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SEC Filings
10-K
TERRAFORM POWER, INC. filed this Form 10-K on 03/07/2018
Entire Document
 

The tax effects of the major items recorded as deferred tax assets and liabilities were as follows:
 
 
As of December 31,
(In thousands)
 
2017
 
2016
Deferred tax assets:
 
 
 
 
Net operating losses and tax credit carryforwards
 
$
402,162

 
$
463,940

Deferred revenue
 

 
743

Other
 

 
5,445

Total deferred tax assets
 
402,162

 
470,128

Valuation allowance
 
(152,142
)
 
(419,875
)
Net deferred tax assets
 
250,020

 
50,253

Deferred tax liabilities:
 
 
 
 
Investment in partnership
 
234,312

 
73,629

Renewable energy facilities
 
29,541

 
4,347

Deferred revenue
 
13

 

Other
 
4,790

 

Total deferred tax liabilities
 
268,656

 
77,976

Net deferred tax liabilities
 
$
18,636

 
$
27,723

    
The underlying renewable energy facilities are controlled under Terra LLC, and thus deferred tax assets and liabilities at the Company's portfolio companies are captured within the deferred tax asset for investment in partnership. The Company has gross net operating loss carryforwards of $1.4 billion in the U.S. and gross net operating loss carryforwards of $138.4 million in foreign jurisdictions that will both expire beginning in 2035. The Company believes that it is more likely than not that it will not generate sufficient taxable income to realize the deferred tax assets associated with its net operating losses and tax credit carryforwards and has recorded a valuation allowance against its deferred tax assets, with the exception of $31.4 million of net operating losses at its Canadian operations. The Company is currently performing an analysis of limitations on the use of net operating losses under Section 382. The results of this analysis may impact the Company's ability to utilize portions of its net operating losses in future periods or could reduce the net operating losses available for carryover and utilization in future periods.

The decrease in the valuation allowance during 2017 was primarily driven by a $75.9 million decrease resulting from the reduction of the U.S. federal tax rate to 21% due to the enactment of the Tax Act, a $43.0 million U.S. return to provision adjustment and a $150.0 million decrease related to an offsetting adjustment to deferred tax liabilities to correct the outside basis in the partnership.

During the fourth quarter of 2017, management identified an immaterial error resulting from the ownership percentages used to allocate lower-tier partnership income to a subsidiary of the Company included in the U.S. tax provision. The error caused an overstatement of taxable income used in the income tax provision calculation in 2016 of approximately $16.2 million, which resulted in an error in the income tax provision. This 2016 error was corrected in the fourth quarter of 2017, which resulted in an increase to the net operating loss carryforward deferred tax asset at the corresponding subsidiary and an offsetting $6.4 million increase in the income tax benefit recognized. Management determined that this error did not have an impact on its previously issued filings for the first, second and third quarter of 2017.
    
As of December 31, 2017 and 2016, the Company had not identified any uncertain tax positions for which a liability was required.



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