Expedia 2014 Annual Report Download - page 113

As of December 31, 2014, we had federal, state, and foreign net operating loss carryforwards (“NOLs”) of
approximately $5 million, $13 million and $185 million. If not utilized, the federal and state NOLs will expire at
various times between 2015 and 2033. Foreign NOLs of $134 million may be carried forward indefinitely, and
foreign NOLs of $51 million will expire at various times between 2016 and 2034.
As of December 31, 2014, we had a valuation allowance of approximately $51 million related to certain
NOL carryforwards for which it is more likely than not the tax benefit will not be realized. The valuation
allowance increased by $18 million from the amount recorded as of December 31, 2013 due to the recording of a
valuation allowance on cumulative foreign net operating losses for which realization is no longer certain,
predominantly at certain Australian and Chinese entities. The amount of the deferred tax asset considered
realizable, however, could be adjusted if estimates of future taxable income during the carryforward period
change, or if objective negative evidence in the form of cumulative losses is no longer present and additional
weight may be given to subjective evidence such as our projections for growth.
We have not provided deferred income taxes on taxable temporary differences related to investments in
certain foreign subsidiaries where the foreign subsidiary has or will invest undistributed earnings indefinitely
outside of the United States. The total amount of such undistributed earnings was $916 million as of
December 31, 2014, which approximates the related taxable temporary difference. In the event we distribute such
earnings in the form of dividends or otherwise, we may be subject to income taxes. Further, a sale of these
subsidiaries may cause these temporary differences to become taxable. Due to complexities in tax laws,
uncertainties related to the timing and source of any potential distribution of such earnings, and other important
factors such as the amount of associated foreign tax credits, it is not practicable to estimate the amount of
unrecognized deferred taxes on these taxable temporary differences.
Reconciliation of U.S. Federal Statutory Income Tax Rate to Effective Income Tax Rate
A reconciliation of amounts computed by applying the federal statutory income tax rate to income from
continuing operations before income taxes to total income tax expense is as follows:
Year Ended December 31,
2014 2013 2012
(In thousands)
Income tax expense at the federal statutory rate of 35% $162,624 $105,243 $122,520
Foreign tax rate differential (81,371) (87,729) (78,094)
State income taxes, net of effect of federal tax benefit 2,720 3,994 1,280
Unrecognized tax benefits and related interest (1,625) 12,096 16,038
Change in valuation allowance 13,914 19,167 (11,838)
Pay-to-play penalties 1,322 14,404 —
trivago acquisition stock-based compensation — 19,825 —
Other, net (5,893) (2,665) (2,828)
Income tax expense $ 91,691 $ 84,335 $ 47,078
Our effective tax rate in 2014, 2013 and 2012 was lower than the 35% federal statutory income tax rate due
to earnings in foreign jurisdictions, primarily Switzerland, where the statutory income tax rate is lower.
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