Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The following table sets forth components of income before income taxes: 
Year Ended December 31,
  2024 2023 2022
Domestic $ 28,256  $ 30,211  $ 98,004 
Foreign 5,684  8,058  7,715 
Income before income taxes $ 33,940  $ 38,269  $ 105,719 
The components of the provision (benefit) for income taxes were as follows: 
Year Ended December 31,
  2024 2023 2022
Current income tax provision (benefit):          
Federal $ 1,246  $ 34  $ (722)
State 805  372  733 
Foreign 2,414  1,255  1,202 
Total current 4,465  1,661  1,213 
Deferred income tax (benefit) provision:
Federal (28,552) (22,677) 2,528 
State 4,265  (5,657) 2,300 
Foreign (178) 1,038  1,129 
Total deferred (24,465) (27,296) 5,957 
Total income tax (benefit) provision $ (20,000) $ (25,635) $ 7,170 
Our deferred tax assets and liabilities result primarily from temporary differences between financial reporting and tax recognition of depreciation, energy efficiency, sale-leasebacks and other accruals, and net operating loss carryforwards.
Deferred tax assets and liabilities consisted of the following:
December 31,
  2024 2023
Deferred income tax assets:      
Compensation accruals $ 5,622  $ 4,137 
Reserves 8,009  5,906 
Sale-leasebacks and other accruals 39,231  49,300 
Net operating losses 9,882  28,565 
Interest limitation 16,706  8,273 
Energy efficiency 138,647  82,827 
Deferred revenue 2,402  2,114 
Gross deferred income tax assets 220,499  181,122 
Valuation allowance (4,015) (3,704)
Total deferred income tax assets $ 216,484  $ 177,418 
Deferred income tax liabilities:
Depreciation $ (148,217) $ (145,880)
Deferred effect of derivative liability (5,606) (2,166)
Outside basis difference (6,759) (6,599)
Interest rate swaps (1,602) (841)
Total deferred income tax liabilities (162,184) (155,486)
Deferred income tax assets (liabilities), net $ 54,300  $ 21,932 
Our valuation allowance related to the following items:
December 31,
2024 2023
Foreign net operating loss (1)
$ 4,013  $ 3,702 
State net operating loss at one of our subsidiaries (2)
2  2 
Total valuation allowance $ 4,015  $ 3,704 
(1) It is more likely than not that we will not generate sufficient taxable income at the foreign subsidiary level to utilize the net operating loss.
(2) It is more likely than not that we will not generate sufficient taxable income at the subsidiary level to utilize the net operating loss.
As of December 31, 2024, we had the following tax loss and credit carryforwards to offset taxable income in prior and future years:
Amount Expiration Period
Federal net operating loss carryforwards $ —  Indefinite
State net operating loss carryforwards 72,865   Various
Canadian net operating loss carryforwards 20,922  2028 through 2043
Ireland net operating loss carryforwards 2,110  Indefinite
Italy net operating loss carryforwards 2,970  Indefinite
Spain net operating loss carryforwards 2,463  Indefinite
Other foreign country net operating loss carryforwards 127  2030
Total tax loss carryforwards $ 101,457 
Federal Energy Investment and Production tax credit carryforward $ 114,839 
2030 through 2043
The provision for income taxes is based on the various rates set by federal and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements.
The principle reason for the difference between the statutory rate and the estimated annual effective rate for 2024 were the effects of tax deductions related to the Section 179D Commercial Buildings Energy-Efficiency deduction and ITCs we are entitled from solar plants and renewable natural gas projects which have been placed into service during 2024. The Section 179D deduction available for 2024 was substantially lower compared to prior years due to timing of project completions. We also incurred additional tax expense from the deferred effect of an increase in our future effective state tax rates resulting from apportionment changes.

