Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 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 separate return.
Income tax expense was $59 and $76 for the three months ended June 30, 2025 and 2024, respectively, and $124 and $144 for the six months ended June 30, 2025 and 2024, respectively.
Our effective tax rate for the three months ended June 30, 2025 and 2024 was 22.3% and 17.7%, respectively. Our effective tax rate for the six months ended June 30, 2025 and 2024 was 23.3% and 19.5%, respectively. The effective tax rate for the three and six months ended June 30, 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 and six months ended June 30, 2024 was primarily impacted by the effect of federal and state income tax expense, partially offset by benefits related to certain tax credits. We estimate our effective tax rate for the year ending December 31, 2025 will be approximately 22%.
We recognized net tax benefits of $9 and $12 during the three months ended June 30, 2025 and 2024, respectively, and we recognized net tax benefits $12 and $16 of during the six months ended June 30, 2025 and 2024, 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. The net tax benefits included tax credits and other income tax benefits of $40 and $54 during the three months ended June 30, 2025 and 2024, respectively, and $77 and $79 during the six months ended June 30, 2025 and 2024, respectively, which were partially offset by amortization expense of $31 and $42 for the three months ended June 30, 2025 and 2024, respectively, and $65 and $63 for the six months ended June 30, 2025 and 2024, respectively.
As of each of June 30, 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.
On July 4, 2025, the President signed into law the One Big Beautiful Bill (“OBBB”) Act, introducing significant amendments to the U.S. Internal Revenue Code. The amendments include the permanent extension of certain individual, business, and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire at the end of 2025.
We are currently evaluating the impact of the OBBB on our consolidated financial statements. The OBBB permanently extends the 100% bonus depreciation of qualifying assets which is expected to accelerate the timing of depreciation deductions for these assets. The OBBB also permanently eliminates the requirement under Internal Revenue Code Section 174 to capitalize and amortize U.S.-based research and experimental expenditures over five years, making these expenditures fully deductible in the period incurred. We expect these provisions to result in a reduction of current income tax liabilities and an increase in deferred tax liabilities, and the impacts could be material. Additionally, we anticipate that these provisions will enhance cash flows in the near term due to the deferral of tax payments. We will continue to assess the implications of the OBBB and will provide further disclosures in subsequent reporting periods as necessary.
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