Income Taxes |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes We have historically filed a consolidated federal income tax return for all of our wholly owned subsidiaries, including Sirius XM and Pandora. On February 1, 2021, we entered into a tax sharing agreement with Liberty Media governing the allocation of consolidated U.S. income tax liabilities and setting forth agreements with respect to other tax matters. The tax sharing agreement contains provisions that we believe are customary for tax sharing agreements between members of a consolidated group. On November 3, 2021, Liberty Media informed us that it beneficially owned over 80% of the outstanding shares of our common stock; as a result of this, we were included in the consolidated tax return of Liberty Media beginning November 4, 2021. The tax sharing agreement and our inclusion in Liberty Media’s consolidated tax group is not expected to have any material adverse effect on us.
We have calculated the provision for income taxes by using a separate return method. Any difference between the tax expense (or benefit) allocated to us under the separate return method and payments to be made for (or received from) Liberty Media for tax expense are treated as either dividends or capital contributions. Income tax expense was $92 and $110 for the three months ended September 30, 2023 and 2022, respectively, and $230 and $307 for the nine months ended September 30, 2023 and 2022, respectively. In addition, we recorded $5 as a capital contribution from Liberty Media during the nine months ended September 30, 2023 related to the tax sharing agreement.
Our effective tax rate for the three months ended September 30, 2023 and 2022 was 20.2% and 30.8%, respectively. Our effective tax rate for the nine months ended September 30, 2023 and 2022 was 20.2% and 26.6%, respectively. The effective tax rate for the three months ended September 30, 2023 was primarily impacted by benefits related to certain tax credits partially offset by shortfalls related to share-based compensation. The effective tax rate for the nine months ended September 30, 2023 was primarily impacted by the release of valuation reserves against state net operating losses we now expect to utilize and benefits related to certain tax credits partially offset by shortfalls related to share-based compensation. The effective tax rate for the three and nine months ended September 30, 2022 was negatively impacted as a result of the expected expiration of certain state and local net operating losses, partially offset by the recognition of excess tax benefits related to share-based compensation. We estimate our effective tax rate for the year ending December 31, 2023 will be approximately 21%.
As of September 30, 2023 and December 31, 2022, we had a valuation allowance related to deferred tax assets of $86 and $113, respectively, that were not likely to be realized due to the timing of certain federal and state net operating loss limitations.
On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy. Based on our historical net stock repurchase activity, the excise tax and the other provisions of the IRA did not have a material impact on our results of operations or financial position.
During the nine months ended September 30, 2023, we invested $33 in certain tax-effective clean energy technologies investments.
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