SPRUCE POWER HOLDING CORPSPRU
SPRUCE POWER HOLDING CORP Income Taxes Disclosure
Income Taxes
Net deferred income tax assets consist of the following components as of December 31, 2025 and 2024:
As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets (liabilities): | |||||||||||
| Net operating loss carryforwards | $ | 154,741 | $ | 142,819 | |||||||
| Accrued settlements | 599 | 1,870 | |||||||||
| Pass-through equity interests | 7,339 | 8,029 | |||||||||
| Fair market value adjustments | (4,571) | (8,746) | |||||||||
| Tax credit carryforwards | 863 | 1,643 | |||||||||
| Reserves | 3,972 | 3,773 | |||||||||
| Stock-based compensation | 1,351 | 1,962 | |||||||||
| Depreciation and amortization | (90,103) | (69,118) | |||||||||
| Interest expense carryforward | 20,910 | 17,020 | |||||||||
| Right of use assets | 249 | 270 | |||||||||
| Other | 1,332 | 485 | |||||||||
| Total deferred tax assets, net | 96,682 | 100,007 | |||||||||
| Less valuation allowance | (96,682) | (100,007) | |||||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows:
| Year Ended December 31, 2025 | |||||||||||
| (Amounts in thousands) | Amount | Percent | |||||||||
| US federal statutory income tax rate | $ | (5,866) | 21.0 | % | |||||||
| State taxes, net of federal benefit | — | — | % | ||||||||
| Effects of changes in tax law or rates enacted in the current period | — | — | % | ||||||||
| Tax credits | |||||||||||
| Research and development tax credits | 780 | (2.8) | % | ||||||||
| Changes in valuation allowance | (2,565) | 9.2 | % | ||||||||
| Nondeductible/nontaxable items | |||||||||||
| Stock based compensation | 16 | (0.1) | % | ||||||||
| Fair market value adjustments | 1,150 | (4.1) | % | ||||||||
| Other | 177 | (0.6) | % | ||||||||
| Other adjustments | |||||||||||
| Return to accrual | (355) | 1.3 | % | ||||||||
| Net operating loss adjustments | 5,638 | (20.2) | % | ||||||||
| RSU forfeitures/cancellations | 272 | (1.0) | % | ||||||||
| Sec 163(j) adjustment | 826 | (3.0) | % | ||||||||
| Other | (73) | 0.3 | % | ||||||||
| Effective tax rate | $ | — | — | % | |||||||
For the year ended December 31, 2025, state taxes for California, New Jersey and New York made up the majority (greater than 50%) of the tax affect.
The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| Year Ended December 31, 2024 | ||||||||
| U.S. federal statutory rate | 21.0 | % | ||||||
| State taxes, net of federal benefit | 8.7 | % | ||||||
| Change in fair value of warrant liability | — | % | ||||||
| Option and RSU expense | — | % | ||||||
| Goodwill impairment | (1.9) | % | ||||||
| Other | (1.9) | % | ||||||
| True-up to prior years' return | 9.5 | % | ||||||
| Change in valuation allowance | (35.4) | % | ||||||
| Purchase accounting | — | % | ||||||
| Effective tax rate | — | % | ||||||
The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary..
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. For the years ended December 31, 2025 and 2024, no liability for unrecognized tax benefits was required to be reported.
The Company has provided a full valuation allowance against its net deferred tax assets since realization of any future benefit from deductible temporary differences and net operating loss cannot be sufficiently assured. Management of the Company has evaluated the positive and negative evidence bearing upon the reliability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development credits. Under the applicable accounting standards, Management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. During the years ended December 31, 2025 and 2024, the Company decreased and increased its valuation allowance by $3.3 million and $25.1 million, respectively.
As of December 31, 2024, the Company had federal and state net operating loss (“NOL”) carryforwards of $523.3 million and $525.7 million, respectively. As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of $568.7 million and $574.0 million, respectively. The federal NOL carryforwards were generated between the years ended December 31, 2018 and 2025 and have an indefinite life. At December 31, 2025, the Company had federal tax credits of approximately $0.9 million. These federal tax credits are available to reduce future taxable income and expire at various dates commencing 2038 through 2041.
The Company files income tax returns in the U.S. federal jurisdiction, and various states. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2018. The Company follows the provisions of FASB Accounting Standards Codification 740-10 (ASC 740-10), Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in consolidated financial statements of uncertain tax positions that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the consolidated financial statements as of December 31, 2025 and 2024.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Apr 9, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 30, 2020 | |
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.