Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our effective income tax rate is (3)%, 0% and 0% for the years ended December 31, 2022, 2021 and 2020, respectively. Total income tax differs from the amounts computed by applying the statutory income tax rate to loss before income tax primarily as a result of our valuation allowance. The sources of these differences are as follows:

	Year Ended   December 31,
	2022			2021			2020
	(in thousands)
Loss before income tax	$	(126,390)		$	(147,250)		$	(307,637)
Statutory federal tax rate	21		%	21		%	21		%
Tax benefit computed at statutory rate	(26,542)			(30,923)			(64,604)
State income tax, net of federal benefit	(3,167)			(2,399)			(16,862)
Adjustments from permanent differences:
Redeemable noncontrolling interests and noncontrolling interests	(6,587)			1,970			11,662
ITC recapture	101			82			232
Other	1,992			1,054			475
Increase in valuation allowance, net	38,089			30,476			69,278
Total income tax expense	$	3,886		$	260		$	181

State, federal and foreign income taxes are $3.9 million, $260,000 and $181,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) are as follows:

	As of December 31,
	2022		2021
	(tax effected, in thousands)
Federal net operating loss carryforward	$	261,837	$	252,277
State net operating loss carryforward	61,141		68,092
ITC carryforward	285,614		275,807
Federal unused interest deduction carryforward	45,750		37,896
Investment in certain financing arrangements	154,635		85,999
Other deferred tax assets	33,701		36,878
Deferred tax assets	842,678		756,949
Fixed asset basis difference	(394,082)		(330,701)
Intangible asset basis difference	(54,196)		(55,934)
Investment in certain financing arrangements	(135,181)		(81,814)
Other deferred tax liabilities	(7,095)		(6,877)
Deferred tax liabilities	(590,554)		(475,326)
Valuation allowance	(252,124)		(281,623)
Net deferred tax asset	$	—	$	—

A full valuation allowance of $252.1 million and $281.6 million was recorded against our net deferred tax assets as of December 31, 2022 and 2021, respectively. We believe it is not more likely than not that future taxable income and the reversal of deferred tax liabilities will be sufficient to realize our net deferred tax assets. Our estimated federal tax net operating loss carryforward as of December 31, 2022 is approximately $1.2 billion, which will begin to expire in 2032 if not utilized. We also generated $9.8 million of Section 48(a) ITCs in 2022 for a net $285.6 million through December 31, 2022, which will begin to expire in 2033 if not utilized.

We assessed whether we had any significant uncertain tax positions taken in a filed tax return, planned to be taken in a future tax return or claim, or otherwise subject to interpretation and determined there were none not more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position, or prospectively approved when such approval may be sought in advance. Accordingly, we recorded no reserve for uncertain tax positions. Should a provision for any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to accrue for such in our income tax accounts. There were no such accruals as of December 31, 2022 and 2021 and we do not expect a significant change in gross unrecognized tax benefits in the next twelve months. Our tax years after 2011 remain subject to examination by the IRS and by the taxing authorities in the states and territories in which we operate.

Under the provisions of the Internal Revenue Code and similar state provisions, our net operating loss carryforwards and tax credit carryforwards are subject to review and possible adjustment by the IRS and state tax authorities. Under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions, our net operating loss and tax credit carryforwards may be subject to an annual limitation in the event of certain cumulative changes in the ownership interest of certain significant shareholders over a three-year period in excess of 50%. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of our company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. We experienced an ownership change in August 2020 as defined by Sections 382 and 383 of the Internal Revenue Code, which limits our future ability to utilize NOLs and tax credits generated before the "ownership change". However, these limitations do not prevent the use of our NOLs to offset certain built-in gains, including deemed gains with respect to our cost recovery deductions, recognized by us within five years after the ownership change with respect to assets held by us at the time of the ownership change, or the use of our tax credits to offset related tax liabilities, to the extent of our "net unrealized built-in gain" at the time of the ownership change. We have determined that, based upon the size of our net unrealized built-in gain at the time of our 2020 ownership change and our projected recognition of deemed built-in gains in the five years following the ownership change, there is no impact on the balances for deferred taxes or valuation allowance.

We conduct operations in the U.S. territories of Puerto Rico, Guam and the Commonwealth of the Northern Mariana Islands. As a result, our income tax expense includes the effects of taxes incurred in such jurisdictions where the tax code for the respective jurisdiction may have separate tax-reporting requirements.

In March 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), featuring significant tax provisions and relief measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic. Relief measures intended to aid businesses in employee retention include payroll tax relief and a refundable tax credit for employers who retain employees during the COVID-19 pandemic. In addition, among other things, the CARES Act establishes (a) a five-year carryback of net operating losses generated in 2018, 2019 and 2020, (b) a temporary suspension of the 80% limitation on the use of net operating losses in 2018, 2019 and 2020 and (c) an increase to the adjusted taxable income limitation from 30% to 50% for business interest deductions under Section 163(j) of the U.S. Internal Revenue Code of 1986, as amended, for 2019 and 2020. We have historically maintained, and continue to maintain, a full valuation allowance against deferred tax assets. Due to our aggregate amount of net operating losses, we cannot utilize the carryback or limitation suspension provisions pertaining to the usage of net operating losses.

In December 2020, the U.S. enacted the Continued Assistance for Unemployment Workers Act of 2020 ("CARES Act II"), which provided an extension of the CARES Act's unemployment benefits. It also extended unemployment benefits to independent contractors and provided independent contractors with paid sick and family leave benefits through March 2021. In March 2021, the U.S. enacted the American Rescue Plant Act of 2021 ("ARP Act"), which further extended certain unemployment benefits through early September 2021. The CARES Act, the CARES Act II and the ARP Act have no impact on our valuation allowance.

In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law. Among other things, the IRA expanded and extended the tax credits available to solar energy projects in an effort to achieve President Biden's non-binding target of net-zero emissions by 2050. The IRA extends the investment tax credit for eligible solar energy projects through at least 2033 and, depending on the location of a particular project, its size, its ability to satisfy certain labor and domestic content requirements and the category of consumers it serves, the investment tax credit percentage can range between 6% and 70%.