Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of loss before the provision for income taxes are as follows (in thousands):

	Years Ended December 31,
	2022		2021		2020
United States	$	(320,107)	$	(195,208)	$	(179,657)
Foreign	6,118		2,885		826
Total	$	(313,989)	$	(192,323)	$	(178,831)

 The provision for income taxes is comprised of the following (in thousands):

	Years Ended December 31,
	2022		2021		2020
Current:
Federal	$	—	$	—	$	—
State	374		107		21
Foreign	1,158		1,012		472
Total current	1,532		1,119		493
Deferred:
Federal	—		—		—
State	—		—		—
Foreign	(435)		(73)		(237)
Total deferred	(435)		(73)		(237)
Total provision for income taxes	$	1,097	$	1,046	$	256

A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate is as follows (in thousands):

	Years Ended December 31,
	2022		2021		2020
Tax at federal statutory rate	$	(65,922)	$	(40,387)	$	(37,552)
State taxes, net of federal effect	374		107		21
Impact on noncontrolling interest	2,872		6,074		4,522
Elimination of acquiree deferred taxes	—		2,149		—
Non-U.S. tax effect	(387)		412		78
Nondeductible expenses and losses	2,258		1,311		908
Stock-based compensation	7,019		5,307		5,956
Loss on debt extinguishment	—		—		214
U.S. tax on foreign earnings (GILTI)	2,525		59		203
(Gain) loss on SK Equity Transaction	(3,932)		2,292		—
Acquisition contingent liability	—		(762)		—
Change in valuation allowance	56,290		24,484		25,906
Provision for income taxes	$	1,097	$	1,046	$	256

For the year ended December 31, 2022, we recognized a provision for income taxes of $1.1 million on a pre-tax loss of $314.0 million, for an effective tax rate of (0.3)%. For the year ended December 31, 2021, we recognized a provision for income taxes of $1.0 million on a pre-tax loss of $192.3 million, for an effective tax rate of (0.5)%. For the year ended December 31, 2020, we recognized a provision for income taxes of $0.3 million on a pre-tax loss of $178.8 million, for an effective tax rate of (0.1)%. The effective tax rate for 2022, 2021 and 2020 is lower than the statutory federal tax rate primarily due to a full valuation allowance against U.S. deferred tax assets.

Significant components of our deferred tax assets and liabilities consist of the following (in thousands): 

	December 31,
	2022		2021
Tax credits and net operating loss carryforwards	$	558,779	$	562,384
Lease liabilities	157,890		151,937
Depreciation and amortization	27,681		9,516
Deferred revenue	18,992		23,208
Accruals and reserves	21,084		14,524
Research and development expenditures capitalization	28,965		—
Stock-based compensation	22,675		20,138
Disallowed Interest expenses	29,159		26,730
Investment in PPA entities	4,354		—
Other items - deferred tax assets	1,519		1,528
Gross deferred tax assets	871,098		809,965
Valuation allowance	(758,242)		(689,257)
Net deferred tax assets	112,856		120,708
Investment in PPA entities	—		(7,911)
Managed services - deferred costs	(18,974)		(20,935)
Right-of-use assets and leased assets	(90,682)		(89,165)
Other items - deferred tax liability	(2,049)		(1,742)
Gross deferred tax liabilities	(111,705)		(119,753)
Net deferred tax asset	$	1,151	$	955

Income taxes are recorded using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (or loss) in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, is not more-likely-than-not to be realized. Management believes that, based on available evidence, both positive and negative, it is not more likely than not that the net U.S. deferred tax assets will be utilized. As a result, a full valuation allowance has been recorded.

The valuation allowance for deferred tax assets was $758.2 million and $689.3 million as of December 31, 2022 and 2021, respectively. The net change in the total valuation allowance for the years ended December 31, 2022 and 2021 was an increase of $69.0 million and a increase of $74.3 million, respectively.

