Income Taxes
The components of loss before income taxes for the years ended December 31, 2015, 2016 and 2017 are as follows:
|
| | | | | | | | | | | | |
| 2015 | | 2016 | | 2017 | |
U.S. | $ | (111,437 | ) | | $ | 7,150 |
| | $ | (44,535 | ) | |
Foreign | (22,407 | ) | | (19,535 | ) | | (38,770 | ) | |
Total loss before income taxes | $ | (133,844 | ) | | $ | (12,385 | ) | | $ | (83,305 | ) | |
The provision for income taxes consists of the following:
|
| | | | | | | | | | | | |
| 2015 | | 2016 | | 2017 | |
Current: | |
| | |
| | |
| |
Federal | $ | 9 |
| | $ | (226 | ) | | $ | 31 |
| |
State | 248 |
| | 93 |
| | 231 |
| |
Foreign | 912 |
| | 567 |
| | 224 |
| |
Total current | 1,169 |
| | 434 |
| | 486 |
| |
Deferred: | |
| | |
| | |
| |
Federal | 337 |
| | 478 |
| | (978 | ) | |
State | 71 |
| | 75 |
| | (184 | ) | |
Foreign | 37 |
| | 352 |
| | (1,238 | ) | |
Total deferred | 445 |
| | 905 |
| | (2,400 | ) | |
Total | $ | 1,614 |
| | $ | 1,339 |
| | $ | (1,914 | ) | |
The Company's federal and state tax benefit from the utilization of net operating loss carryovers for the year ended December 31, 2017 was $6,002 and $1,328 respectively. Income tax expense (benefit) for the years ended December 31, 2015, 2016 and 2017 differs from the "expected" amount computed using the federal income tax rate of 35% as a result of the following:
|
| | | | | | | | | | | | |
| 2015 | | 2016 | | 2017 | |
Computed expected tax (benefit) | $ | (46,846 | ) | | $ | (4,335 | ) | | $ | (29,157 | ) | |
Nondeductible expenses | 24,998 |
| | 5,971 |
| | 13,420 |
| |
Tax rate differential on foreign earnings | 3,701 |
| | 720 |
| | 11,860 |
| |
Impact of federal income tax rate change | — |
| | — |
| | 59,729 |
| |
Tax credits | (9,988 | ) | | (9,331 | ) | | (27 | ) | |
Other | (372 | ) | | 833 |
| | 2,376 |
| |
Change in valuation allowance | 30,121 |
| | 7,481 |
| | (60,115 | ) | |
Total tax expense | $ | 1,614 |
| | $ | 1,339 |
| | $ | (1,914 | ) | |
On December 21, 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35 percent to 21 percent beginning on January 1, 2018, requires companies to pay a one-time transition tax on certain previously unremitted earnings of non-U.S. subsidiaries, creates new taxes on certain foreign sourced earnings and imposes additional limitations on certain deductions, including interest expense and net operating losses arising after 2017. The Company has assessed the impact of the TCJA and is not subject to the one-time transition tax. The Company remeasured certain deferred tax assets and liabilities and uncertain tax positions based on the rates at which they are expected to reverse in the future, which is generally 21 percent under the TCJA. The decrease in the Company's net deferred tax assets was offset by a corresponding decrease in our valuation allowance.
During the year ended December 31, 2015, federal tax legislation enacted AFTC through December 31, 2016 with retroactive effect to January 1, 2015. Additionally, in 2013 federal tax guidance was issued that clarified that the AFTC in excess of the Company's fuel tax obligation, which is collected from customers, can be excluded from taxable income. The AFTC, which had previously expired on December 31, 2016, was reinstated on February 9, 2018 to apply to vehicle fuel sales made from January 1, 2017 through December 31, 2017. As a result, all AFTC revenue for vehicle fuel the Company sold in the 2017 calendar year, will be recognized and collected subsequent to December 31, 2017.
The Company recorded a federal tax benefit of $9,298, $9,112 and $0 related to the exclusion of AFTC associated with 2015, 2016 and 2017 fuel sales in excess of its fuel tax obligation, respectively. These amounts increased the Company's deferred tax asset attributed to its federal net operating loss carryforwards and the Company's deferred tax asset valuation allowance.
Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax effect of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2016 and 2017 are as follows:
|
| | | | | | | | |
| 2016 | | 2017 | |
Deferred tax assets: | |
| | |
| |
Accrued expenses | $ | 4,566 |
| | $ | 5,775 |
| |
Sales-type leases | 55 |
| | — |
| |
Alternative minimum tax and general business credits | 6,137 |
| | 6,291 |
| |
Stock option expense | 26,154 |
| | 13,782 |
| |
Other | 1,168 |
| | 881 |
| |
Loss carryforwards | 181,884 |
| | 103,892 |
| |
Total deferred tax assets | 219,964 |
| | 130,621 |
| |
Less valuation allowance | (195,968 | ) | | (120,834 | ) | |
Net deferred tax assets | 23,996 |
| | 9,787 |
| |
Deferred tax liabilities: | |
| | |
| |
Depreciation and amortization | (19,364 | ) | | (3,600 | ) | |
Goodwill | (5,599 | ) | | (4,206 | ) | |
Investments in joint ventures and partnerships | (1,432 | ) | | (1,981 | ) | |
Total deferred tax liabilities | (26,395 | ) | | (9,787 | ) | |
Net deferred tax liabilities | $ | (2,399 | ) | | $ | — |
| |
As of December 31, 2017, the Company had federal, state and foreign net operating loss carryforwards of approximately $417,402, $284,955 and $727, respectively. The Company's federal, state and foreign net operating loss carryforwards will, if not utilized, expire beginning in 2026, 2018 and 2030, respectively. The Company also has federal tax credit carryforwards of $6,083 that will expire beginning in 2026. Due to the change of ownership provisions of Internal Revenue Code Section 382, utilization of a portion of the Company's net operating loss and tax credit carryforwards may be limited in future periods.
