 million at December 31, 2023, which is predominantly attributable to non-U.S. jurisdictions. We recognized an income tax benefit of $11 million in 2024, an income tax expense of $20 million in 2023, and an income tax benefit of $14 million in 2022, related to accrued interest and penalties. Unrecognized tax benefits (including interest and penalties) of $29 million and $38 million, net of indemnification, would have impacted the effective tax rate for the years ended December 31, 2024 and December 31, 2023, respectively, if recognized. We anticipate $31 million of unrecognized tax benefits, including interest and penalties, will be indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., (the “Tax Matters Agreement”) and consequently have recorded a corresponding indemnification asset. The unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on our Balance Sheets. Our income tax returns are subject to examination by relevant tax authorities. Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2020. The amount of the unrecognized tax benefits may increase or decrease within the next twelve months as a result of audits or audit settlements. Other As of December 31, 2024, the $16 million tax reserve for non-income tax issues is predominantly related to the ILG Acquisition. We expect that we will be indemnified for liabilities of $3 million in connection with the Legacy-ILG non-income tax matters pursuant to the Tax Matters Agreement and consequently have recorded a corresponding indemnification asset.

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