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Note 10. Income Taxes Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | INCOME TAXES The components of pretax income for domestic and foreign operations consisted of the following:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Domestic | $ | 351 |  |  | $ | 290 |  |  | $ | 230 |
Foreign | 10 |  |  | 8 |  |  | 4 |
Pretax income | $ | 361 |  |  | $ | 298 |  |  | $ | 234 |
The components of income tax expense consisted of the following:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |
Federal | $ | 10 |  |  | $ | 8 |  |  | $ | 5 |
State | 8 |  |  | 3 |  |  | 1 |
Foreign | 2 |  |  | 3 |  |  | 4 |
Total current | 20 |  |  | 14 |  |  | 10 |
Deferred: |  |  |  |  |
Federal | 107 |  |  | 91 |  |  | 76 |
State | 16 |  |  | 4 |  |  | 1 |
Foreign | 1 |  |  | 1 |  |  | — |
Total deferred | 124 |  |  | 96 |  |  | 77 |
Income tax expense | $ | 144 |  |  | $ | 110 |  |  | $ | 87 |
A reconciliation of the Company’s effective income tax rate at the U.S. federal statutory rate of 35% to the actual expense was as follows:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Federal statutory rate | 35 | % |  | 35 | % |  | 35 | %
State and local income taxes, net of federal tax benefits | 4 |  |  | 2 |  |  | 5 |
Permanent differences | 1 |  |  | 1 |  |  | 2 |
Net change in valuation allowance | — |  |  | 1 |  |  | (3 | )
Other | — |  |  | (2 | ) |  | (2 | )
Effective tax rate | 40 | % |  | 37 | % |  | 37 | %
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the deferred income tax assets and liabilities, as of December 31, are as follows:
| 2016 |  | 2015
Deferred income tax assets: |  |  |
Net operating loss carryforwards | $ | 503 |  |  | $ | 654 |
Tax credit carryforwards | 41 |  |  | 28 |
Accrued liabilities | 131 |  |  | 123 |
Minimum pension obligation | 23 |  |  | 23 |
Provision for doubtful accounts | 16 |  |  | 18 |
Liability for unrecognized tax benefits | 3 |  |  | 6 |
Interest rate swaps | 8 |  |  | 11 |
Other | — |  |  | 1 |
Total deferred tax assets | 725 |  |  | 864 |
Less: valuation allowance | (10 | ) |  | (11 | )
Total deferred income tax assets after valuation allowance | 715 |  |  | 853 |
Deferred income tax liabilities: |  |  |
Depreciation and amortization | 1,099 |  |  | 1,105 |
Change in tax return accounting methods | — |  |  | 9 |
Prepaid expenses | 1 |  |  | 2 |
Undistributed foreign earnings | 2 |  |  | 2 |
Basis difference in investment in joint ventures | 2 |  |  | 1 |
Total deferred tax liabilities | 1,104 |  |  | 1,119 |
Net deferred income tax liabilities | $ | (389 | ) |  | $ | (266 | )
Deferred tax assets and deferred tax liabilities are netted by tax jurisdiction. The Net deferred income tax liability of $389 million as of December 31, 2016 is included in the accompanying Consolidated Balance Sheets with the entire $389 million in deferred income taxes (non-current liabilities). The Net deferred income tax liability of $266 million as of December 31, 2015 is included in the accompanying Consolidated Balance Sheets with $267 million in deferred income taxes (non-current liabilities) and $1 million in other non-current assets. As of December 31, 2016, the Company had gross federal and state net operating loss carryforwards of $1,253 million which is net of loss carryforwards which were limited due to the October 2012 ownership change. The federal net operating loss carryforwards expire between 2022 and 2033 and the state net operating loss carryforwards expire between 2017 and 2033. Accounting for Uncertainty in Income Taxes The Company utilizes the FASB guidance for accounting for uncertainty in income taxes, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company reflects changes in its liability for unrecognized tax benefits as income tax expense in the Consolidated Statements of Operations. As of December 31, 2016, the Company’s gross liability for unrecognized tax benefits was $78 million, of which $70 million would affect the Company’s effective tax rate, if recognized. The Company files U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. Tax returns for the 2006 through 2016 tax years remain subject to examination by federal and certain state tax authorities. In significant foreign jurisdictions, tax returns for the 2008 through 2016 tax years generally remain subject to examination by their respective tax authorities. The Company believes that it is reasonably possible that the total amount of its unrecognized tax benefits could decrease by $3 million in certain taxing jurisdictions where the statute of limitations is set to expire within the next 12 months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in interest expense and operating expenses, respectively. The Company recognized a reduction of interest expense of $4 million for the year ended December 31, 2016, a reduction of interest expense of $1 million for the year ended December 31, 2015 and no change to interest expense for the year ended December 31, 2014. The rollforward of unrecognized tax benefits are summarized in the table below:
Unrecognized tax benefits—January 1, 2014 | 113 |
Gross increases—tax positions in prior periods | 1 |
Gross decreases—tax positions in prior periods | (8 | )
Gross increases—tax positions in current period | 3 |
Settlements | (1 | )
Reduction due to lapse of statute of limitations | (2 | )
Unrecognized tax benefits—December 31, 2014 | 106 |
Gross decreases—tax positions in prior periods | (4 | )
Gross increases—tax positions in current period | 1 |
Settlements | (23 | )
Reduction due to lapse of statute of limitations | (2 | )
Unrecognized tax benefits—December 31, 2015 | 78 |
Gross increases—tax positions in prior periods | 3 |
Reduction due to lapse of statute of limitations | (3 | )
Unrecognized tax benefits—December 31, 2016 | $ | 78 |
The Company is subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording related assets and liabilities. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities whereby the outcome of the audits is uncertain. The Company believes there is appropriate support for positions taken on its tax returns. The liabilities that have been recorded represent the best estimates of the probable loss on certain positions and are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. However, the outcomes of tax audits are inherently uncertain. Tax Sharing Agreement Under the Tax Sharing Agreement with Cendant, Wyndham Worldwide and Travelport, the Company is generally responsible for 62.5% of payments made to settle claims with respect to tax periods ending on or prior to December 31, 2006 that relate to income taxes imposed on Cendant and certain of its subsidiaries, the operations (or former operations) of which were determined by Cendant not to relate specifically to the respective businesses of Realogy, Wyndham Worldwide, Avis Budget or Travelport. With respect to any remaining residual legacy Cendant tax liabilities, the Company and its former parent believe there is appropriate support for the positions taken on Cendant’s tax returns. However, tax audits and any related litigation, including disputes or litigation on the allocation of tax liabilities between parties under the Tax Sharing Agreement, could result in outcomes for the Company that are different from those reflected in the Company’s historical financial statements.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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