Commitments and Contingencies
|6 Months Ended
Jun. 30, 2023
|Commitments and Contingencies
|Commitments and Contingencies
(8) Commitments and Contingencies
In the ordinary course of business, the Company and its subsidiaries are parties to legal proceedings and claims arising out of our operations. These matters may relate to claims involving patent and intellectual property rights (including alleged infringement of third-party intellectual property rights), tax matters (including value-added, excise, transient occupancy and accommodation taxes), regulatory compliance (including competition and consumer matters), defamation and other claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.
Income Tax Matters
Tripadvisor received Notices of Proposed Adjustments from the IRS with respect to income tax returns filed by Expedia when Tripadvisor was part of Expedia Group’s consolidated income tax return for the 2009, 2010, and 2011 tax years. The assessment is related to certain transfer pricing arrangements with foreign subsidiaries, which Tripadvisor had requested competent authority assistance under the Mutual Agreement Procedure (“MAP”) for the 2009 through 2011 tax years. In January 2023, Tripadvisor received a final notice from the IRS regarding a MAP settlement for the 2009 through 2011 tax years, which Tripadvisor accepted in February 2023. In the first quarter of 2023, Tripadvisor recorded additional income tax expense as a discrete item, inclusive of interest, of $31 million specifically related to this settlement. During the first quarter of 2023, Tripadvisor reviewed the impact of the acceptance of this settlement position against its existing transfer pricing income tax reserves for the subsequent tax years, which resulted in incremental income tax expense, inclusive of estimated interest, of $24 million. The total impact of these adjustments resulted in an incremental income tax expense of $55 million, which was recognized during the three months ended March 31, 2023.
During the three months ended June 30, 2023, Tripadvisor made a U.S. federal tax payment of $113 million,
inclusive of interest, to Expedia related to this IRS audit settlement, pursuant to a tax sharing agreement with Expedia. This amount was previously accrued in other liabilities on the unaudited condensed consolidated balance sheet. Tripadvisor anticipates a competent authority refund and federal tax benefits, net of state tax payments due, associated with this IRS audit settlement will be substantially settled in the next twelve months, resulting in an estimated net cash inflow of $45 million to $55 million, inclusive of related interest expense. The related receivable is reflected in income taxes receivable on the unaudited condensed consolidated balance sheet as of June 30, 2023.