In assessing the realizability of the net deferred tax assets, management considers whether it is more likely than not that some or all 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 projected future taxable income and tax planning strategies in making this assessment. As of December 31, 2016 and 2017, the Company provided a valuation allowance of $195,968, and $120,834, respectively, to reduce the net deferred tax assets due to uncertainty surrounding the realizability of these assets. The increase in the valuation allowance for the year ended December 31, 2016 of $6,765 was primarily attributable to operating losses incurred in certain jurisdictions for which a full valuation allowance was established. The decrease in the valuation allowance for the year ended December 31, 2017 of $(75,134) was primarily attributable to the reduction on the federal tax rate, the CEC combination, and was offset by an increase related to the adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payments Accounting, which eliminated the requirement to defer recognition of an excess tax benefit until the benefit is realized through a reduction to income taxes payable.
For the year ended December 31, 2017, the Company did not have any offshore earnings of certain non-U.S. subsidiaries which are permanently reinvested outside the United States.
The Company does not recognize the impact of a tax position in its financial statements unless the position is more likely than not to be sustained, based on the technical merits of the position. The Company has unrecognized tax benefits of $34,065 at December 31, 2017 including $692 of tax benefits that, if recognized, would reduce the Company's annual effective tax rate. The remaining $33,373, if recognized, would not result in a tax benefit since it would be fully offset with a valuation allowance.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31, 2015, 2016 and 2017:
|
| | | | |
Unrecognized tax benefit—December 31, 2015 | $ | 27,497 |
| |
Gross increases—tax positions in current year | 4,556 |
| |
Gross increases—tax positions in prior years | 17,549 |
| |
Unrecognized tax benefit—December 31, 2016 | 49,602 |
| |
Gross increases—tax positions in current year | — |
| |
Gross decreases—tax positions in prior years | (15,537 | ) | |
Unrecognized tax benefit—December 31, 2017 | $ | 34,065 |
| |
The increase in the Company's unrecognized tax benefits during the year ended December 31, 2016 is primarily attributable to the portion of AFTC revenue that was offset by the fuel tax the Company collected from its customers as an unrecognized tax benefit during the year ended December 31, 2016. The Company believes the portion of AFTC revenue that is offset by the fuel tax the Company collects from its customers can be excluded from taxable income, although the ultimate outcome of this tax position is uncertain.
The Company increased its reserve for unrecognized tax positions in the year ended December 31, 2016. The increase in the Company's reserve for unrecognized tax positions was attributable to the write-off of unamortized debt issuance costs resulting from the Company's termination of its Credit Agreement with GE on December 15, 2015. Although the ultimate outcome of this tax position is uncertain, the Company believes that this charge can be deducted in determining its U.S. taxable income for the year ended December 31, 2015. As unrecognized tax positions are not recognized for financial reporting purposes, these positions do not have an impact on the Company's consolidated balance sheets, statement of operations, or statement of cash flows. If these positions were to be sustained, then there would be an increase in the Company's deferred tax assets attributed to its federal and state net operating loss carryforwards, as well as an increase to the amount of the Company's deferred tax asset valuation allowance.
The decrease in the Company's unrecognized tax benefits during the year ended December 31, 2017 is primarily attributable to the reduction on the federal tax rate under the TCJA.
FASB authoritative guidance requires the Company to accrue interest and penalties where there is an underpayment of taxes based on the Company's best estimate of the amount ultimately to be paid. The Company's policy is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. In addition to the unrecognized tax benefits noted above, the Company accrued $241 and $308 of interest expense as of December 31, 2016 and 2017, respectively. The Company recognized interest expense related to uncertain tax positions of $58, $62 and $67 for the years ended December 31, 2015, 2016 and 2017, respectively.
The Company is under examination by the Internal Revenue Service ("IRS") for its U.S. federal income tax returns for the year ended December 31, 2015. The IRS has not proposed any significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company's tax years for 2013 through 2017 are subject to examination by various tax authorities. While the Company is no longer subject to U.S. examination for years before 2014, and for state tax examinations for years before 2013, taxing authorities can adjust the net operating losses that arose in earlier years if and when the net operating losses reduce future income. In addition, the Company is required to indemnify SAFE&CEC S.r.l. for taxes that are imposed on CEC for pre -contribution tax periods.
A number of years may elapse before an uncertain tax position is finally resolved. It is often difficult to predict the final outcome or the timing of resolution of an uncertain tax position, but the Company believes that its reserves for income taxes reflect the most probable outcomes. The Company adjusts the reserve, as well as the related interest and penalties, in light of changing facts and circumstances. The amount of penalties accrued is immaterial. Settlement of any particular position would usually require the use of cash and result in the reduction of the related reserve, or there could be a change in the amount of the Company's net operating loss. The resolution of a matter would be recognized as an adjustment to the provision for income taxes at the effective tax rate in the period of resolution. The Company does not expect a significant increase or decrease in its uncertain tax positions within the next twelve months.