At December 31, 2022, we had federal and California net operating loss carryforwards of $2.1 billion and $1.4 billion, respectively, to reduce future taxable income. The expiration of federal and California net operating loss carryforwards is summarized as follows (in billions):

	Federal		California
Expire in 2025 - 2027	$	0.1	$	—
Expire in 2028 - 2032	0.7		0.6
Expire beginning in 2033	0.9		0.8
Carryforward indefinitely	0.4		—
Total	$	2.1	$	1.4

At December 31, 2021, we also had other state net operating loss carryforwards of $365.3 million, that will begin to expire in 2023. In addition, we had approximately $31.0 million of federal research credit, $6.6 million of federal investment tax credit, and $17.4 million of state research credit carryforwards.

The expiration of the federal and California credit carryforwards is summarized as follows (in millions):

	Federal		California
Expire in 2025 - 2027	$	3.1	$	—
Expire in 2028 - 2032	7.8		—
Expire beginning in 2033	26.7		—
Carryforward indefinitely	—		17.4
Total	$	37.6	$	17.4

We have not reflected deferred tax assets for the federal and state research credit carryforwards as the entire amount of the carryforwards represent unrecognized tax benefits.

Internal Revenue Code Section 382 (“Section 382”) limits the use of net operating loss and tax credit carryforwards in certain situations in which changes occur in our capital stock ownership. Any annual limitation may result in the expiration of net operating losses and credits before utilization. If we should have an ownership change, as defined by the tax law, utilization of the net operating loss and credit carryforwards could be significantly reduced. We completed a Section 382 analysis through December 31, 2022. Based on this analysis, Section 382 limitations will not have a material impact on our net operating loss and credit carryforwards related to any ownership changes.

During the year ended December 31, 2022, the amount of uncertain tax positions increased by $6.4 million. We have not recorded any uncertain tax liabilities associated with our tax positions.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits were as follows (in thousands):

	Years Ended December 31,
	2022		2021		2020
Unrecognized tax benefits beginning balance	$	42,010	$	37,753	$	34,480
Gross (decrease) increase for tax positions of prior year	(55)		95		307
Gross increase for tax positions of current year	6,434		4,162		2,966
Unrecognized tax benefits end balance	$	48,389	$	42,010	$	37,753

If fully recognized in the future, there would be no impact to the effective tax rate, and $44.7 million would result in adjustments to the valuation allowance. We do not have any tax positions that are expected to significantly increase or decrease within the next 12 months.

Interest and penalties, to the extent there are any, would be included in income tax expense. There were no material interest or penalties accrued during or for the years ended December 31, 2022 and 2021.

We are subject to taxation in the United States and various states and foreign jurisdictions. We currently have an income tax examination in progress, and we believe that adequate amounts have been reserved. All of our tax years will remain open for examination by federal and state authorities for three and four years from the date of utilization of any net operating losses and tax credits.

The Tax Cuts and Jobs Act of 2017 (“Tax Act”) includes a provision referred to as Global Intangible Low-Taxed Income (“GILTI”) which generally imposes a tax on foreign income in excess of a deemed return on tangible assets. Guidance issued by the Financial Accounting Standards Board in January 2018 allows companies to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which the tax is incurred (“period cost method”), or (ii) account for GILTI in the measurement of deferred taxes (“deferred method”). We elected to account for the tax effects of this provision using the period cost method.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the United States on March 27, 2020. The CARES Act includes several U.S. income tax provisions related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications to the net interest deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. The CARES Act did not have a material impact on our financial results for the year ended December 31, 2022 and 2021.

On August 16, 2022, the U.S. government enacted the IRA. The IRA establishes a new corporate alternative minimum tax based on financial statement income adjusted for certain items. The new minimum tax is effective for tax years beginning after December 31, 2022. The enactment of the IRA did not have a material impact to the Company’s financial statements for the years ended December 31, 2022 and 2021, but we are currently assessing the impact of the production and tax credit-related IRA provisions on our business for future periods.

Our accumulated undistributed foreign earnings as of December 31, 2022 have been subject to either the deemed one-time mandatory repatriation under the Tax Act or the current year income inclusion under GILTI regime for U.S. tax purposes. If we were to make actual distributions of some or all of these earnings, including earnings accumulated after December 31, 2017, we would generally incur no additional U.S. income tax but could incur U.S. state income tax and foreign withholding taxes. We have not accrued for these potential U.S. state income tax and foreign withholding taxes because we intend to permanently reinvest our foreign earnings in our international operations. However, any additional income tax associated with the distribution of these earnings would be immaterial.