Nextpower Inc.NXT

Nextpower Inc. Income Taxes Disclosure

10-KFiled May 19, 20267 min read
Income taxes
As disclosed in Note 2, the Company adopted ASU 2023-09, Income Taxes – Improvements to Income Tax Disclosures, for the annual disclosures for the fiscal year ended March 31, 2026 on a prospective basis. Comparative financial information for prior periods has not been recast and continues to be reported under the accounting standards in effect for those periods.
The domestic and foreign components of income before income taxes were comprised of the following:
Fiscal year ended March 31,
202620252024
(In thousands)
Domestic$634,828$620,166$576,009
Foreign78,998 27,850 31,988 
Total$713,826 $648,016 $607,997 
The provision for income taxes for fiscal year 2026 consisted of the following, subsequent to the adoption of ASU 2023-09:
Fiscal year ended March 31, 2026
Current:(In thousands)
Federal$105,229 
State8,356 
Foreign14,581 
Total128,166 
Deferred:
Federal$11,045 
State(3,506)
Foreign(7,762)
Total(223)
Provision for income taxes$127,943 
The provision for income taxes for fiscal years 2025 and 2024 consisted of the following, prior to the adoption of ASU 2023-09:
Fiscal year ended March 31,
20252024
Current:
(In thousands)
Domestic$132,181$65,286
Foreign11,486 7,904 
Total143,667 73,190 
Deferred:
Domestic$(13,452)$30,496 
Foreign555 8,096 
Total(12,897)38,592 
Provision for income taxes$130,770 $111,782 
The domestic statutory income tax rate was 21% in fiscal years 2026, 2025 and 2024. The reconciliation of the income tax expense expected based on domestic statutory income tax rates to the expense (benefit) for income taxes included in the consolidated statements of operations is as follows, subsequent to the adoption of ASU 2023-09 (in thousands, except percentages):
Fiscal year ended March 31, 2026
AmountPercent
U.S. federal tax at statutory rate$149,903 21.0 %
State and local income taxes, net of federal income tax effect (1)5,710 0.8 %
Foreign tax effects:
Spain
Transfer pricing adjustment(13,680)(1.9)%
Other5,380 0.8 %
Other foreign jurisdictions(1,043)(0.1)%
Effects of cross-border tax laws
Foreign-derived intangible income(15,208)(2.1)%
Tax credits(9,180)(1.3)%
Nontaxable or nondeductible items:
Stock-based compensation expense (2)6,117 0.9 %
Other(56)— %
Total provision for income taxes and effective tax rate$127,943 17.9 %
(1)State and local taxes in Arizona, California, Illinois, Indiana, and Wisconsin made up the majority (greater than 50%) of the tax effect in this category.
(2)Includes amounts related to non-deductible stock-based compensation, non-deductible executive compensation, and excess tax benefits or shortfalls from stock-based compensation. The total includes $8.7 million related to excess tax benefits on current year vested and exercised awards.
The reconciliation of the income tax expense expected based on domestic statutory income tax rates to the expense (benefit) for income taxes included in the consolidated statements of operations is as follows, prior to the adoption of ASU 2023-09:
Fiscal year ended March 31,
20252024
(In thousands)
Income taxes based on domestic statutory rates$136,083$127,679
Effect of tax rate differential1,682 2,165 
Foreign-derived intangible income deduction(20,747)(9,055)
Foreign disregarded entities6,261 5,574 
Change in TRA liability23 (12,416)
Amount allocated to non-controlling interest(1,702)(41,348)
Stock-based compensation7,097 — 
State15,314 7,810 
Change in state effective rate(7,494)31,279 
Other(5,747)94 
Provision for income taxes$130,770 $111,782 
The amounts of income taxes paid by jurisdiction for the fiscal year ended March 31, 2026, subsequent to the adoption of ASU 2023-09 (in thousands):
Fiscal year ended March 31, 2026
Federal (1)$160,629 
State and Local27,455 
Foreign8,074 
Total income taxes paid$196,158 
(1)Includes assigned or transferred 45X Federal Tax Credits of $130.1 million.
The components of deferred income taxes are as follows:
As of March 31,
20262025
Deferred tax liabilities:(In thousands)
Foreign taxes$(20,908)$(18,128)
Fixed assets(3,410)(2,871)
Intangible assets(13,704)(10,329)
Others(12,081)(4,047)
Total deferred tax liabilities(50,103)(35,375)
Deferred tax assets:
Stock-based compensation19,186 24,125 
Deferred revenue22,446 — 
Capitalized research and development47,117 — 
Goodwill289,986 — 
Net operating loss and other carryforwards27,293 23,417 
Investment in the LLC— 435,802 
TRA liability60,524 — 
Interest deduction on investment in the LLC40,483 28,267 
Foreign tax credits17,065 13,632 
Others37,828 9,962 
Total deferred tax assets561,928 535,205 
Valuation allowances(1,253)(1,052)
Total deferred tax assets, net of valuation allowances560,675 534,153 
Net deferred tax asset$510,572 $498,778 
The net deferred tax asset is classified as follows:
Long-term asset$511,815 $498,778 
Long-term liability(1,243)— 
Total$510,572$498,778
