Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

The Company and its subsidiaries are subject to income taxes. The Company files a consolidated U.S. income tax return with its wholly owned domestic subsidiaries, including its allocated share of the taxable income from the solar and wind facilities through the date of sale. The Company and its subsidiaries file separate and combined state income tax returns.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and included provisions that have an impact on the Company’s federal taxable income. The most significant of these are 100% bonus depreciation on qualifying assets (which is scheduled to phase down ratably to 0% between 2023 and 2027) and a reduction in the federal corporate tax rate from 35% to 21%.

The Tax Cuts and Jobs Act also includes a new limitation on the deductibility of net interest expense that generally limits the deduction to 30% of “adjusted taxable income”. For years before 2022, adjusted taxable income is defined as taxable income computed without regard to certain items, including net business interest expense, the amount of any NOL deduction, tax depreciation and tax amortization. The Company does not expect to incur net interest expense that is greater than 30% of adjusted taxable income prior to 2022.

Components of the Company’s income tax provision (benefit) related to the income from continuing operations in 2019, 2018 and 2017 were ($ in millions):



	Year Ended December 31,
	2019			2018			2017
Current taxes:
State	$	12		$	14		$	10
Total current tax provision	12			14			10
Deferred taxes:
Federal	28			31			(247		)
State	(1		)	9			6
Total deferred tax provision (benefit)	27			40			(241		)
Change in valuation allowance	—			(4		)	1
Total tax provision (benefit)	$	39		$	50		$	(230	)

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities from continuing operations at December 31, 2019 and 2018 were ($ in millions):



	At December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	30		$	26
Operating lease liabilities	91			—
Deferred revenue	9			7
Accrued expenses	34			28
Investment and foreign tax credits	1			4
Total gross deferred tax assets	165			65
Less: valuation allowance	—			(1		)
Net deferred tax assets	165			64
Deferred tax liabilities:
Intangible assets	(99		)	(93		)
Investment basis difference	(19		)	(19		)
Operating lease assets, net	(90		)	—
Property and equipment	(633		)	(624		)
Unrealized loss (gains) on derivative instruments, net	4			(2		)
Equity component of convertible senior notes	(5		)	(6		)
Prepaid expenses	(2		)	(1		)
Total deferred tax liabilities	(844		)	(745		)
Net deferred tax liabilities	$	(679	)	$	(681	)

Schedule of Reconciliation of Income Taxes

These amounts are different from the amounts computed by applying the U.S. federal income tax rate for the period to pretax income as a result of the following ($ in millions):



	Year Ended December 31,
	2019		2018			2017
Tax provision at U.S. statutory rate	$	29	$	24		$	71
Permanent differences and other	1		4			10
State income taxes, net of federal benefit	9		19			11
Income attributable to noncontrolling interest	—		1			1
Change in investment and foreign tax credits	—		6			(8		)
Change in U.S. tax law	—		—			(316		)
Change in valuation allowance	—		(4		)	1
Total tax provision (benefit)	$	39	$	50		$	(230	)