Additional federal tax expense due to tax examination

[Table](#i433d81903e814837b268e57261b357cb_7) [of Contents](#i433d81903e814837b268e57261b357cb_7)Unrecognized Tax Benefits and InterestA reconciliation of the beginning and ending amount of gross unrecognized tax benefits and interest is as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
|   |   |  | (In millions) |  |   |
| Balance, beginning of year | $ | 345  |  |  | $ | 305  |  |  | $ | 293  |  |
| Increases to tax positions related to the current year | 11  |  |  | 16  |  |  | 12  |  |
| Increases to tax positions related to prior years | 3  |  |  | 18  |  |  | 5  |  |
| Decreases to tax positions related to prior years | (11) |  |  | (2) |  |  | —  |  |
| Reductions due to lapsed statute of limitations | —  |  |  | (4) |  |  | (2) |  |
| Settlements during current year | (6) |  |  | —  |  |  | (11) |  |
| Interest and penalties | 7  |  |  | 12  |  |  | 8  |  |
| Balance, end of year | $ | 349  |  |  | $ | 345  |  |  | $ | 305  |  |

As of December 31, 2021, we had $349 million of gross unrecognized tax benefits, $213 million of which, if recognized, would affect the effective tax rate. As of December 31, 2020, we had $345 million of gross unrecognized tax benefits, $219 million of which, if recognized, would affect the effective tax rate. As of December 31, 2019, we had $305 million of gross unrecognized tax benefits, $188 million of which, if recognized, would affect the effective tax rate. As of December 31, 2021 and 2020, total gross interest and penalties accrued was $56 million and $49 million, respectively. We recognized interest expense of $7 million in 2021, $12 million in 2020 and $8 million in 2019 in connection with our unrecognized tax benefits.The Company is routinely audited by U.S. federal, state, local and foreign income tax authorities. These audits include questioning the timing and amount of income and deductions, and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service ("IRS") is currently examining Expedia Group’s consolidated U.S. federal income tax returns for the periods ended December 31, 2011 through December 31, 2016. The Company has consented to an extension of the statute of limitations, until March 31, 2023 related to the 2011 through 2016 tax years, and until June 30, 2022 related to the 2017 tax year. As of December 31, 2021, for the Expedia Group, Inc. and Subsidiaries group, statute of limitations for tax years 2011 through 2020 remain open to examination in the U.S. federal jurisdiction and most state jurisdictions. For the HomeAway and Orbitz groups, the tax years 2001 through 2015 remain subject to examination in the U.S. federal and most state jurisdictions due to NOL carryforwards.During the fourth quarter of 2019, the Internal Revenue Service (“IRS”) issued final adjustments related to transfer pricing with our foreign subsidiaries for our 2011 to 2013 tax years. The proposed adjustments would increase our U.S. taxable income by $696 million, which would result in U.S. federal tax of approximately $244 million, subject to interest. We do not agree with the position of the IRS. We filed a protest with the IRS for our 2011 to 2013 tax years and Appeals returned the case to Exam for further review. We are also under examination by the IRS for our 2014 to 2016 tax years. Subsequent years remain open to examination by the IRS. We do not anticipate a significant impact to our gross unrecognized tax benefits within the next 12 months related to these years.NOTE 11 — Capital Stock Common Stock and Class B Common StockOur authorized common stock consists of 1.6 billion shares of common stock with par value of $0.0001 per share, and 400 million shares of Class B common stock with par value of $0.0001 per share. Both classes of common stock qualify for and share equally in dividends, if declared by our Board of Directors, and generally vote together on all matters. Common stock is entitled to 1 vote per share and Class B common stock is entitled to 10 votes per share. Holders of common stock, voting as a single, separate class are entitled to elect 25% of the total number of directors. Class B common stockholders may, at any time, convert their shares into common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of Expedia Group, Inc., the holders of both classes of common stock have equal rights to receive all the assets of Expedia Group, Inc. after the rights of the holders of the preferred stock, if any, have been satisfied.Preferred Stock and Warrants On May 5, 2020, we issued and sold to (1) AP Fort Holdings, L.P., an affiliate of Apollo Global Management, Inc. (the “Apollo Purchaser”), 600,000 shares of the Company’s newly created Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) and Warrants (the “Warrants”) to purchase 4.2 million shares of our common stock for an F- 34