As of March 31, 2026, the Company has terminated the status of the LLC as a partnership for U.S. federal income tax purposes, as such, the investment in the LLC deferred tax asset of $435.8 million, as of March 31, 2025, was recast into separate components including a goodwill deferred tax asset of $290.0 million. The Company has recorded deferred tax assets of
approximately $27.3 million related to tax losses and other carryforwards. These tax losses and other carryforwards will expire at various dates as follows:
Expiration dates of deferred tax assets related to operating losses and other carryforwards
Amount
Fiscal year
(In millions)
2027 - 2032$2,847 
2033 - 2038253 
2039 - Post827 
Indefinite23,366 
Total$27,293 
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, for the fiscal year ended March 31, 2026, no material change to the valuation allowance account of $1.3 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased.
As of March 31, 2026, the Company has provided for earnings in foreign subsidiaries that are not considered to be indefinitely reinvested and therefore subject to withholding taxes on $124.3 million of undistributed foreign earnings, recording a deferred tax liability of approximately $8.9 million thereon.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal year ended March 31,
202620252024
(In thousands)
Balance, beginning of fiscal year$1,118$349$434
Increase / (decrease) to tax positions in prior period— (4)(85)
Increase due to business combinations547 1,118 — 
Lapse of statute of limitations— (345)— 
Balance, end of fiscal year$1,665$1,118$349
Nextpower and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, Nextpower is no longer subject to income tax examinations by tax authorities for years before 2018.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company’s tax expense. The Company had immaterial accrued interest and penalties as of March 31, 2026 and 2025, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties) will be reduced and reflected as a reduction of the overall income tax provision.
The Company has entered into 45X Credit transfer and assignment agreements with certain suppliers which resulted in an offset of the Company’s federal tax payable by $130.1 million and $63.8 million for the fiscal years ended March 31, 2026 and 2025, respectively.
Tax Receivable Agreement
On February 13, 2023, Nextpower Inc. entered into the TRA with the LLC, Yuma, Yuma Sub, TPG Rise and the TPG Affiliates. The TRA provides for the payment by Nextpower Inc. to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that Nextpower Inc. is deemed to realize under certain circumstances as a result of (i) its allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of outstanding Series A Preferred Units or common units of the LLC (collectively, the “LLC Units”), including as part of the Transactions or under the Exchange Agreement, (ii) increases in tax basis resulting from exchanges or acquisitions of LLC Units and shares of Nextpower Inc.’s Class B common stock (including as part of the Transactions or under the Exchange Agreement), (iii) certain pre-existing tax attributes of certain blocker corporations affiliated with TPG Rise that each merged with a separate direct, wholly-owned subsidiary of Nextpower Inc., as part of the Transactions, and (iv)
certain other tax benefits related to Nextpower Inc. entering into the TRA, including tax benefits attributable to payments under the TRA. Prior to the Spin-off, Yuma and Yuma Sub assigned their respective rights under the TRA to an entity that remains an affiliate of the former parent.
As of March 31, 2026 and 2025, a liability of $393.2 million and $419.4 million, respectively, was recorded for the expected amount to be paid to the affiliate of the former parent, TPG and the TPG affiliates, of which $372.7 million and $394.9 million, respectively, were included in TRA liabilities and $20.5 million and $24.5 million, respectively, were included in other current liabilities on the consolidated balance sheets.
Pillar Two
The Organization for Economic Co-operation and Development ("OECD"), a global policy forum, issued Pillar Two Global Anti-Base Erosion rules, which a global minimum tax of 15% would apply to multinational groups with consolidated financial statement revenue in excess of EUR 750 million. The Company has evaluated the impact of these rules and currently believes that it will not have a material impact on its financial results through 2026.
As many countries have proposed or enacted Pillar Two in jurisdictions in which the Company operates, the Company continues to monitor the relevant developments.
Tax distributions
During fiscal years 2026, 2025 and 2024 and pursuant to the LLC Agreement, the LLC made pro rata tax distributions cash payment to its former non-controlling interest holders in the aggregate amount of approximately $3.0 million, $6.1 million, and $66.9 million, respectively.

Historical Timeline

Fiscal YearFiled
2026May 19, 2026Showing above
2025May 22, 2025
2024May 28, 2024
2023Jun 9, 2023

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.

Other Available Disclosures

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