Nextpower Inc.NXT

Nextpower Inc. Income Taxes Disclosure

10-KFiled May 22, 20256 min read
Income taxes
The domestic and foreign components of income before income taxes were comprised of the following:
Fiscal year ended March 31,
202520242023
(In thousands)
Domestic$620,166$576,009$117,115
Foreign27,850 31,988 51,968 
Total$648,016 $607,997 $169,083 
The provision for income taxes consisted of the following:
Fiscal year ended March 31,
202520242023
Current:(In thousands)
Domestic$132,181$65,286$35,244
Foreign11,486 7,904 18,238 
Total143,667 73,190 53,482 
Deferred:
Domestic$(13,452)$30,496 $(8,660)
Foreign555 8,096 2,928 
Total(12,897)38,592 (5,732)
Provision for income taxes$130,770 $111,782 $47,750 
The domestic statutory income tax rate was 21% in fiscal years 2025, 2024 and 2023. 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:
Fiscal year ended March 31,
202520242023
(In thousands)
Income taxes based on domestic statutory rates$136,083$127,679$35,508
Effect of tax rate differential1,682 2,165 7,487 
Foreign-derived intangible income deduction(20,747)(9,055)(3,235)
Foreign disregarded entities6,261 5,574 11,020 
Foreign tax deduction— — (3,659)
Change in TRA Liability23 (12,416)— 
Amount allocated to non-controlling interest(1,702)(41,348)(1,671)
Stock-based compensation7,097 — — 
State15,314 7,810 4,535 
Change in state effective rate(7,494)31,279 — 
Guaranteed payment on Series A Preferred Units— — (4,500)
Other(5,747)94 2,265 
Provision for income taxes$130,770 $111,782 $47,750 
The components of deferred income taxes are as follows:
As of March 31,
20252024
Deferred tax liabilities:(In thousands)
Foreign taxes$(18,128)$(14,319)
Fixed assets(2,871)(3)
Intangible assets(10,329)— 
Others(4,047)(763)
Total deferred tax liabilities(35,375)(15,085)
Deferred tax assets:
Stock-based compensation24,125 15,629 
Net operating loss and other carryforwards23,417 5,032 
Investment in Nextracker LLC435,802 384,594 
Interest deduction on investment in Nextracker LLC28,267 25,122 
Foreign tax credits13,632 9,455 
Others9,962 5,908 
Total deferred tax assets535,205 445,740 
Valuation allowances(1,052)(1,173)
Total deferred tax assets, net of valuation allowances534,153 444,567 
Net deferred tax asset$498,778 $429,482 
The net deferred tax asset is classified as follows:
Long-term asset$498,778 $438,272 
Long-term liability— (8,790)
Total$498,778$429,482
The Company has recorded deferred tax assets of approximately $23.4 million related to tax losses and other carryforwards. These tax losses and other carryforwards will expire at various dates as follows:
Expiration dates of deferred tax assets related to operating losses and other carryforwards
Fiscal year
(In millions)
2026 - 2031$— 
2032 - 2037364 
2038 - Post139 
Indefinite22,914 
Total$23,417 
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, as of March 31, 2025, no change to the valuation allowance account of $1.1 million related to a foreign jurisdiction has been recorded to recognize only the portion of the deferred tax asset that is most 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, 2025, the Company has provided for earnings in foreign subsidiaries that are not considered to be indefinitely reinvested and therefore subject to withholding taxes on $77.9 million of undistributed foreign earnings, recording a deferred tax liability of approximately $5.5 million thereon.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Fiscal year ended March 31,
202520242023
(In thousands)
Balance, beginning of fiscal year$349$434$440
Increase / (decrease) to tax positions in prior period(4)(85)(6)
Increase due to business combinations1,118 — — 
Lapse of statute of limitations(345)— — 
Balance, end of fiscal year$1,118$349$434
Nextracker and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, Nextracker 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, 2025 and 2024, respectively. Based on current information, the Company does not expect any of these unrecognized tax benefits to reverse in the next twelve months.
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 $63.8 million for the year ended March 31, 2025.
Tax Receivable Agreement
On February 13, 2023, Nextracker Inc. entered into the TRA with the LLC, Yuma, Yuma Sub, TPG Rise and the TPG Affiliates. The Tax Receivable Agreement provides for the payment by Nextracker Inc. to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that Nextracker 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 Nextracker 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 Nextracker Inc., as part of the Transactions, and (iv) certain other tax benefits related to Nextracker Inc. entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. Prior to the Spin Transactions, Yuma and Yuma Sub assigned their respective rights under the Tax Receivable Agreement to an entity that remains an affiliate of Flex.
As of March 31, 2025 and 2024, a liability of $419.4 million and $391.6 million, respectively, was recorded for the expected amount to be paid to Flex affiliate, TPG and the TPG affiliates, of which $394.9 million and $391.6 million, respectively, were included in TRA liabilities and $24.5 million and zero, respectively, were included in other current liabilities on the consolidated balance sheets. Separately, a deferred tax asset of $435.8 million and $384.6 million has been booked as of March 31, 2025 and 2024, respectively, reflecting Nextracker's outside basis difference in Nextracker LLC, which is included in deferred tax assets and other assets on the consolidated balance sheets. The difference between the liability and the deferred tax asset was recorded to additional paid-in-capital on the consolidated balance sheets.
During fiscal years 2025 and 2024, the Company incurred $0.1 million and $28.4 million of other tax related loss and income, respectively, driven by the reduction in its liability under the TRA due to an increase and decrease in its forecasted estimated state effective tax rate. These tax related income have been presented in other income, net on the consolidated statement of operations for the fiscal years ended March 31, 2025 and 2024.
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 2025 and 2024, and pursuant to the LLC Agreement, Nextracker LLC made pro rata tax distributions cash payment to its non-controlling interest holders in the aggregate amount of approximately $6.1 million and $66.9 million, respectively.
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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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