Travel & Leisure Co.TNL
Travel & Leisure Co. Income Taxes Disclosure
Income Taxes
The income tax provision attributable to continuing operations consisted of the following (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 61 | $ | 55 | $ | 53 | |||||||||||
| State | 12 | 13 | 7 | ||||||||||||||
| Foreign | 55 | 41 | 26 | ||||||||||||||
| 128 | 109 | 86 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (14) | 31 | — | ||||||||||||||
| State | (5) | (3) | 6 | ||||||||||||||
| Foreign | (2) | (2) | 2 | ||||||||||||||
| (21) | 26 | 8 | |||||||||||||||
| Provision for income taxes | $ | 107 | $ | 135 | $ | 94 | |||||||||||
Pre-tax income for domestic and foreign operations attributable to continuing operations consisted of the following (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 142 | $ | 331 | $ | 315 | |||||||||||
| Foreign | 195 | 182 | 170 | ||||||||||||||
| Income before income taxes | $ | 337 | $ | 513 | $ | 485 | |||||||||||
Deferred income tax assets and liabilities were comprised of the following (in millions):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Provision for doubtful accounts and loan loss allowance for vacation ownership contract receivables | $ | 205 | $ | 189 | |||||||
| Other comprehensive income | 16 | 84 | |||||||||
| Accrued liabilities and deferred income | 93 | 74 | |||||||||
| Inventory write-downs and impairments | 55 | — | |||||||||
| Foreign tax credit carryforward | 27 | 41 | |||||||||
| Net operating loss carryforward | 22 | 22 | |||||||||
| Tax basis differences in assets of foreign subsidiaries | 12 | 12 | |||||||||
| Other | 89 | 91 | |||||||||
Valuation allowance (a) | (107) | (109) | |||||||||
| Deferred income tax assets | 412 | 404 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Installment sales of vacation ownership interests | 793 | 762 | |||||||||
| Depreciation and amortization | 213 | 194 | |||||||||
| Other comprehensive income | — | 66 | |||||||||
| Estimated VOI recoveries | 54 | 52 | |||||||||
| Other | 29 | 29 | |||||||||
| Deferred income tax liabilities | 1,089 | 1,103 | |||||||||
| Net deferred income tax liabilities | $ | 677 | $ | 699 | |||||||
| Reported in: | |||||||||||
| Other assets | $ | 27 | $ | 23 | |||||||
| Deferred income taxes | 704 | 722 | |||||||||
| Net deferred income tax liabilities | $ | 677 | $ | 699 | |||||||
(a) The valuation allowance of $107 million at December 31, 2025, relates to foreign tax credits, net operating loss carryforwards, and certain deferred tax assets of $22 million, $10 million, and $75 million. The valuation allowance of $109 million at December 31, 2024, relates to foreign tax credits, net operating loss carryforwards, and certain deferred tax assets of $25 million, $9 million, and $75 million. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized.
As of December 31, 2025, the Company’s net operating loss carryforwards primarily relate to state and foreign net operating losses of $10 million and $9 million. The state net operating losses are due to expire at various dates, but no later than 2045 for those that cannot be carried forward indefinitely. The majority of the foreign net operating losses can be carried forward indefinitely. As of December 31, 2025, the Company had $27 million of foreign tax credits. These foreign tax credits expire between the 2027 and 2035 tax years.
