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Income Taxes
 6 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 16—Income Taxes

The provision for income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded.

The Company recorded an income tax benefit of $0.1 million and income tax expense of $0.8 million in the three months ended June 30, 2023 and 2024, respectively. The Company recorded an income tax benefit of $0.1 million and income tax expense of $0.6 million in the six months ended June 30, 2023 and 2024, respectively. Income tax benefit and/or expense in each period is related to the Company’s U.S. and foreign operations. The effective tax rates for the three and six months ended June 30, 2023 and 2024 are different from the federal statutory tax rate primarily due to losses for which no tax benefit has been recognized.

The Company increased its unrecognized tax benefits in the six months ended June 30, 2024 by $2.7 million. This increase is primarily attributable to the portion of AFTC revenue recognized in the period attributed to the federal fuel tax the Company collected from its customers and deductions attributed to the unvested Amazon Warrant during the six months ended June 30, 2024. The net interest incurred was immaterial for the six months ended June 30, 2023 and 2024.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. Besides the reinstatement of AFTC for the three year period from January 1, 2022 to December 31, 2024, the IRA offers tax incentives targeting energy transaction and renewables:

●The investment tax credit under Section 48 of the Internal Revenue Code is expanded to include Qualified Biogas Property, which is expected to be available for the RNG dairy projects that the Company has invested in or will invest in. The investment tax credit rate could range from 6% up to a 50% bonus rate depending on meeting certain wage, apprenticeship, domestic content, and energy community requirements.
●A new tax credit under Section 45Z of the Internal Revenue Code was introduced to apply to low-emissions transportation fuel produced at a qualified facility and sold by the taxpayer after December 31, 2024 through December 31, 2027. The IRA provides a base credit of 20 cents per gallon or $1.00 per gallon multiplied by an applicable emission factor if prevailing wage and apprenticeship requirements are met. The Company expects its RNG dairy projects will be eligible for this credit, although the rate of the credit per gallon is still pending further guidance from the US Treasury department.
●The alternative fuel refueling property credit under Section 30C of the Internal Revenue Code was reinstated for 2022 and extended an additional 10 years to apply to any property placed in service before January 1, 2033. The base credit amount is 6% with a bonus rate of 30% if wage and registered apprenticeship requirements are met with a maximum credit amount of $100,000 (previously $30,000) per single refueling pump.

The Internal Revenue Service has been granted broad authority to issue regulations or other guidance that could clarify how these taxes will be applied and credits will be eligible. The Company is continuing to evaluate the financial impact of the IRA as additional information becomes available. For the six months ended June 30, 2024, the Company’s RNG equity method investee transferred the investment tax credits on one of the two RNG projects that were placed in service in 2023 and received $9.3 million of total cash proceeds. The Company’s RNG equity method investee is in the process of transferring the tax credit of the other RNG project.