HA Sustainable Infrastructure Capital, Inc.HASI
HA Sustainable Infrastructure Capital, Inc. Income Taxes Disclosure
Income Tax
As discussed in Note 1, as a result of expanding opportunities in non-qualifying REIT assets, effective January 1, 2024, we have elected to revoke our REIT election, and are taxed as a C Corporation beginning in tax year 2024. Commencing with the taxable year ended December 31, 2024, all of the Company’s taxable income is subject to U.S. federal and state income tax at the applicable corporate tax rate. Dividends paid to stockholders are no longer tax deductible. The Company is also no longer subject to the REIT compliance requirements for assets, income, or distributions to stockholders among other REIT compliance requirements.
Operating as a taxable C Corporation provides the Company with flexibility to execute various strategic initiatives without the constraints of complying with REIT requirements, including increased investing in power generating, transportation, and alternative fuel assets that are not REIT qualifying. The Company’s transition to a taxable C Corporation is not expected to result in significant incremental current income tax expense in the near term due to the availability of net operating loss (“NOL”) carryforwards and tax credits typically offered by the assets in which we often invest.
We recorded an income tax expense of approximately $85 million for the year ended December 31, 2025, a $70 million tax expense for the year ended December 31, 2024, and a $32 million tax expense for the year ended 2023. The statutory federal income tax expense and benefits recorded were determined using a rate of 21%. Our deferred tax assets and liabilities were measured using a federal rate of 21%. All of the Company's pre-tax income for the years presented was generated in the United States and all income tax expense recognized relates solely to deferred tax expense. No material cash income taxes were paid to the or state and local jurisdictions during the year ended December 31, 2025.
The provision (benefit) for income taxes consists of the following:
| 2025 | 2024 | 2023 | |||||||||||||||
(in millions) | |||||||||||||||||
Current tax expense | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
State and local | — | — | — | ||||||||||||||
Total current tax expense | $ | — | $ | — | $ | — | |||||||||||
Deferred tax expense | |||||||||||||||||
Federal | $ | 58 | $ | 48 | $ | 23 | |||||||||||
State and local | 27 | 22 | 9 | ||||||||||||||
Total deferred tax expense | $ | 85 | $ | 70 | $ | 32 | |||||||||||
Total income tax expense | $ | 85 | $ | 70 | $ | 32 | |||||||||||
The following table reconciles the U.S. federal statutory tax rate and expense to the effective income tax rate and expense:
For the year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||
| Federal statutory income tax rate | $ | 57 | 21 | % | $ | 58 | 21 | % | $ | 38 | 21 | % | |||||||||||||||||||||||
| Changes in rate resulting from: | |||||||||||||||||||||||||||||||||||
State and local income tax, net of federal effect (1) | |||||||||||||||||||||||||||||||||||
State and local taxes | 13 | 5 | % | 14 | 5 | % | 3 | 2 | % | ||||||||||||||||||||||||||
State deferred tax remeasurement | (8) | (3) | % | 9 | 3 | % | — | — | % | ||||||||||||||||||||||||||
| State deferred tax other adjustments | 21 | 8 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Tax Credits | |||||||||||||||||||||||||||||||||||
Energy tax credits | (6) | (2) | % | (9) | (3) | % | (10) | (6) | % | ||||||||||||||||||||||||||
Changes in valuation allowance | — | — | % | — | — | % | (10) | (6) | % | ||||||||||||||||||||||||||
Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
Share-based compensation | 5 | 2 | % | 5 | 2 | % | 3 | 2 | % | ||||||||||||||||||||||||||
REIT benefit/dividends paid deduction | — | — | % | — | — | % | (25) | (14) | % | ||||||||||||||||||||||||||
Other | — | — | % | 2 | 1 | % | 2 | 1 | % | ||||||||||||||||||||||||||
Other reconciling differences | |||||||||||||||||||||||||||||||||||
Recognition of deferred tax liability from REIT revocation | — | — | % | — | — | % | 33 | 18 | % | ||||||||||||||||||||||||||
Prior period adjustments (2) | 3 | 1 | % | (8) | (3) | % | (1) | — | % | ||||||||||||||||||||||||||
Other | — | — | % | (1) | — | % | (1) | (1) | % | ||||||||||||||||||||||||||
| Effective tax rate | $ | 85 | 32 | % | 70 | 26 | % | $ | 32 | 17 | % | ||||||||||||||||||||||||
(1)State taxes in California and Maryland made up the majority (greater than 50 percent) of the tax effect in this category.
(2)Prior period adjustments included above primarily relate to changes in estimates made in calculating the Company's tax provision and estimates of taxable income from investments.
Our deferred tax liability was $237 million and $155 million as of December 31, 2025 and 2024. Our deferred tax liability is included in accounts payable, accrued expenses and other on our consolidated balance sheet. Deferred income taxes represent the tax effect from continuing operations of the differences between the book and tax basis of assets and liabilities. Deferred tax assets (liabilities) include the following as of December 31:
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Net operating loss (NOL) carryforwards | $ | 189 | $ | 219 | |||||||
| Tax credit carryforwards | 47 | 40 | |||||||||
| Share-based compensation | 3 | 2 | |||||||||
| Gross deferred tax assets | 239 | 261 | |||||||||
| Equity method investments | (394) | (338) | |||||||||
| Receivables basis difference | $ | (75) | $ | (68) | |||||||
Other | (7) | (10) | |||||||||
| Gross deferred tax liabilities | (476) | (416) | |||||||||
| Net deferred tax liabilities | $ | (237) | $ | (155) | |||||||
We have unused NOLs of $843 million and tax credits of approximately $42 million. Approximately $42 million of our NOLs will begin to expire in 2034. If we were to experience a change in control as defined in Section 382 of the Internal Revenue Code, our ability to utilize NOLs in the years after the change in control would be limited. Similar rules and limitation may apply for state tax purposes as well. Of our NOLs, $801 million were added in taxable years after 2017 which are not subject to expiration but are limited to 80% of taxable income. We have invested, and continue to invest in the normal course of business, in projects which generate tax credits and other tax attributes such as depreciation. Our tax credits related to investments made through 2025 begin to expire in 2034.
We have no examinations in progress, none are expected at this time, and years 2022 through 2025 are open. As of December 2025 and 2024, we had no uncertain tax positions. Our policy is to recognize interest expense and penalties related to income tax matters as a component of general and administrative expense. There were no accrued interest and penalties as of December 31, 2025 and 2024, and no interest and penalties were recognized during the years ended December 31, 2025, 2024, or 2023.
For federal income tax purposes, the cash dividends paid for the years ended December 31, 2025 and 2024 are characterized as follows:
(1)100% of the taxable dividend is eligible to be treated as a qualified dividend.| 2025 | 2024 | ||||||||||
| Common distributions | |||||||||||
Taxable dividend (1) | 43 | % | — | % | |||||||
Return of capital | 57 | % | 100 | % | |||||||
Total common distributions | 100 | % | 100 | % | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Mar 1, 2016 | |
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.