Note 10 - Income Taxes

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 10 — INCOME TAXES

The Company’s effective tax rate provision for the three months ended September 30, 2023 and 2022 was 24.1% and 26.1%, respectively. The Company's effective tax rate provision for the nine months ended September 30, 2023 and 2022 was 2.4% and 28.5%, respectively. The effective rate differs from the federal statutory rate of 21% primarily due to the generation of investment tax credits, a net benefit associated with the statutory tax rate change in Kenya resulting from the Finance Act, and the jurisdictional mix of earnings at differing tax rates.

On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law in the United States. The Company believes that the construction and operations of its geothermal power plants, recovered energy-based power plants, battery energy storage systems and solar PV will benefit in the future from the IRA and enhance the economic feasibility of projects in the United States. PTC’s can be generated from 2.75 cents per kWh, once the Wages & Apprenticeship rules are met, and if bonus credit requirements are met the credit could rise up to 3.30 cents per kWh. ITC’s can be earned on investments from 30.0%, once the Wages & Apprenticeship rules are met, and if bonus credit requirements are met the credit could rise up to 50.0%. Battery Energy Storage Systems are eligible for ITC for projects placed-in-service after December 31, 2022. In addition, the Company can now monetize PTC’s and ITC’s earned by transferring the credits to a third party without having to enter into a tax equity transaction. The Company views the enactment of the IRA as favorable for the overall business climate for its sector.

On June 26, 2023, the President of Kenya signed into law the 2023 Finance Act ("Finance Act"). On June 30, 2023, the Kenyan High Court issued a Temporary Conservatory Order against the Finance Act which barred the implementation of the Finance Act until a decision was made by the High Court. The Finance Act, among several other changes, reduces the statutory corporate income tax rate for Branches from 37.5% to 30%, introduces a Branch Profits tax based on the change in Net Assets and limits interest deductions to 30% of EBITDA. On July 28, 2023, the Kenya appeals court lifted the Temporary Conservatory Order on the Finance Act which results in the Finance Act being implemented as signed. As a result, the Company recorded a tax benefit associated with the corporate tax rate change for Branches from 37.5% to 30.0% in the quarter ending September 30, 2023, in the amount of approximately $9.4 million. This benefit is recorded as a reduction to income tax expense in the condensed consolidated statements of comprehensive operations and income.