NOTE

 federal statutory tax rate to the Company’s effective income tax rate is as follows:

December 31, 2017,

$145.0

$222.2

2029

2037

2018

2037

$0.8

December 31, 2017

$85.2

December 31, 2017

20

2026

2037.

$86.2

31,

2017

10

2027.

  Realization of the deferred tax assets and tax credits is dependent on generating sufficient taxable income in appropriate jurisdictions prior to expiration of the NOL carryforwards and tax credits. Based upon available evidence of the Company’s ability to generate additional taxable income in the future and historical losses in prior years, a valuation allowance in the amount of  million and million is recorded against the U.S. deferred tax assets as of and respectively, as it is more likely than that the deferred tax assets will be realized.  The decrease in the valuation allowance of  million is based upon new available evidence of the Company's ability to generate additional taxable income in the U.S. due to the closing of the SCPPA portfolio and the taxable income impacts of the recently enacted Tax Act, discussed further below.  The Company is maintaining a valuation allowance of  million against a portion of the U.S. foreign tax credits, production tax credits, state tax credits and state NOLs that are expected to expire before they can be utilized in future periods.

October 2016,

2016

16,

2016

16

December 15, 2017,

ng entity to recognize the tax expense from intra-entity transfers of assets other than inventory in the selling entity's tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated  in consolidation. Any deferred tax asset that arises in the buying entity's jurisdiction would also be recognized at the time of the transfer. For additional information on the new accounting standard related to tax effects associated with intercompany transfers of assets please see 

New accounting pronouncements effective in future periods” in Note to our consolidated financial statements set forth in Item of this annual report.

1

$0.1

2013

11,

2017,

  The decision was made to distribute million, of which  million was received in and the remaining million is expected to be received during   The Company recorded the tax impact of this change in the income tax provision, notable a withholding tax of approximately  million.  The Company recorded a foreign tax credit deferred tax asset for the withholding tax and an associated valuation allowance based on the Company’s ability to utilize foreign tax credits in the U.S. prior to the expiration period.

was approximately million at It is the Company’s intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, provision has been made for foreign withholding taxes which become payable if undistributed earnings of foreign subsidiaries were paid as dividends to the Company. The U.S. tax associated with the undistributed earnings were included as part of the Transition Tax.  The additional taxes on that portion of undistributed earnings which is available for dividends are practicably determinable.

re are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered probable.

December 31, 2017

2016,

$9.0

$5.7

ing authorities on an underpayment of income taxes are included as a component of income tax provision in the consolidated statements of operations and comprehensive income.

December 31, 2017,

not

by the Internal Revenue Service for the years - 

and by local state jurisdictions for the years - These examinations lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods.

$0.0

million and million in and respectively, was due to the statute of limitations expiration on certain tax positions as well as Ormat System's tax settlement as detailed below. 

’s foreign subsidiaries remain open to examination by the local income tax authorities in the following countries for the years indicated:

may

.

2016

  On the Bipartisan Budget Act of was enacted extending the production tax credit (PTC) and investment tax credit (ITC) in lieu of PTCs for geothermal projects that begin construction before   Geothermal projects that begin construction before and meet certain other “begun construction” rules qualify for cents per kilowatt hour of PTCs for their -years of operations; alternatively, the owner of the project elect a ITC in lieu of PTCs.  For projects that do satisfy the begun construction rules, the ITC is reduced to   The owner of the power plant must choose between the PTC and the ITC described above. In either case, under current tax rules for tax credits generated before any unused tax credit has a -year carry back and a -year carry forward.  Whether the Company claims the PTC or the ITC, for assets acquired and placed in service after the Company is permitted to fully expense the cost of qualified property (“bonus depreciation”).  In later years, the -year bonus depreciation deduction phases down, as follows:

        for property placed in service after and before

.

        for property placed in service after and before

.

        for property placed in service after and before

.

        for property placed in service after and before

.

Company could also elect in lieu of bonus deprecation to depreciate most of the plant for tax purposes over years on an accelerated basis, meaning that more of the cost be deducted in the few years than during the remainder of the depreciation period.

’s “tax base” in the plant that it can recover through bonus or accelerated depreciation (if elected) must be reduced by half of the ITC.  If the Company claims the PTC, there is reduction in the tax basis for depreciation.  Companies that place qualifying renewable energy facilities in service, during or or that begin construction of qualifying renewable energy facilities during or and place them in service by choose to apply for a cash grant from the U.S. Department of the Treasury (“U.S. Treasury”) in an amount equal to the ITC. Likewise, the tax base for depreciation will be reduced by of the cash grant received. Under the ARRA revised by the CAA, the U.S. Treasury is instructed to pay the cash grant within governmental business days of the application or the date on which the qualifying facility is placed in service

.

Guatemala

— The enacted tax rate is Orzunil, a wholly owned subsidiary, was granted a benefit under a law which promotes development of renewable power sources. The law allows Orzunil to reduce the investment made in its geothermal power plant from income tax payable, which reduces the effective tax rate to zero. Ortitlan, another wholly owned subsidiary, was granted a tax exemption for a period of years ending Starting Ortitlan pays income tax of on its Electricity revenues. The effect of the tax exemption in the years ended and is million, million, and million, respectively ( and per share of common stock, respectively).

