Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income taxes Income Taxes
Income tax expense consisted of the following:
Years ended December 31,
(in millions) 2024 2023 2022
Current:
U.S. federal $ 126  72  159 
State and local 24  (6) 38 
Foreign jurisdictions 78  84  84 
Total 228  150  281 
Deferred:
U.S. federal (189) 21  (43)
State and local (39) 7  1 
Foreign jurisdictions 3  27  (19)
Total (225) 55  (61)
Total income tax expense $ 3  205  220 
Pre-tax income (loss) was as follows:
Years ended December 31,
(in millions) 2024 2023 2022
QxH $ (1,253) 114  (1,812)
QVC-International 234  302  222 
Consolidated QVC $ (1,019) 416  (1,590)
Total income tax expense differs from the amounts computed by applying the U.S. federal income tax rate of 21% in 2024, 2023 and 2022, as a result of the following:
Years ended December 31,
2024 2023 2022
Provision at statutory rate $ (214) 87 (334)
State income taxes, net of federal benefit (12) 1 31
Foreign taxes 16  24 (7)
Goodwill impairment 189  68 508
Foreign net operating losses (245) —  — 
Valuation allowance 243  7 (1)
Tax on foreign earnings, net of federal tax benefits
 20  6 16
Other permanent differences 5  12 4
Other, net 1  —  3 
Total income tax expense $ 3  205 220
For the years ended December 31, 2024, 2023 and 2022, income tax expense differs from the U.S. statutory rate of 21% primarily due to an impairment of goodwill of $902 million in 2024, $326 million in 2023 and $2,420 million in 2022 that are not deductible for tax purposes, in addition to state income tax expense and foreign tax expense.
The tax effects of temporary differences that gave rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:
December 31,
(in millions) 2024 2023
Deferred tax assets:
Accounts receivable, principally due to the allowance for credit losses and related reserves for the uncollectible accounts $ 18  19 
Inventories, principally due to obsolescence reserves and additional costs of inventories for tax purposes pursuant to the Tax Reform Act of 1986
 37  37 
Allowance for sales returns
 19  21 
Deferred revenue
 43  68 
Debt - Original Issuance Discount (OID) 26  — 
Deferred compensation
 13  14 
Unrecognized federal and state tax benefits
 9  10 
Foreign net operating loss and other carryforwards 362  119 
Foreign tax credits carryforward
 57  57 
Lease obligations
 123  129 
Cumulative translation of foreign currencies
 6  5 
Accrued liabilities
 15  12 
Other
 —  2 
Subtotal
 728  493 
Valuation allowance
 (420) (177)
Total deferred tax assets
 308  316 
Deferred tax liabilities:
Depreciation and amortization
 (556) (779)
Lease assets
 (117) (126)
Other
 (4) — 
Total deferred tax liabilities
 (677) (905)
Net deferred tax liability
 $ (369) (589)

In the above table, valuation allowances exist due to the uncertainty of whether or not the benefit of certain U.S. foreign tax credits and foreign net operating losses will ultimately be utilized for income tax purposes. The 2024 net deferred tax liability above includes deferred tax assets of $25 million relating to foreign jurisdictions which are included within other noncurrent assets in the consolidated balance sheet and deferred tax liabilities of $391 million in domestic jurisdictions and $3 million in foreign jurisdictions, which are included within deferred income taxes in the consolidated balance sheet. The 2023 net deferred tax liability above includes deferred tax assets of $32 million relating to foreign jurisdictions which are included within other noncurrent assets in the consolidated balance sheet and deferred tax liabilities of $621 million in domestic jurisdictions which are included within deferred income taxes in the consolidated balance sheet.
The Company is party to the Tax Agreement with QVC Group. The Tax Agreement establishes the methodology for the calculation and payment of income taxes in connection with the consolidation of the Company with QVC Group for income tax purposes. Generally, the Tax Agreement provides that the Company will pay QVC Group an amount equal to the tax liability, if any, that it would have if it were to file as a consolidated group separate and apart from QVC Group, with exceptions for the treatment and timing of certain items, including but not limited to deferred intercompany transactions, credits, and net operating and capital losses. To the extent that the separate company tax expense is different from the payment terms of the Tax Agreement, the difference is recorded as either a dividend or capital contribution. These differences are related primarily to foreign tax credits recognized by QVC that are creditable under the Tax Agreement when and if utilized in QVC Group’s consolidated tax return. The difference recorded during the year ended December 31, 2024 was a capital contribution of $1 million, primarily related to foreign tax credit carryovers being utilized in QVC Group's consolidated tax return in excess of those recognized by QVC. The differences recorded during the years ended December 31, 2023 and 2022 were dividends of $3 million and $1 million respectively, primarily related to foreign tax credits recognized by QVC and not utilized in QVC Group's consolidated tax return. The amounts of the tax-related payable balance due to QVC Group as of December 31, 2024 and 2023 were $32 million and $59 million, respectively, and are included in accrued liabilities in the consolidated balance sheets.
A reconciliation of the 2023 and 2024 beginning and ending amount of the liability for unrecognized tax benefits is as follows:
(in millions)
Balance at January 1, 2023 $ 76 
Increases related to prior year tax positions 7 
Decreases related to prior year tax positions (14)
Decreases related to settlements with taxing authorities (26)
Increases related to current year tax positions 4 
Balance at December 31, 2023 47 
Increases related to prior year tax positions 1 
Decreases related to prior year tax positions (8)
Decreases related to settlements with taxing authorities — 
Increases related to current year tax positions 2 
Balance at December 31, 2024 $ 42 
Included in the balance of unrecognized tax benefits as of December 31, 2024 and 2023 are potential benefits of $33 million (net of a $9 million federal tax effect) and $37 million (net of a $10 million federal tax effect), respectively, that if recognized, would be reflected in income tax expense and affect the effective rate.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in interest expense in the consolidated statements of operations. The Company did not have a material amount of interest or tax penalties accrued related to unrecognized tax benefits for the years ended December 31, 2024, 2023 or 2022.
The Company has tax positions for which the amount of related unrecognized tax benefits could change during 2025. These consist of nonfederal transfer pricing and other nonfederal tax issues. It is reasonably possible that the amount of the Company’s gross unrecognized tax benefits may decrease within the next 12 months by up to $20 million.
The Company participates in a consolidated federal return filing with QVC Group. As of December 31, 2024, the Internal Revenue Service ("IRS") has completed its examination of QVC Group’s tax years through 2022. The Company's 2023 and 2024 tax years are being examined currently as part of the QVC Group consolidated return under the IRS's Compliance Assurance Process program. The Company files income tax returns in various states and foreign jurisdictions. As of December 31, 2024, the Company was under examination in Massachusetts, Minnesota, Pennsylvania, South Carolina, Wisconsin, Utah, Texas, New York City, Germany and the U.K.