Income Taxes |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes Certain entities and activities attributed to us were included in the federal consolidated income tax returns of Liberty Media during the periods presented. Tax sharing payments were remitted between Liberty Media and us in accordance with Liberty Media’s tax sharing policies based on income tax benefits or liabilities attributed to us. As of September 30, 2024 and December 31, 2023, we had an income tax payable of approximately $45 and $131, respectively, included in other current liabilities in our unaudited consolidated balance sheet.
In connection with the Transactions, we entered into a new Tax Sharing Agreement with Liberty Media. The Tax Sharing Agreement generally allocates taxes, tax benefits, tax items, and tax-related losses between Liberty Media and us in a manner consistent with the tax sharing policies of Liberty Media in effect prior to the Split-Off, with taxes, tax benefits and tax items attributable to the assets, liabilities and activities attributed to the Liberty Formula One Group and the Liberty Live Group being allocated to Liberty Media, and taxes, tax benefits and tax items attributable to the assets, liabilities and activities attributed to the Liberty SiriusXM Group being allocated to us. In addition, the Tax Sharing Agreement includes additional provisions related to the manner in which any taxes or tax-related losses arising from the Split-Off will be allocated between the parties and provides restrictive covenants intended to preserve the generally tax-free treatment of the Transactions. The failure by a party to comply with its restrictive covenants may change the general allocation of taxes, tax benefits and tax items between the parties related to the Transactions. The parties must indemnify each other for taxes and losses allocated to them under the Tax Sharing Agreement and for taxes and losses arising from a breach by them of their respective covenants and obligations under the Tax Sharing Agreement. The Tax Sharing Agreement also includes provisions addressing the filing of tax returns, control of tax audits, cooperation on tax matters, retention of tax records, indemnification, and other tax matters.
Income tax benefit (expense) was $39 and $(79) for the three months ended September 30, 2024 and 2023, respectively, and $(103) and $(199) for the nine months ended September 30, 2024 and 2023, respectively.
Our effective tax rate for the three months ended September 30, 2024 and 2023 was 1.3% and (21.4)%, respectively. Our effective tax rate for the nine months ended September 30, 2024 and 2023 was (4.6)% and (20.8)%, respectively. The effective tax rate for the three and nine months ended September 30, 2024 was primarily impacted by the nondeductible Sirius XM goodwill impairment charge, partially offset by tax losses related to share-based compensation and an increase in valuation allowance and net operating loss expirations related to state net operating losses that are projected to expire unutilized. The effective tax rate for the three and nine months ended September 30, 2023 was primarily impacted by the release of valuation reserves against state net operating losses we now expect to realize and benefits related to certain tax credits. We estimate our effective tax rate for the year ending December 31, 2024 will be approximately 21%.
During the three and nine months ended September 30, 2024, we recognized net tax benefits of $9 and $25, respectively, related to our tax equity investments. These recognized net tax benefits were recorded to Income tax expense in our unaudited
consolidated statement of comprehensive income. During the three and nine months ended September 30, 2024, the net tax benefits included tax credits and other income tax benefits of $44 and $123, respectively, which were partially offset by amortization expense of $35 and $98, respectively.
As of September 30, 2024 and December 31, 2023, we had a valuation allowance related to deferred tax assets of $93 and $88, respectively, that were not likely to be realized due to the timing of certain federal and state net operating loss limitations.
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