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SEC Filing Details

10-K
NRG ENERGY, INC. filed this Form 10-K on 03/01/2018
Entire Document
 

The following table summarizes NRG's net deferred tax position:
 
As of December 31,
 
2017
 
2016
 
(In millions)
Net deferred tax asset — noncurrent
$
134

 
$
225

Net deferred tax liability — noncurrent
(21
)
 
(20
)
Net deferred tax asset
$
113

 
$
205

The primary driver for the decrease in the net deferred tax asset from $205 million to $113 million is the revaluation of the ending balance utilizing a 21% corporate income tax rate instead of a 35% corporate income tax rate pursuant to the Tax Act as of December 22, 2017. NRG Energy, Inc.’s revaluation is completely offset by its valuation allowance. Since NRG Yield, Inc. does not have a valuation allowance against its net deferred tax asset, its ending balance remains at December 31, 2017. Additionally, due to GenOn's petition for bankruptcy on June 14, 2017, its inventory of deferreds is reclassed to discontinued operations for the year ended December 31, 2016 and is completely deconsolidated for the year ended December 31, 2017.
Deferred tax assets and valuation allowance
        Net deferred tax balance — As of December 31, 2017 and 2016, NRG recorded a net deferred tax asset of $1.9 billion and $2.2 billion, respectively. The Company believes the federal and certain state net deferred tax assets may not be realizable under a “more likely than not” measurement and as such, a valuation allowance has been recorded to reduce the asset accordingly. The Company assesses cumulative and forecasted pretax book earnings and the future reversal of existing taxable temporary differences, including the potential impacts of the recently enacted Tax Act. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company may recognize provisional amounts for the effect of the changes related to the Tax Act. Consistent with that guidance, the Company recognized provisional amounts based upon our interpretation of the tax laws and estimates which require significant judgments.
Based on the Company's assessment of positive and negative evidence, including available tax planning strategies, NRG believes that it is more likely than not that a benefit will not be realized on $1.8 billion and $2.0 billion of tax assets as of December 31, 2017, and 2016, respectively, thus a valuation allowance has been recorded. The net deferred tax asset of $113 million is predominantly due to the inclusion of NRG Yield Inc.'s net deferred tax asset consisting primarily of net operating losses.
NOL carryforwards — At December 31, 2017, the Company had tax effected cumulative domestic NOLs consisting of carryforwards for federal income tax purposes of $596 million and state of $140 million. The Company estimates it will need to generate future taxable income to fully realize the net federal deferred tax asset before expiration commencing in 2026. In addition, NRG has cumulative foreign NOL carryforwards of $66 million with no expiration date.
        Valuation allowance — As of December 31, 2017, the Company's tax effected valuation allowance was $1.8 billion, consisting of domestic federal net deferred tax assets of approximately $1.5 billion, domestic state net deferred tax assets of $267 million, foreign net operating loss carryforwards of $66 million and foreign capital loss carryforwards of approximately $1 million. Based upon the assessment of cumulative and forecasted pretax book earnings, and the future reversal of existing taxable temporary differences, it was determined that a valuation allowance was required to be recorded during the year.
Taxes Receivable and Payable
As of December 31, 2017, NRG recorded a current tax payable of $7 million that represents a tax liability due for state income taxes. NRG has a tax receivable of $1 million, comprised of refunds due from state income tax estimated payments and return filings for 2017 and 2016, respectively.
Uncertain tax benefits
NRG has identified uncertain tax benefits whose after-tax value is $30 million for which, as of December 31, 2017 and 2016, NRG has recorded a non-current tax liability of $33 million and $37 million, respectively. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense. During the year ended December 31, 2017, the Company recognized an expense of $1 million in interest. As of December 31, 2017 and 2016, NRG had cumulative interest and penalties related to these uncertain tax benefits of $3 million and $4 million, respectively.
        Tax jurisdictions — NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia.

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