Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Years Ended December 31,
	2021		2020		2019
United States	$	(195,208)	$	(179,657)	$	(324,467)
Foreign	2,885		826		1,634
Total	$	(192,323)	$	(178,831)	$	(322,833)

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

	Years Ended December 31,
	2021		2020		2019
Current:
Federal	$	—	$	—	$	—
State	107		21		26
Foreign	1,012		472		595
Total current	1,119		493		621
Deferred:
Federal	—		—		—
State	—		—		—
Foreign	(73)		(237)		12
Total deferred	(73)		(237)		12
Total provision for income taxes	$	1,046	$	256	$	633

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,
	2021		2020		2019
Tax at federal statutory rate	$	(40,387)	$	(37,552)	$	(67,795)
State taxes, net of federal effect	107		21		26
Impact on noncontrolling interest	6,074		4,522		4,001
Elimination of acquiree deferred taxes	2,149		—		—
Non-U.S. tax effect	412		78		264
Nondeductible expenses	3,603		908		144
Stock-based compensation	5,307		5,956		6,484
Loss on debt extinguishment	—		214		—
U.S. tax on foreign earnings (GILTI)	59		203		221
Acquisition contingent liability	(762)		—		—
Change in valuation allowance	24,484		25,906		57,288
Provision for income taxes	$	1,046	$	256	$	633

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)%. For the year ended December 31, 2019, we recognized a provision for income taxes of $0.6 million on a pre-tax loss of $322.8 million, for an effective tax rate of (0.2)%. The effective tax rate for 2021, 2020 and 2019 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,
	2021		2020
Tax credits and net operating loss carryforwards	$	562,384	$	510,599
Lease liabilities	151,937		128,151
Depreciation and amortization	9,516		7,541
Deferred revenue	23,208		27,134
Accruals and reserves	14,524		15,068
Stock-based compensation	20,138		35,815
Other items - deferred tax assets	28,258		25,931
Gross deferred tax assets	809,965		750,239
Valuation allowance	(689,257)		(614,958)
Net deferred tax assets	120,708		135,281
Investment in PPA entities	(7,911)		(10,757)
Discount upon issuance of debt	—		(29,513)
Managed services - deferred costs	(20,935)		(21,898)
Right-of-use assets and leased assets	(89,165)		(70,818)
Other items - deferred tax liability	(1,742)		(1,413)
Gross deferred tax liabilities	(119,753)		(134,399)
Net deferred tax asset	$	955	$	882

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.

In August 2020, FASB issued ASU 2020-06. The new standard simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted as early as fiscal years beginning after December 15, 2020. We elected to early adopted ASU 2020-06 as of January 1, 2021, and upon adoption, we combined the previously separated equity component with the liability component of Green Notes that were issued in 2021. There will no longer be a debt discount representing the difference between the carrying value and the principal of the convertible debt instrument. As a result, the deferred tax liabilities for debt discount established at issuance was adjusted accordingly upon the adoption of ASU 2020-06, offset by a corresponding impact to the increase of valuation allowance, thus has no impact on our financial results.

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 $689.3 million and $615.0 million as of December 31, 2021 and 2020, respectively. The net change in the total valuation allowance for the years ended December 31, 2021 and 2020 was an increase of $74.3 million and a decrease of $18.6 million, respectively.

At December 31, 2021, we had federal and California net operating loss carryforwards of $2.1 billion and $1.3 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 2022 - 2026	$	0.1	$	—
Expire in 2027-2031	0.6		0.5
Expire beginning in 2032	1.0		0.8
Carryforward indefinitely	0.4		—
Total	$	2.1	$	1.3

At December 31, 2021, we also had other state net operating loss carryforwards of $366.1 million, that will begin to expire in 2022. In addition, we had approximately $26.2 million of federal research credit, $6.6 million of federal investment tax credit, and $15.9 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 2022 - 2026	$	1.7	$	—
Expire in 2027 - 2031	7.2		—
Expire beginning in 2032	23.9		—
Carryforward indefinitely	—		15.9
Total	$	32.8	$	15.9

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, 2021. 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, 2021, the amount of uncertain tax positions increased by $4.3 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,
	2021		2020
Unrecognized tax benefits beginning balance	$	37,753	$	34,480
Gross decrease for tax positions of prior year	—		—
Gross increase for tax positions of prior year	95		307
Gross increase for tax positions of current year	4,162		2,966
Unrecognized tax benefits end balance	$	42,010	$	37,753

If fully recognized in the future, there would be no impact to the effective tax rate, and $38.7 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 interest or penalties accrued during or for the years ended December 31, 2021 and 2020.

We are subject to taxation in the United States and various states and foreign jurisdictions. We currently do not have any income tax examinations in progress nor have we had any income tax examinations since our inception. 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 does not have a material impact on our financial results for the year ended December 31, 2021.

Our accumulated undistributed foreign earnings as of December 31, 2021 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.