FTC Solar, Inc. Income Taxes Disclosure
Note 13. Income taxes
The components of our loss before income taxes were as follows:
|
|
Year ended December 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
United States loss |
|
$ |
(47,125 |
) |
|
$ |
(48,530 |
) |
Foreign loss |
|
|
(1,251 |
) |
|
|
(2,098 |
) |
Total loss before income taxes |
|
$ |
(48,376 |
) |
|
$ |
(50,628 |
) |
The provisions for (benefits from) income taxes and the reasons for the differences between the provisions for and benefits from income taxes using the U.S. federal income tax rate were as follows:
|
|
Year ended December 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Current - |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
— |
|
|
|
(350 |
) |
Foreign |
|
|
355 |
|
|
|
95 |
|
|
|
|
355 |
|
|
|
(255 |
) |
Deferred - |
|
|
|
|
|
|
||
Federal |
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
Foreign |
|
|
(125 |
) |
|
|
(83 |
) |
|
|
|
(125 |
) |
|
|
(83 |
) |
Provisions for (benefits from) income taxes |
|
$ |
230 |
|
|
$ |
(338 |
) |
|
|
|
|
|
|
|
||
Federal income tax benefit at statutory rate |
|
$ |
(10,159 |
) |
|
$ |
(10,632 |
) |
State taxes, net of federal |
|
|
(1,778 |
) |
|
|
(739 |
) |
Research and experimentation tax credit |
|
|
(116 |
) |
|
|
1,544 |
|
Change in valuation allowance |
|
|
10,724 |
|
|
|
10,200 |
|
Stock compensation |
|
|
1,480 |
|
|
|
1,218 |
|
Section 162m limitation on executive compensation |
|
|
— |
|
|
|
203 |
|
Deferred tax true ups |
|
|
493 |
|
|
|
(1,500 |
) |
State payable true ups |
|
|
— |
|
|
|
(326 |
) |
Change in state tax rate |
|
|
(1,508 |
) |
|
|
(266 |
) |
Change in fair value of warrant liability |
|
|
908 |
|
|
|
— |
|
Permanent differences and other |
|
|
186 |
|
|
|
(40 |
) |
Provisions for (benefits from) income taxes |
|
$ |
230 |
|
|
$ |
(338 |
) |
The components of deferred tax assets and liabilities were as follows:
(in thousands) |
|
December 31, |
|
|
December 31, |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Fixed assets and intangibles |
|
$ |
115 |
|
|
$ |
44 |
|
Leases |
|
|
268 |
|
|
|
348 |
|
Accrued expenses |
|
|
4,629 |
|
|
|
5,590 |
|
Net operating loss carryforward |
|
|
74,596 |
|
|
|
64,055 |
|
Stock options |
|
|
2,132 |
|
|
|
2,475 |
|
R&D credit carryforward |
|
|
2,119 |
|
|
|
1,886 |
|
Other |
|
|
3,257 |
|
|
|
2,048 |
|
Subtotal |
|
|
87,116 |
|
|
|
76,446 |
|
Less: valuation allowance |
|
|
(86,582 |
) |
|
|
(75,858 |
) |
Total deferred tax assets |
|
|
534 |
|
|
|
588 |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Leases |
|
|
(261 |
) |
|
|
(339 |
) |
Prepaid expenses |
|
|
(52 |
) |
|
|
(166 |
) |
Total deferred tax liabilities |
|
|
(313 |
) |
|
|
(505 |
) |
Net deferred tax assets |
|
$ |
221 |
|
|
$ |
83 |
|
The net change in the total valuation allowance for the year ended December 31, 2024, was an increase of $10.7 million recorded through continuing operations. The net change in the total valuation allowance for the year ended December 31, 2023, was an increase of $10.2 million recorded through continuing operations. In assessing the realizability of deferred tax assets, we considered whether it is more likely than not that some portion 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. We considered
the scheduled reversal of deferred tax liabilities, carryback potential, projected future taxable income and tax planning strategies in making this assessment. After consideration of these factors and based upon the level of historical taxable losses, we believe it is more likely than not that the Company will not realize the benefits of these deductible differences at December 31, 2024.
We have federal net operating loss carryforwards of approximately $321.1 million at December 31, 2024. These loss carryforwards have an indefinite carryforward period. We also have state net operating loss carryforwards of approximately $126.2 million which begin to expire in .
We have federal R&D credit carryforwards of approximately $2.4 million at December 31, 2024, which begin to expire in .
Utilization of our net operating loss carryforwards and other tax attributes to offset federal taxable income may be subject to annual limitation due to changes in ownership, pursuant to Internal Revenue Code Sections 382 and 383.
We are subject to U.S. federal income tax, as well as income tax in multiple state and foreign jurisdictions. The tax returns for years 2018 and beyond remain open for examination. As of December 31, 2024, we are not currently under audit by any taxing authority.
We account for uncertainty in taxes in accordance with authoritative guidance. Changes in our accruals for unrecognized tax benefits were as follows:
|
|
Year ended December 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
1,039 |
|
|
$ |
1,421 |
|
Increase for tax positions related to the current period |
|
|
— |
|
|
|
— |
|
Increase for tax provisions related to prior periods |
|
|
— |
|
|
|
— |
|
Decrease for tax positions related to prior periods |
|
|
— |
|
|
|
(382 |
) |
Balance at end of period |
|
$ |
1,039 |
|
|
$ |
1,039 |
|
The unrecognized tax benefits would not impact the effective tax rate if recognized due to the valuation allowance. We do not anticipate a significant increase or decrease over the next twelve months in the unrecognized tax benefits reported above. As of December 31, 2024, and 2023, we have not accrued any interest or penalties related to unrecognized tax benefits.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.