The following table is a reconciliation of the U.S. federal statutory rate to the Company’s effective rate for the year ended December 31, 2025 in accordance with the recently adopted guidance discussed in Note 2 —Summary of Significant Accounting Policies:
Amount (in millions) | % | ||||||||||
Federal statutory rate | $ | 71 | 21.0 | % | |||||||
State and local income taxes, net of federal tax benefits (a) | 8 | 2.3 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Australia: | |||||||||||
| Statutory tax rate difference | 6 | 1.7 | % | ||||||||
| Puerto Rico: | |||||||||||
| Statutory tax rate difference | (4) | (1.2) | % | ||||||||
| Other | 1 | 0.4 | % | ||||||||
| Other foreign jurisdictions | 9 | 2.7 | % | ||||||||
Effect of cross-border tax laws: | |||||||||||
Branch income | 13 | 3.9 | % | ||||||||
| Other | 4 | 1.3 | % | ||||||||
Tax credits: | |||||||||||
Foreign tax credits | (12) | (3.5) | % | ||||||||
| Other | (3) | (1.0) | % | ||||||||
Changes in valuation allowances | 5 | 1.5 | % | ||||||||
Nontaxable or nondeductible items | 7 | 2.1 | % | ||||||||
Changes in unrecognized tax benefits | 6 | 1.8 | % | ||||||||
| Installment sale interest | (5) | (1.4) | % | ||||||||
Other adjustments | 1 | 0.2 | % | ||||||||
Effective tax rate | $ | 107 | 31.8 | % | |||||||
(a) State taxes in Florida and California made up the majority (greater than 50 percent) of the tax effect in this category.
The Company’s effective income tax rate during 2024 and 2023 differs from the U.S. federal statutory rate as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal statutory rate | 21.0% | 21.0% | |||||||||
| State and local income taxes, net of federal tax benefits | 2.6 | 2.6 | |||||||||
| Taxes on foreign operations at rates different than U.S. federal statutory rates | (0.5) | (2.0) | |||||||||
| Taxes on foreign income, net of tax credits | 2.5 | 2.5 | |||||||||
| Valuation allowance | (1.2) | (5.4) | |||||||||
| Installment sale interest | 0.9 | 0.8 | |||||||||
| Other | 1.1 | (0.1) | |||||||||
| 26.4% | 19.4% | ||||||||||
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 22 | $ | 22 | $ | 25 | |||||||||||
| Increases related to tax positions taken during a prior period | 10 | — | — | ||||||||||||||
| Increases related to tax positions taken during the current period | 2 | 2 | 1 | ||||||||||||||
| Decreases related to settlements with taxing authorities | (1) | — | — | ||||||||||||||
| Decreases related to tax positions taken during a prior period | — | — | (1) | ||||||||||||||
| Decreases as a result of a lapse of the applicable statute of limitations | (3) | (2) | (3) | ||||||||||||||
| Ending balance | $ | 30 | $ | 22 | $ | 22 | |||||||||||
The gross amount of the unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate were $24 million, $17 million, and $18 million as of December 31, 2025, 2024, and 2023. The Company records potential penalties and interest as a component of Provision for income taxes on the Consolidated Statements of Income related to these unrecognized tax benefits. During 2025 penalties and interest decreased by $1 million. During both 2024 and 2023, penalties and interest decreased by less than $1 million. The Company had a liability for potential penalties of $3 million as of December 31, 2025, 2024 and 2023, and potential interest of $9 million, $9 million, and $10 million during these periods. Such liabilities are reported as a component of Accrued expenses and other liabilities on the Consolidated Balance Sheets.
The Company files U.S. federal and state, and foreign income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years prior to 2022 and state and local income tax examinations prior to 2016. In significant foreign jurisdictions, generally years prior to 2017 are no longer subject to income tax examinations by their respective tax authorities.
The Company asserts that substantially all undistributed foreign earnings will be reinvested indefinitely as of December 31, 2025. In the event the Company determines not to continue to assert that all or part of its undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes, as well as U.S. taxes on currency transaction gains and losses, the determination of which is not practicable.
The Company made cash income tax payments, net of refunds, of $87 million, $100 million, and $144 million during 2025, 2024, and 2023. Such payments exclude income tax related payments made to or refunded by the Company’s former parent Avis Budget Group, Inc. (“ABG”), formerly Cendant Corporation and Wyndham Hotels & Resorts, Inc. (“Wyndham Hotels”). During 2025, the Company’s cash income tax payments consisted of (in millions):
| Year Ended December 31, 2025 | |||||
| Federal | $ | 27 | |||
| State | 15 | ||||
| Foreign: | |||||
| Australia | 22 | ||||
| USVI | 6 | ||||
| Other | 17 | ||||
| Total | $ | 87 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.