Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes 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 have agreed to 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.
Subsequent to September 9, 2024 and as a result of the Split-Off, our current tax expense represents taxes attributable to the business carried on by us on a standalone basis. For the period from January 1, 2024 through September 9, 2024, our current tax expense was the amount of tax payable on the basis of a hypothetical, current-year separate return.
Income tax expense was $65 and $68 for the three months ended March 31, 2025 and 2024, respectively.
Our effective tax rate for the three months ended March 31, 2025 and 2024 was 24.2% and 22%, respectively. The effective tax rate for the three months ended March 31, 2025 was primarily driven by federal and state income tax expense and tax losses related to share-based compensation, partially offset by certain tax credits. The effective tax rate for the three months ended March 31, 2024 was primarily impacted by benefits related to certain tax credits, offset by the effect of state income taxes. We estimate our effective tax rate for the year ending December 31, 2025 will be approximately 22%.
During the three months ended March 31, 2025 and 2024, we recognized net tax benefits of $3 and $4, 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 months ended March 31, 2025 and 2024, the net tax benefits included tax credits and other income tax benefits of $37 and $25, respectively, which were partially offset by amortization expense of $34 and $21, respectively.
As of each of March 31, 2025 and December 31, 2024, we had a valuation allowance related to deferred tax assets of $93 that were not likely to be realized due to the timing of certain federal and state net operating loss limitations.
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