Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 16—Income Taxes

The provision for income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded.

The Company’s income tax expense was $0.1 million for each of the three months ended September 30, 2021 and 2022, and $0.2 million for each of the nine months ended September 30, 2021 and 2022. Tax expense for all periods consists of taxes due on the Company’s U.S. and foreign operations. The effective tax rates for the three and nine months ended September 30, 2021 and 2022 are different from the federal statutory tax rate primarily due to losses for which no tax benefit has been recognized.

The Company increased its unrecognized tax benefits in the nine months ended September 30, 2022 by $3.3 million. This increase is primarily attributable to the portion of AFTC revenue recognized in the period attributed to the federal fuel tax the Company collected from its customers and deductions attributed to the unvested Amazon Warrant. The net interest incurred was immaterial for the three and nine months ended September 30, 2021 and 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 ("the IRA”) was signed into law.

● Under the IRA, there is a new 15% corporate alternative minimum tax for certain large corporations with at least $1 billion adjusted financial statement income over a consecutive three-year period effective in tax years beginning after December 31, 2022. This provision will not have an impact on the Company.

● Beginning after December 31, 2022, there will be a 1% excise tax on certain share repurchases with certain exceptions. The Company will be subject to the 1% excise tax if it repurchases shares after December 31, 2022.

In addition, the IRA offers significant tax incentives targeting energy transaction and renewables:

● Alternative Fuel Tax Credit (“AFTC”) is reinstated to apply retroactively to fuel sales transactions from January 1, 2022 through December 31, 2024. The Company has accordingly recorded the $25.3 million benefit of AFTC.

● The investment tax credit under Section 48 of the Internal Revenue Code is expanded to include Qualified Biogas Property placed in service after December 31, 2022, which is expected to bring significant cash flow for the Renewable Natural Gas projects that the Company has invested or will invest.

● A new tax credit under Section 45Z of the Internal Revenue Code is introduced to apply to transportation fuel produced and sold by the taxpayer from January 1, 2025 through December 31, 2027. The IRA provides a base credit of 20 cents per gallon or $1.00 per gallon if prevailing wage and apprentices requirements are met. The Company expects that the Renewable Natural Gas projects will be eligible for this credit.

● The alternative fuel refueling property credit under Section 30C of the Internal Revenue Code is reinstated for 2022 and extended an additional 10 years to apply to any property placed in service before January 1, 2033. For business property, the credit amount decreases to 6% (from 30%) with a maximum amount of $100,000 per item (previously $30,000 per location per year). Business property meeting prevailing wage and registered apprenticeship requirements may be eligible for a credit amount of 30% ($100,000 maximum).

The Internal Revenue Service has been granted broad authority to issue regulations or other guidance that could clarify how these taxes will be applied and credits will be eligible. The Company will continue to evaluate the impact of the IRA as additional information becomes available.