Israel

— The Company’s operations in Israel through its wholly owned Israeli subsidiary, Ormat Systems Ltd. (“Ormat Systems”), are taxed at the regular corporate tax rate of in in   in  and in and thereafter. Ormat Systems received “Benefited Enterprise” status under Israel’s Law for Encouragement of Capital Investments, (the “Investment Law”), with respect to of its investment programs. In new legislation amending the Investment Law was enacted. Under the new legislation, a uniform rate of corporate tax would apply to all qualified income of certain industrial companies, as opposed to the current law’s incentives that are limited to income from a “Benefited Enterprise” during their benefits period. According to the amendment, the uniform tax rate applicable to the zone where the production facilities of Ormat Systems are located would be in and thereafter. Ormat Systems decided to irrevocably comply with the new law starting in

ends and since upon liquidation the Company will have to pay a tax on exempt income, Ormat Systems recorded deferred tax liability at the rate of in respect of the tax exempt income in - In the event that Ormat Systems fails to comply with the program terms, the tax benefits be canceled and it be required to refund the amount of the benefits utilized, in whole or in part, with the addition of linkage differences and interest.

Ormat Systems tax assessment for fiscal years - was finalized and settled in The settlement resulted in impact to income statement due to release of the related uncertain tax position liability.

Kenya

- The Company’s operations in Kenya are taxed at the rate of On Kenya's Income Tax Act was amended pursuant to certain provisions of the recently adopted Finance Act, Among other matters, these amendments retain the enhanced investment deduction of under Section of the Income Tax Act, extend the period for deduction of tax losses from years to years under Sections () and () of the Income Tax Act, and amend the effective date from to under Sections () and () of the Income Tax Act. Previously, the Company had a valuation allowance for the additional investment deduction reducing its deferred tax asset in Kenya as the utilization of the related tax losses was probable within the original year carryforward period. As a result of the change in legislation and the expected continued profitability during the extended carryforward period, the Company expects that it will be able to fully utilize the carryforward tax losses within the year period and as such released the valuation allowance in Kenya resulting in a million of tax benefits in the year ended

fourth

2016,

$4.7

 used in the calculation of taxable income at its Kenya operations, which principally related to fiscal years prior to  The Company recorded an adjustment to reduce income tax expense and deferred tax liabilities by million in the quarter of to correct this misstatement.

 

KRA”) conducted an audit related to the Company’s operations in Kenya for fiscal years and On the Company has signed a Settlement Agreement with the KRA under which it paid approximately million in principal for full settlement of all claims raised by the KRA during the audit. The principal amount that was paid in was recorded as an addition to the cost of the power plants and is qualified for investment deduction at under the terms of the settlement agreement. Additionally, as per the Settlement Agreement, the Company submitted a request for waiver on the applied interest in the amount of approximately million, for which the Company recorded a provision to cover such a potential exposure.

- The Company’s operations in Guadeloupe are taxed at a rate of in a rate of up to a taxable income of  million and  on taxable income exceeding million in a rate of up to taxable income of  million and  on taxable income higher than  million in a rate of in in and in

Honduras

- The Company’s operations in Honduras are exempt from income taxes for the years starting at the commercial operation date of the power plant.

Other significant foreign countries

— The Company’s operations in New Zealand are taxed at the rate of in and

December 22, 2017,

Tax Act”).  The Tax Act makes broad and complex changes to the U.S. tax code, including, but limited to, () reducing the U.S. federal corporate tax rate from percent to percent; () requiring companies to include in taxable income a -time tax on certain repatriated earnings of foreign subsidiaries; () generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; ()

; () eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; () creating the base erosion anti-abuse tax (BEAT), a new minimum tax; () creating a new limitation on deductible interest expense; and () changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after

118,

  SAB provides a measurement period that should extend beyond year from the Tax Act enactment date for companies to complete the accounting under ASC   In accordance with SAB a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC is complete.  To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.  If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC on the basis of the provision of the tax laws that were in effect immediately before the enactment of the Tax Act.

may

 

However, we

           Reduction in U.S. federal corporate tax rate: The Tax Act reduces the corporate tax rate of percent to percent, effective Consequently, we have recorded a provision increase related to deferred taxes of  million with a corresponding net adjustment to deferred income tax benefit for the year ended While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, it be affected by other analyses related to the Tax Act, including, but limited to, our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.

one

  To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post- E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings.  We are able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax income inclusion of million.  The Company has sufficient NOLs to offset such

, therefore there is resulting obligation due for such amount.  We are continuing to gather additional information to refine the amount

Transition Tax.

’s U.S. Shareholder.  GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of () percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over () the amount of certain interest expense taken into account in the determination of net CFC-texted income.

740.

 As discussed further below, for valuation allowance purposes, GILTI inclusions were determined using estimates of book income, but the Company will calculate the impact of GILTI as a period cost.

 

its valuation allowance analyses are affected by various aspects of the Tax Act (e.g. deemed repatriation of deferred foreign income, GILTI inclusions, new categories of FTCs, interest expense limitations).  Since, as discussed herein, the Company has recorded provisional amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in a valuation allowance is provisional

.

nalyses are affected by various aspects of the Tax Act (e.g. deemed repatriation of deferred foreign income, GILTI inclusions, new categories of FTCs, interest expense limitations).  Since, as discussed herein, the Company has recorded provisional amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in an uncertain tax position is provisional

.