Income Taxes |
3 Months Ended |
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Mar. 31, 2022 | |
| 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 will now be 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 payment made to Liberty Media, pursuant to the tax sharing agreement, shall be treated as a capital contribution or a distribution. For the three months ended March 31, 2022 and 2021, income tax (expense) benefit was $(100) and $62, respectively. In addition, we recorded $13 as a capital contribution related to the tax sharing agreement with Liberty Media within Related party liabilities on our unaudited consolidated balance sheet as of March 31, 2022.
Our effective tax rate for the three months ended March 31, 2022 and 2021 was 24.4% and (39.5)%, respectively. The effective tax rate for the three months ended March 31, 2022 was primarily impacted by a benefit associated with the
recognition of excess tax benefits related to share-based compensation. The effective tax rate for the three months ended March 31, 2021 was primarily impacted by a $95 benefit associated with a state tax audit settlement and the recognition of excess tax benefits related to share-based compensation. We estimate our effective tax rate for the year ending December 31, 2022 will be approximately 25%.
As of March 31, 2022 and December 31, 2021, we had a valuation allowance related to deferred tax assets of $81 and $83, 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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