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INCOME TAXES | 9 Months Ended
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Sep. 30, 2024
Income Taxes [Abstract] |
INCOME TAXES | NOTE 22: INCOME TAXES For the three months ended September 30, 2024, the Company reported income taxes at an effective tax rate of (11.2)%, compared to the three months ended September 30, 2023, where the Company reported income taxes at an effective tax rate of (143.6)%. The change in effective tax rate in the three months ended September 30, 2024 compared to the corresponding period in 2023 is mainly due to the impairments and disposals, which significantly increased the quarterly loss before income tax, offset by higher tax expenses resulting from an increase in the valuation allowance during the quarter. For the nine months ended September 30, 2024, the Company reported income taxes at an effective tax rate of (6.0)%, compared to the nine months ended September 30, 2023, where the Company reported income taxes at an effective tax rate of 33.6%. The change in effective tax rate in the nine months ended September 30, 2024 compared to the corresponding period in 2023 is mainly due to the Company transitioning to a loss position in 2024 which has increased significantly as a result of impairments and disposals, in addition to higher tax expenses due to valuation allowance. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent that the Company believes they will not be realized. The Company considers all available evidence, including historical information, long range forecast of future taxable income and evaluation of tax planning strategies. Amounts recorded for valuation allowance can result from a complex series of judgments about future events and can rely on estimates and assumptions. Based primarily on the negative evidence outweighing the positive evidence, including the Company's three year cumulative, consolidated GAAP loss, historical tax losses and the difficulty in forecasting excess tax benefits related to equity-based compensation, the Company believes there is uncertainty as to when it will be possible to utilize certain net operating losses (each a "NOL"), credit carryforwards and other deferred tax assets. Therefore, the Company recorded a valuation allowance against the deferred tax assets for which it is more-likely-than-not they will not be realized. Should the Company's operating results improve and projections show continued utilization of the tax attributes, the Company would consider that as significant positive evidence and future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required. If this were to occur, any reversal of the valuation allowance would result in a corresponding non-cash income tax benefit, thereby increasing total DTAs. As of September 30, 2024, and December 31, 2023, the Company recorded valuation allowance in the amount of $217,314 and $51,245, respectively. As of September 30, 2024, and December 31, 2023, unrecognized tax benefits were valued at $21,992 and $15,908, respectively. If recognized, such benefits would favorably affect the Company’s effective tax rate. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest as of September 30, 2024 and December 31, 2023 were $5,543 and $2,927, respectively. In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”), which includes several incentives intended to promote clean energy, battery and energy storage, electrical vehicles, and other solar products, and is expected to impact our business and operations. As part of such incentives, the IRA will, among other things, extend the investment tax credit (“ITC”) through 2034 and is therefore expected to increase the demand for solar products. The IRA is expected to further incentivize residential and commercial solar customers and developers due to the inclusion of significant tax credits for qualifying energy projects, and Advanced Manufacturing Production Tax Credits ("AMPTC") for U.S. manufacturing of eligible components (under IRC §45X), including PV inverters and DC-optimized systems. The Company has been manufacturing eligible products in the U.S. since the fourth quarter of 2023. In the three and nine months ended September 30, 2024, the Company manufactured and sold products that entitle it to $13,963 and $44,084 of AMPTCs, respectively, which were recorded as a reduction in of cost of revenues. As of September 30, 2024 and December 31, 2023 benefits from AMPTCs of $68,001 and $6,020, respectively, were recorded as a tax prepayment within prepaid expenses and other current assets. On October 24, 2024, final regulations concerning the application of IRC §45X were published. The regulations contain detailed rules concerning the eligibility, qualifying and accounting for AMPTCs. Of particular relevance to the Company are the rules concerning the qualification and measurement of AMPTCs to Residential Inverters, Commercial Inverters and DC-Optimized Inverter Systems, that are included in the definition of Microinverters.

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