Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

15. INCOME TAXES

Income tax provision (benefit) consists of the following (in thousands):

	Year Ended December 31,
	2021			2020		2019
Current income tax provision:
Federal	$	30,450		$	35,423	$	30,306
State		15,192			10,455		6,952
		45,642			45,878		37,258
Deferred income tax provision:
Federal		21,607			12,603		6,928
State		(595	)		522		778
		21,012			13,125		7,706
Total income tax provision	$	66,654		$	59,003	$	44,964

The income tax provision differs from the amount of income tax determined by applying the U.S. Federal statutory rate to income before taxes as a result of the following (in thousands):

	Year Ended December 31,
	2021			2020			2019
U.S. Federal statutory taxes	$	57,832		$	49,273		$	39,838
State and local taxes, net of U.S. Federal benefit		12,174			10,641			8,412
Permanent items		1,208			1,198			1,266
Excess tax benefits from vesting or settlement of stock compensation awards		(2,868	)		(1,635	)		(3,540	)
Federal credits		(686	)		(565	)		(654	)
Other		(1,006	)		91			(358	)
Total income tax provision	$	66,654		$	59,003		$	44,964

Deferred tax assets and liabilities consist of the following (in thousands):

	As of December 31,
	2021		2020
Deferred tax assets:
Net operating losses	$	64	$	43
Residential product warranty reserve		7,260		7,532
Stock-based compensation		1,305		1,071
Accruals not currently deductible and other		1,371		2,041
Inventories		2,210		5,548
Operating lease liability		8,965		9,081
Deferred revenue		2,935		—
Goodwill amortization		6,858		—
State tax credit carryforwards		3,394		3,345

	As of December 31,
	2021			2020
Gross deferred tax assets, before valuation allowance		34,362			28,661
Valuation allowance		(2,232	)		(2,775	)
Gross deferred tax assets, after valuation allowance		32,130			25,886
Deferred tax liabilities:
Depreciation		(63,483	)		(29,792	)
Operating lease right-of-use asset		(8,635	)		(8,755	)
Goodwill amortization		—			(5,775	)
Other		(3,979	)		(4,520	)
Gross deferred tax liabilities		(76,097	)		(48,842	)
Net deferred tax liability	$	(43,967	)	$	(22,956	)

The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax laws and statutory tax rates. In accordance with accounting standards, the Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized, primarily certain state income tax credits. As of December 31, 2021, the Company had a valuation allowance of $2.2 million against deferred tax assets it estimates will not be realized. The Company will analyze its position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred tax assets.

The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. As of December 31, 2021, the Company has identified no uncertain tax position and, accordingly, has not recorded any unrecognized tax benefits or associated interest and penalties.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with accounting standards. As of December 31, 2021, for certain tax jurisdictions, tax years 2018 through 2021 remain subject to examination. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdictions as the Company does not have a taxable presence.