The Accountant
Active Member
What was our conclusion with teslas deferred tax credit? I don't see these impairment charges as anything material because the deferred tax credit when realized also does nothing to the stock. Might as well have accounting rule fight it out and neutralize this q.
I have hesitated commenting on the Deferred Tax Asset Valuation Allowance because it is a very difficult topic to explain.
Here is a very simplified explanation with my thoughts on recognition:
- Tesla will have losses on their annual Tax Returns for many years to come as Stock Compensation is expensed at a higher amount for tax purposes than it is for the financial 10K. So when we see profits in their financial statements (10K), there will still be losses on their Tax Return.
- The Deferred Tax Asset we are looking at relates to the fact that Tesla can take losses from prior years to offset profits in future years. But carrying forward these losses have an expiration. If you don't use them by the expiry date, you lose them. Since Tesla is not certain that they can use these losses before expiry, they have not taken this benefit.
- The US Federal Tax law changed so that losses incurred starting in 2018 have no expiration. See this chart and my commentary below the chart:
- I completed this chart a few years ago. It is directional at best. At the end of 2019, Tesla had $1,955m in Deferred Tax Assets related to prior losses that they have not recognized. Much of it will expire if not used except for the Federal Amounts in 2018 and 2019.
- I have always believed that Tesla could at least take $333m ($200m from 2018 and $133m from 2019) as a benefit to income, since these years have no expiration. From reading prior 10Qs and 10Ks, I don't believe Tesla has taken this $333m benefit to the financial statements yet.
- So there is a possibility that we see some benefit come to the P&L soon but I believe it is unlikely as Tesla appears to be very conservative in this area.