Income Taxes

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



	Years Ended December 31,
	2018			2017			2016

United States	$	(259,787	)	$	(283,710	)	$	(337,449	)
Foreign	1,835			3,081			1,862
Total	$	(257,952	)	$	(280,629	)	$	(335,587	)

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



	Years Ended December 31,
	2018			2017			2016

Current:
Federal	$	—		$	—		$	—
State	191			25			42
Foreign	1,407			621			702
Total current	1,598			646			744
Deferred:
Federal	—			—			—
State	—			—			—
Foreign	(61		)	(10		)	(15		)
Total deferred	(61		)	(10		)	(15		)
Total provision for income taxes	$	1,537		$	636		$	729

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,
	2018			2017			2016

Tax at federal statutory rate	$	(54,170	)	$	(95,414	)	$	(114,100	)
State taxes, net of federal effect	191			25			42
Impact on noncontrolling interest	3,725			6,347			19,264
Non-U.S. tax effect	960			(437		)	54
Nondeductible expenses	6,637			5,698			4,426
Stock-based compensation	3,892			4,854			4,243
U.S. tax reform impact	—			239,117			—
U.S. tax on foreign earnings	127			—			—
Change in valuation allowance	40,175			(159,554		)	86,800
Provision for income taxes	$	1,537		$	636		$	729

For the year ended December 31, 2018, the Company recorded an expense for income taxes of $1.5 million on a pre-tax loss of $258.0 million, for an effective tax rate of (0.6)%. For the year ended December 31, 2017, the Company recorded an expense for income taxes of $0.6 million on a pre-tax loss of $280.6 million, for an effective tax rate of (0.2)%. For the year ended December 31, 2016, the Company recorded an expense for income taxes of $0.7 million on a pre-tax loss of $335.6 million, for an effective tax rate of (0.2)%. The effective tax rate for 2018, 2017 and 2016 is lower than the statutory federal tax rate primarily due to a full valuation allowance against U.S. deferred tax assets.

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



	December 31,
	2018			2017

Tax credits and NOLs	$	468,612		$	457,718
Depreciation and amortization	9,631			10,811
Deferred revenue	17,415			27,195
Accruals and reserves	14,103			17,163
Stock-based compensation	62,793			18,956
Derivative liability	—			33,200
Other items	24,834			16,218
Gross deferred tax assets	597,388			581,261
Valuation allowance	(566,442		)	(542,409		)
Net deferred tax assets	30,946			38,852
Investment in PPA entities	(21,587		)	(25,252		)
Debt issuance cost	(8,586		)	(12,827		)
Gross deferred tax liabilities	(30,173		)	(38,079		)
Net deferred tax asset	$	773		$	773

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 $566.4 million and $542.4 million as of December 31, 2018 and 2017, respectively. The net change in the total valuation allowance for the years ended December 31, 2018 and December 31, 2017 was an increase of $24.0 million and a decrease of $141.3 million, respectively. There were no releases from the valuation allowance in either period.

At December 31, 2018, the Company had federal and state net operating loss carryforwards of $1.7 billion and $1.5 billion, respectively, which will expire, if unused, beginning in 2022 and 2028, respectively. In addition, the Company had approximately $17.7 million of federal research credit, $6.6 million of federal investment tax credit, and $12.6 million of state research credit carryforwards. The federal tax credit carryforwards begin to expire in 2022. The state credit carryforwards may be carried forward indefinitely. The Company has 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 the capital stock ownership of the Company. Any annual limitation may result in the expiration of net operating losses and credits before utilization. If the Company should have an ownership change as defined by the tax law, utilization of the net operating loss and credit carryforwards could be significantly reduced. The Company completed a Section 382 analysis through December 31, 2018. Based on this analysis, Section 382 limitations will not have a material impact on the Company’s net operating loss and credit carryforwards related to any ownership changes which occurred during the period covered by the analysis.

During the year ended December 31, 2018, the amount of uncertain tax positions increased by $1.9 million. The Company has not recorded any uncertain tax liabilities associated with its tax positions.

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



	Years Ended December 31,
	2018			2017

Unrecognized tax benefits beginning balance	$	28,331		$	27,136
Gross decrease for tax positions of prior year	(468		)	—
Gross increase for tax positions of prior year	353			—
Gross increase for tax positions of current year	2,095			1,195
Unrecognized tax benefits end balance	$	30,311		$	28,331

If fully recognized in the future, there would be no impact to the effective tax rate, and $27.7 million would result in adjustments to the valuation allowance. The Company does 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, are included in income tax expense and there was no interest or penalties accrued during or for the years ended December 31, 2018 and 2017.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company currently does not have any tax examinations in progress nor has it had any tax examinations since its inception. All of the Company’s 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.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law, which significantly changes existing U.S. tax law and includes many provisions applicable to us, such as reducing the U.S. federal statutory tax rate, imposing a one-time transition tax on deemed repatriation of deferred foreign income, and adopting a territorial tax system. The Tax Act reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018.

Given the significance of the legislation, the U.S. Securities and Exchange Commission (the "SEC") staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. During December 2017, we recorded tax charges from the impact of the Tax Act effects using the current available information and technical guidance on the interpretations of the Tax Act. As permitted by SAB 118, we recorded provisional estimates in 2017 and finalized our accounting for these provisional estimates based on guidance, interpretations and all of the available data in the quarter ended December 31, 2018. The Company finalized the provisional amounts recorded for the one-time mandatory repatriation transition tax. The previously recorded provisional amount was reduced by an adjustment of $0.6 million, however this adjustment was offset by a corresponding adjustment to the valuation allowance resulting in no net impact to the tax provision.

The Tax Act also 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. FASB guidance issued 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 (the "period cost method"), or (ii) account for GILTI in the measurement of deferred taxes (the "deferred method"). The Company elects to account for the tax effects of this provision using the period cost method.

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