Expedia 2012 Annual Report Download - page 119

The following table presents our estimated future minimum rental payments under operating leases with
noncancelable lease terms that expire after December 31, 2012, in thousands:
Year ending December 31,
2013 $ 43,794
2014 39,791
2015 37,092
2016 33,556
2017 30,186
2018 and thereafter 41,349
$225,768
Legal Proceedings
In the ordinary course of business, we are a party to various lawsuits. Management does not expect these
lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia. We
also evaluate other potential contingent matters, including value-added tax, federal excise tax, transient
occupancy or accommodation tax and similar matters. We do not believe that the aggregate amount of liability
that could be reasonably possible with respect to these matters would have a material adverse effect on our
financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our
legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business
and financial performance.
Litigation Relating to Hotel Occupancy Taxes. Eighty lawsuits have been filed by cities, counties and states
involving hotel occupancy taxes. Forty-three lawsuits are currently active. These lawsuits are in various stages
and we continue to defend against the claims made in them vigorously. With respect to the principal claims in
these matters, we believe that the ordinances at issue do not apply to the services we provide, namely the
facilitation of hotel reservations, and, therefore, that we do not owe the taxes that are claimed to be owed. We
believe that the ordinances at issue generally impose occupancy and other taxes on entities that own, operate or
control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date,
thirty-two of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and,
generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further
litigation. Nineteen dismissals were based on a finding that we and the other defendants were not subject to the
local hotel occupancy tax ordinance or that the local government lacked standing to pursue their claims. As a
result of this litigation and other attempts by certain jurisdictions to levy such taxes, we have established a
reserve for the potential settlement of issues related to hotel occupancy taxes, consistent with applicable
accounting principles and in light of all current facts and circumstances, in the amount of $35 million as of
December 31, 2012 and $32 million as of December 31, 2011. This reserve is based on our best estimate and the
ultimate resolution of these contingencies may be greater or less than the liabilities recorded. In addition, as of
December 31, 2011, we had an accrual totaling $10 million related to court decisions and final settlements.
Changes to these settlement reserves are included within legal reserves, occupancy tax and other in the
consolidated statements of operations.
In connection with various occupancy tax audits and assessments, certain jurisdictions may assert that
taxpayers are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the
ordinances, which is referred to as “pay-to-play.” These jurisdictions may attempt to require that we pay any
assessed taxes prior to being allowed to contest or litigate the applicability of the tax ordinance. Payment of these
amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made,
we continue to defend our position vigorously. During 2010 and 2009, we expensed $3 million and $48 million
related to monies paid in advance of litigation in occupancy tax proceedings in the cities of Santa Monica and San
Francisco. In each case, we paid such amounts in order to be allowed to pursue litigation challenging whether we
F-37