TAXES |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TAXES | TAXES
Provision for income taxes increased during the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, primarily due to increased pre-tax income. We are subject to audits by federal, state, and foreign tax authorities. U.S. tax years 2021 through 2023 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 ("IRS") is asserting that loyalty program contributions are taxable income to the Company. The litigation remains ongoing before the U.S. Court of Appeals for the Seventh Circuit, as discussed below. U.S. tax years 2012 through 2020 are open pending the outcome of the proceedings for U.S. years 2009 through 2011. The Tax Court issued an opinion on October 2, 2023 related to the loyalty program 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 for the Seventh Circuit on December 9, 2024 to challenge the Tax Court's rulings that were not in the Company's favor. On April 22, 2026, the Seventh Circuit issued an opinion agreeing with certain of the Company's legal arguments, disagreeing with certain of the Tax Court's conclusions, vacating the decision of the Tax Court, and remanding the case to the Tax Court for further proceedings. On July 8, 2026, the IRS filed a petition for panel rehearing and rehearing en banc with the U.S. Court of Appeals for the Seventh Circuit. If the legal proceedings ultimately reach a conclusion consistent with the Tax Court's prior opinion, the estimated income tax payment due for the subsequent tax years 2012 through 2026 would be $387 million, including $71 million of estimated interest, net of federal benefit. We believe we have an adequate uncertain tax liability recorded 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 June 30, 2026 and December 31, 2025, total unrecognized tax benefits recorded in other long-term liabilities on our condensed consolidated balance sheets were $470 million and $503 million, respectively, of which $171 million and $244 million, respectively, would impact the effective tax rate, if recognized. The decrease was primarily related to the settlement of an assumed tax liability that was triggered by the Playa Hotels Acquisition, partially offset by an increase related to an accrual for the U.S. tax treatment of the loyalty program. 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. During the six months ended June 30, 2026, the Mexican Circuit Court issued rulings and disallowed deductions for the other tax year, and the Mexican tax authorities issued a final tax assessment. At June 30, 2026 and December 31, 2025, we had $40 million and $37 million, respectively, of tax liabilities recorded in connection with this matter, which included $26 million and $37 million, respectively, recorded in other long-term liabilities and $14 million and no amount, respectively, recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets. Further, the Mexican tax authorities disallowed credits taken on historical tax returns and applied value added taxes to certain transactions. The Mexican Circuit Court ruling described above also resulted in a favorable outcome for one of the tax years with respect to this matter. During the three months ended June 30, 2026, our appeal related to the other tax year was denied, and we appealed the decision to a higher court. We have not recorded a liability associated with the additional value added tax for the other tax year as we do not believe a loss is probable. At June 30, 2026, our maximum exposure is not expected to exceed $9 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, we have not recorded a liability in connection with this matter. At June 30, 2026, our maximum exposure is not expected to exceed $20 million, including $15 million of estimated penalties and interest.
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