The principle reason for the difference between the statutory rate and the estimated annual effective rate for 2023 were the effects of tax deductions related to the Section 179D Commercial Buildings Energy-Efficiency deduction, ITCs we are entitled from solar plants which have been placed into service during 2023 and, the deferred benefit for a reduction in future state taxes. The Section 179D deduction available for 2023 was substantially higher compared to prior years because of enhancements to Section 179D in the IRA. In addition, we were able to identify and document a large Section 179D eligible from a prior year that had not previously been available. We also benefited from the deferred effect of a reduction in our future state tax rates resulting from apportionment changes in a major state.
The ITCs and production tax credits we may be entitled to fluctuate from year to year based on the cost of the renewable energy plants we place in service and production levels at facilities we own in that year.
On December 27, 2020 the President signed the Consolidated Appropriations Act, 2021 H.R. 133, which among other things made the Section 179D Energy Efficient Commercial Building Deduction permanent. The Section had previously been extended for years up to December 31, 2020. That Act also made changes to the way in which the deduction is calculated including adding an inflation adjustment and an update of the American Society of Heating, Refrigerating and Air-Conditioning Engineers (“ASHRAE”) Standard by which energy improvements are measured. On December 23, 2022, the IRS issued Announcement 2023-1 which clarified the ASHRAE energy efficiency standards which will be applied to projects placed in service for 2021 and 2022.
The following is a reconciliation of the effective tax rates:
Year Ended December 31,
  2024   2023   2022
Income before (benefit) provision for income taxes $ 33,940    $ 38,269  $ 105,719 
Federal statutory tax expense $ 7,128    $ 8,036  $ 22,201 
State income taxes, net of federal benefit 2,345    (774) 3,844 
Net state impact of deferred rate change 2,919    (3,213) (575)
Nondeductible expenses 1,182    667  2,198 
Impact of reserve for uncertain tax positions (265) (200) 59 
Stock-based compensation expense 1,240    4  353 
Energy efficiency preferences (38,929)   (30,359) (21,410)
Foreign items and rate differential 2,629    458  37 
State tax adjustment —  (66) — 
Redeemable non-controlling interests 729  (227) (411)
Valuation allowance 311  81  (159)
Miscellaneous 711    (42) 1,033 
Total income tax (benefit) provision $ (20,000)   $ (25,635)   $ 7,170 
Effective tax rate:          
Federal statutory rate expense 21.0  % 21.0  % 21.0  %
State income taxes, net of federal benefit 6.9  % (2.0) % 3.6  %
Net state impact of deferred rate change 8.6  % (8.4) % (0.5) %
Nondeductible expenses 3.5  % 1.7  % 2.1  %
Impact of reserve for uncertain tax positions (0.8) % (0.5) % 0.1  %
Stock-based compensation expense 3.7  % —  % 0.3  %
Energy efficiency preferences (114.7) % (79.3) % (20.3) %
Foreign items and rate differential 7.7  % 1.2  % —  %
State tax adjustment —  % (0.2) % —  %
Redeemable non-controlling interests 2.1  % (0.6) % (0.4) %
Valuation allowance 0.9  % 0.2  % (0.2) %
Miscellaneous 2.2  % (0.1) % 1.1  %
Effective tax rate (58.9) % (67.0) % 6.8  %
 
The following table provides a reconciliation of gross unrecognized tax benefits which are included in other liabilities within the consolidated balance sheets:
Year Ended December 31,
  2024   2023
Balance, beginning of year $ 800  $ 900 
Additions for current year tax positions 104  100 
Reductions of prior year tax positions —  (200)
Balance, end of year $ 904  $ 800 
The amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods was $904 as of December 31, 2024 and $310 as of December 31, 2023 (both net of the federal benefit on state amounts).
We do not accrue U.S. tax for foreign earnings that we consider to be permanently reinvested outside the United States. Consequently, we have not provided any withholding tax on the unremitted earnings of our foreign subsidiaries. As of December 31, 2024 and 2023, we estimated that there were no earnings for which repatriation tax has not been provided.
The tax years 2021 through 2024 remain open to examination by major taxing jurisdictions. We recognize interest and penalties related to uncertain tax positions as components of our income tax provision (benefit) in our consolidated statements of income. We increased income tax expense for these items by $29 in 2024, $22 in 2023, and $22 in 2022.