The Company and its subsidiaries are subject to income taxes. The Company files a consolidated U.S. income tax return with its wholly-owned subsidiaries, including its allocated share of the taxable income from the wind and solar facilities. The Company and its subsidiaries file separate and combined state income tax returns.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and includes provisions that may have an impact on the Company’s federal taxable income. The most significant of these are 100% bonus depreciation on qualifying assets (which is scheduled to phase down ratably to 0% between 2023 and 2027) and a reduction in the federal corporate tax rate from 35% to 21% (see further discussion below).

In response to the Tax Cuts and Jobs Act, on December 22, 2017 the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Cuts and Jobs Act in the period of enactment. The SEC Staff noted in SAB 118 that in these cases a company should continue to apply Topic 740, Income Taxes, based on the provisions of the tax laws that were in effect immediately prior to the Tax Cuts and Jobs Act being enacted. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Cuts and Jobs Act enactment date for companies to complete the accounting under Topic 740. While the Company was able to make reasonable estimates of the impact of the changes to provisions of the Internal Revenue Code related to its foreign entities on its tax provision for the year ended December 31, 2017, the final impact of the Tax Cuts and Jobs Act may differ from these estimates, due to, among other things, changes in the interpretations and assumptions of the Tax Cuts and Jobs Act, and additional guidance that may be issued by the Internal Revenue Service. As a result, the Company will continue to gather additional information to determine the final impact of these changes.

The Tax Cuts and Jobs Act also includes a new limitation on the deductibility of net interest expense that generally limits the deduction to 30% of “adjusted taxable income”. For years before 2022, adjusted taxable income is defined as taxable income computed without regard to certain items, including net business interest expense, the amount of any NOL deduction, tax depreciation and tax amortization. The Company does not expect to incur net interest expense that is greater than adjusted taxable income prior to 2022.

Components of the Company’s income tax provision (benefit) related to the income (loss) for the years ended December 31, 2017, 2016 and 2015 were ($ in thousands):

 

		Year Ended December 31,
		2017				2016				2015
Current taxes:
Federal		$	—			$	—			$	(6,884	)
State			11,160				7,310				457
Total current tax provision (benefit)		$	11,160			$	7,310			$	(6,427	)
Deferred taxes:
Federal		$	(250,602	)		$	79,796			$	(46,744	)
State			4,154				(1,185	)			(14,348	)
Total deferred tax (benefit) provision			(246,448	)			78,611				(61,092	)
Change in valuation allowance			1,134				(14,664	)			2,358
Total tax (benefit) provision		$	(234,154	)		$	71,257			$	(65,161	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016, were ($ in thousands):

 

		At December 31,
		2017				2016
Deferred tax assets:
Net operating loss carryforwards		$	133,934			$	186,948
Deferred revenue			8,854				8,681
Accrued compensation			6,156				13,894
Accrued expenses			25,008				32,114
Investment and foreign tax credits			17,650				1,876
Other			515				4,066
Total gross deferred tax assets			192,117				247,579
Less: valuation allowance			(5,453	)			(4,319	)
Net deferred tax assets		$	186,664			$	243,260
Deferred tax liabilities:
Intangible assets		$	(94,163	)		$	(145,199	)
Investment basis difference			(45,271	)			(75,105	)
Property and equipment			(660,706	)			(892,382	)
Unrealized gains on derivative instruments, net			(9,682	)			(14,104	)
Equity component of convertible senior notes			(7,761	)			(11,882	)
Prepaid expenses			(1,151	)			(704	)
Total deferred tax liabilities			(818,734	)			(1,139,376	)
Net deferred tax liabilities		$	(632,070	)		$	(896,116	)

At December 31, 2017, the Company and its wholly owned subsidiaries had federal income tax NOL carryforwards of $347.3 million, which are available to offset future taxable income, if any, through 2036. The Company’s NOL balance begins to expire in 2029. Approximately $28.0 million of these NOLs may be limited, on an annual basis, due to the change of control for tax purposes of the respective subsidiaries in which such losses were incurred. The Company generated federal consolidated taxable income for the year ended December 31, 2017, which decreased the NOL carryforward. The Company believes that it will be able to utilize all federal prior year NOLs.

In addition, the Company and its subsidiaries have state NOL carryforwards. State NOL carryforwards are specific to the state in which the NOL was generated and various states impose limitations on the utilization of NOL carryforwards.

In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. For the year ended December 31, 2017, the Company increased the valuation allowance by $1.1 million.

As of December 31, 2017, the Company had $632.1 million in noncurrent deferred tax liabilities. A significant portion of the Company’s deferred tax liabilities relates to tax basis temporary differences of both property and equipment and intangible assets. The Company records the acquisitions of consolidated businesses under the purchase method of accounting and accordingly recognizes a significant increase to the value of the property and equipment and to intangible assets. For tax purposes, the Company may assume the existing tax basis of the acquired businesses, in which case the Company records a deferred tax liability to reflect the increase in the purchase accounting basis of the assets acquired over the carryover income tax basis. This liability will reduce in future periods as these temporary differences reverse.

For the years ended December 31, 2017, 2016 and 2015, the Company recorded an income tax benefit of $234.2 million, an income tax expense of $71.3 million and an income tax benefit of $65.2 million, respectively. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Cuts and Jobs Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $312.3 million tax benefit in the Company’s consolidated statement of income for the year ended December 31, 2017. These amounts are different from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax income as a result of the following ($ in thousands):

 

		Year Ended December 31,
		2017				2016				2015
Tax provision (benefit) at U.S. statutory rate		$	77,685			$	79,144			$	(62,639	)
Permanent differences and other			1,167				(469	)			1,299
State income taxes, net of federal benefit			10,534				8,958				(10,082	)
Income attributable to noncontrolling interest			621				(257	)			3,903
Change in investment and foreign tax credits			(13,030	)			(1,455	)			—
Change in U.S. tax law			(312,265	)			—				—
Change in valuation allowance			1,134				(14,664	)			2,358
Total tax (benefit) provision		$	(234,154	)		$	71,257			$	(65,161	)

The amount of unrecognized tax benefits at December 31, 2017 and 2016 are not significant. The Company does not expect that the amount of unrecognized tax benefits will change in the next 12 months. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense in the statements of operations, which is consistent with the recognition of these items in prior reporting periods.

The federal statute of limitations on the assessment of additional income tax liabilities has lapsed for all returns filed for years ended on or before December 31, 2014. The various state statutes of limitations on the assessment of additional income taxes have lapsed on all returns filed for the years ended on or before December 31, 2013.