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SEC Filings
10-K
TERRAFORM POWER, INC. filed this Form 10-K on 03/15/2019
Entire Document
 

Effective Tax Rate

The income tax provision differed from the expected amounts computed by applying the statutory U.S. federal income tax rate of 21% as of December 31, 2018 and 35% as of December 31, 2017 and 2016, to loss before income taxes, as follows:
 
 
Year Ended December 31,
 
 
2018
 
2017
 
2016
Income tax benefit at U.S. federal statutory rate
 
21.0
 %
 
35.0
 %
 
35.0
 %
Increase (reduction) in income taxes:
 
 
 
 
 
 
State income taxes, net of U.S. federal benefit
 
5.0

 
4.0

 
(5.9
)
Foreign operations
 
(0.5
)
 
8.7

 
(1.5
)
Non-controlling interests
 
(25.9
)
 
(9.4
)
 
(15.9
)
Impairment of goodwill
 

 

 
(6.2
)
Permanent differences
 
(1.6
)
 

 

Tax Act rate change impact
 

 
2.0

 

Return to provision
 

 
2.8

 

Change in valuation allowance
 
7.8

 
(34.1
)
 
(4.7
)
Other
 
1.6

 

 
(1.0
)
Effective tax rate
 
7.4
 %
 
9.0
 %
 
(0.2
)%
        
Prior to the consummation of the Merger on October 16, 2017, TerraForm Power owned approximately 66% of Terra LLC and SunEdison owned approximately 34% of Terra LLC. On October 16, 2017, pursuant to the Settlement Agreement, SunEdison transferred its interest in Terra LLC to TerraForm Power. Since the date of this transaction, TerraForm Power owns 100% of the capital and profits interest in Terra LLC, except for the IDRs which are owned by Brookfield IDR Holder. The Merger resulted in a change in control to occur subjecting TerraForm Power’s loss carryforwards to be limited for future usage under Internal Revenue Code Section 382 (“Section 382”).

On December 31, 2018, the Company executed a reorganization of its Capital Dynamics portfolio which resulted in no tax impact by effectively moving the stock of the Capital Dynamics corporate entities up to TerraForm Power and then immediately contributing Capital Dynamics project assets to Terra LLC. As a result of this reorganization, TerraForm Power Holdings, Inc. (formerly known as TerraForm CD Holdings Corporation) will elect to become part of the consolidated US federal and state tax filing group under TerraForm Power for the year ending December 31, 2019. The Company recognized a tax benefit of $20.1 million during the year ended December 31, 2018 resulting from an excess net deferred tax liability that was previously recognized by TerraForm Power Holdings, Inc. as a separate taxpayer which is now expected to reverse in future periods as part of the U.S. federal and state tax consolidated group and provide a source of future taxable income to realize the Company’s net operating loss carryforwards.

For the years ended December 31, 2018 and December 31, 2017, the overall effective tax rate was different than the statutory rate of 21% and 35%, respectively, and was primarily due to the recording of a valuation allowance on certain income tax benefits attributed to the Company, losses allocated to non-controlling interests, the 2018 revaluation of deferred federal and state tax balances for TerraForm Power Holdings, Inc., and the effect of foreign and state taxes. For the year ended December 31, 2016, the overall effective tax rate was different from the statutory tax rate of 35% primarily due to the recording of a valuation allowance on certain income tax benefits attributed to the Company, losses allocated to non-controlling interests, the impairment of nondeductible goodwill and the effects of state income taxes.


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