Note 21. Income Taxes

The following table presents the loss before income taxes for the periods presented (in thousands):

	For the Year Ended December 31,
	2016			2015		2014
(Income) loss attributable to common stockholders	$	(127,680	)	$	33,545	$	80,895
Loss attributable to noncontrolling interest and redeemable noncontrolling interests		394,988			220,660		86,638
Loss before income taxes	$	267,308		$	254,205	$	167,533

The income tax provision (benefit) consists of the following (in thousands):

	For the Year Ended December 31,
	2016		2015			2014
Current
Federal	$	—	$	—		$	—
State		—		—			—
Total current expense		—		—			—
Deferred
Federal		30,197		(7,516	)		(8,196	)
State		5,796		2,217			(1,847	)
Total deferred provision		35,993		(5,299	)		(10,043	)
Total	$	35,993	$	(5,299	)	$	(10,043	)

The following table represents a reconciliation of the statutory federal rate and the Company’s effective tax rate for the periods presented:

	For the Year Ended December 31,
	2016			2015			2014
Tax provision (benefit) at federal statutory rate		(34.00	)%		(34.00	)%		(34.00	)%
State income taxes, net of federal benefit		1.92			0.87			(1.10	)
Effect of noncontrolling and redeemable noncontrolling interests		50.23			29.53			17.59
Stock-based compensation		0.68			1.06			1.37
Effect of prepaid tax asset		(5.57	)		0.04			9.39
Tax credits		(1.61	)		(0.43	)		(0.22	)
Other		1.81			0.85			0.98
Total		13.46	%		(2.08	)%		(5.99	)%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table represents significant components of the Company’s deferred tax assets and liabilities for the periods presented (in thousands):

	December 31,
	2016			2015
Deferred tax assets
Accruals and prepaids	$	18,010		$	12,904
Deferred revenue		23,559			34,710
Net operating loss carryforwards		218,719			229,464
Stock-based compensation		6,908			3,748
Investment tax and other credits		18,454			11,261
Total deferred tax assets		285,650			292,087
Less: Valuation allowance		(663	)		—
Gross deferred tax assets		284,987			292,087
Deferred tax liabilities
Capitalized initial direct costs		45,030			27,539
Fixed asset depreciation		206,754			178,511
Deferred tax on investment in partnerships		448,600			276,183
Gross deferred tax liabilities		700,384			482,233
Net deferred tax liabilities	$	(415,397	)	$	(190,146	)

As of December 31, 2016, the Company had net operating loss carryforwards for federal, California and other state income tax purposes of approximately $571.3 million, $348.2 million and $176.7 million, respectively, which will begin to expire in the year 2028, 2028 and 2024, respectively, if not utilized. Of the federal, California, and other state NOL carryover, $8.6 million, $4.5 million and $2.4 million relates to windfall stock option deductions which, when realized, will be an increase to additional paid in capital. As of December 31, 2015, the Company had net operating loss carryforwards for federal, California and other state income tax purposes of approximately $595.0 million, $368.0 million and $178.6 million, respectively. Of the federal, California, and other state NOL carryover, $5.3 million, $1.3 million and $2.5 million relates to windfall stock option deductions which, when realized, will be an increase to additional paid in capital.

As of December 31, 2016, the Company has an investment tax credit carryforward of approximately $9.3 million which begins to expire in the year 2028, if not utilized and California enterprise zone credits of approximately $1.0 million, which are subject to valuation allowance. As of December 31, 2015, the Company has an investment tax credit carryforward of approximately $4.2 million and California enterprise zone credits of approximately $1.0 million.

Generally, utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code (IRC) of 1986, as amended and similar state provisions. The Company performed an analysis to determine whether an ownership change under Section 382 of the Code had occurred and determined that no ownership changes were identified as of December 31, 2016.

Valuation allowances are provided against deferred tax assets to the extent that it is more likely than not that the deferred tax asset will not be realized. The Company’s management considers all available positive and negative evidence including its history of operating income or losses, future reversals of existing taxable temporary difference, taxable income in carryback years and tax-planning strategies. The Company has concluded there was sufficient positive evidence based on the reversal pattern of the deferred tax liability and available tax planning strategies being relied upon at the end of December 31, 2016 and 2015 to support the position that the Company does not need to maintain a valuation allowance on deferred tax assets, except certain state tax credits which are not expected to be utilized based on the above criteria.

Uncertain Tax Positions

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable. The statute of limitations for the tax returns varies by jurisdictions.

We determine whether a tax position is 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. We use a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. We have analyzed the Company’s inventory of tax positions with respect to all applicable income tax issues for all open tax years (in each respective jurisdiction).

Our policy is to include interest and penalties related to unrecognized tax benefits, if any, within the provision for taxes in the consolidated statements of operations. The Company does not have any tax positions for which it is reasonably possible that the total amount of gross unrecognized tax benefits will significantly change within 12 months of December 31, 2016.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

Balance at December 31, 2014	$	—
Acquired from CEE		1,525
Balance at December 31, 2015 and 2016	$	1,525

As of December 31, 2016 and 2015, the Company had $1.5 million, of unrecognized tax benefits related to the acquisition of CEE. In addition, there was $0.3 million and $0.3 million, respectively, of interest and penalties for uncertain tax positions as of December 31, 2016 and 2015. The Company does not have any tax positions for which it is reasonably possible that the total amount of gross unrecognized tax benefits will increase or decrease within the next 12 months.

Five of our investment funds are currently being audited by the Internal Revenue Service (the “IRS”), three of which involve a review of our fair market value determinations of our solar energy systems. In addition, two of our investors are currently being audited by the IRS, which audits involve a review of the fair market value determination of our solar energy systems. If these audits result in an adverse finding, we would be subject to an indemnity obligation to these investors. The Company is subject to taxation and files income tax returns in the U.S., and various state and local jurisdictions. Due to the Company’s net losses, substantially all of its federal, state and local income tax returns since inception are still subject to audit.

The following table summarizes the tax years that remain open and subject to examination by the tax authorities in the most significant jurisdictions in which the Company operates:

		Tax Years
U.S. Federal		2013 - 2016
State		2012 - 2016

Net Operating Loss Carryforwards

As a result of the Company’s net operating loss carryforwards as of December 31, 2016, the Company does not expect to pay income tax, including in connection with its income tax provision for the year ended December 31, 2016, until the Company’s net operating losses are fully utilized. As of December 31, 2016, the Company’s federal and state net operating loss carryforwards were $571.3 million and $524.9 million, respectively. If not utilized, the federal net operating loss will begin to expire in the year 2028 and the state net operating losses will begin to expire in the year 2024.