Note 11 - Income Taxes

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11 — INCOME TAXES

Income tax benefit for the nine months ended September 30, 2015 includes a tax benefit of a $49.4 million deferred tax asset relating to the release of the valuation allowance for the additional 50% investment deduction for our Olkaria 3 power plant in Kenya based on amendments to the Kenya Income Tax Act that came into effect on September 11, 2015 and which extended the period to utilize such investment deduction from five years to ten years. The Company’s effective tax rate for the nine months ended September 30, 2015, excluding the income tax benefit of $49.4 million, and 2014 was 29.3% and 26.5%, respectively. The effective tax rate, excluding the income tax benefit of $49.4 million, differs from the federal statutory rate of 35% for the nine months ended September 30, 2015 due to: (i) a full valuation allowance against the Company’s U.S. deferred tax assets in respect of NOL carryforwards and unutilized tax credits (see below), (ii) lower tax rates in Israel; and (iii) a tax credit and tax exemption related to the Company’s subsidiaries in Guatemala. The effect of the tax credit and tax exemption for the three months ended September 30, 2015 and 2014 was $602,000 and $895,000, respectively, and for the nine months ended September 30, 2015 and 2014 was $2,628,000 and $2,921,000, respectively.

At December 31, 2014, the Company had U.S. federal NOL carryforwards of approximately $280.2 million and state NOL carryforwards of approximately $216.5 million, with a full valuation allowance available to reduce future taxable income, which expire between 2021 and 2034 for federal NOLs and between 2014 and 2034 for state NOLs. The Company’s investment tax credits (“ITCs”) in the amount of $0.7 million at December 31, 2014 are available for a 20-year period and expire between 2022 and 2024. Production tax credits (“PTCs”) in the amount of $71.4 million at December 31, 2014 are available for a 20-year period and expire between 2026 and 2034.

Realization of the deferred tax assets and tax credits is dependent on generating sufficient taxable income in appropriate jurisdictions prior to expiration of the NOL carryforwards and tax credits. The most significant factor considered with respect to the ability of the Company to realize these deferred tax assets is the Company’s U.S. cumulative results over the past three years, which made it difficult to support a conclusion that expected taxable income from future operations justifies recognition of deferred tax assets. Based on the results, a valuation allowance in the amount of $111.3 million and $114.8 million was recorded against the U.S. deferred tax assets as of December 31, 2014 and 2013, respectively as, at this point in time, it is more likely than not that the deferred tax assets will not be realized except for the Northleaf transaction as more fully described below.

As more fully described in Note 1 (under the heading “Northleaf Transaction”), the Company entered into a significant transaction for the partial sale of certain assets which resulted in a taxable gain in the U.S., for which the Company expects to utilize a portion of its NOL and tax credit carryforwards to fully offset the tax impact of the gain. In 2015 or in future years, if sufficient additional evidence of the Company’s ability to generate future taxable income is established, the Company may be required to reduce or fully release the valuation allowance, resulting in income tax benefits in its consolidated statement of operations.

The total amount of undistributed earnings of foreign subsidiaries for income tax purposes was approximately $75.9 million at December 31, 2014. It is the Company’s intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of foreign subsidiaries were paid as dividends to the Company. The additional taxes on that portion of undistributed earnings which is available for dividends are not practicably determinable.

The Company believes that based on its plans to increase operations outside of the U.S., the cash generated from the Company’s operations outside of the U.S. will be reinvested outside of the U.S. In addition, the Company’s U.S. sources of cash and liquidity are sufficient to meet its needs in the U.S. and, accordingly, the Company does not currently plan to repatriate the funds it has designated as being permanently invested outside the U.S. If the Company changes its plans, it may be required to accrue and pay U.S. taxes to repatriate these funds.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	Nine Months Ended September 30,
	2015			2014
	(Dollars in thousands)
Balance at beginning of year	$	7,511		$	4,950
Additions based on tax positions taken in prior years		43			93
Additions based on tax positions taken in the current year		825			563
Reduction based on tax positions taken in prior years		(1,267	)		—
Balance at end of year	$	7,112		$	5,606