Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

Deferred income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities using enacted tax rates currently in effect. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards.

The following summarizes income tax expense (benefit) for the years ended December 31:

thousands	2023		2022		2021
Current	$	108	$	18,478	$	4,797
Deferred	(163,613)		42,022		10,356
Total	$	(163,505)	$	60,500	$	15,153

Reconciliation of the Income tax expense (benefit) if computed at the U.S. federal statutory income tax rate to the Company’s reported Income tax expense (benefit) for the years ended December 31 is as follows:

thousands except percentages	2023			2022			2021
Income (loss) before income taxes	$	(714,213)		$	245,136		$	64,077
U.S. federal statutory tax rate	21.0		%	21.0		%	21.0		%
Tax computed at the U.S. federal statutory rate	$	(149,985)		$	51,479		$	13,456
Increase (decrease) in valuation allowance, net	25,392			1,065			2,378
State income tax expense (benefit), net of federal income tax	(32,023)			5,483			(3,182)
Tax expense (benefit) from other change in rates, prior period adjustments, and other permanent differences	2,014			315			(181)
Tax expense on compensation disallowance	2,604			2,180			1,570
Net (income) loss attributable to noncontrolling interests	(51)			(22)			1,507
Tax expense (benefit) on tax credits	(11,456)			—			(395)
Income tax expense (benefit)	$	(163,505)		$	60,500		$	15,153
Effective tax rate	22.9		%	24.7		%	23.6		%

As of December 31, 2023, the amounts and expiration dates of operating loss carryforwards for tax purposes are as follows:

thousands	Amount
Net operating loss carryforwards - Federal (a)	$	51,731
Net operating loss carryforwards - State (b)	587,852

(a)Federal net operating loss carryforwards have an indefinite carryforward period.

(b)State net operating loss carryforwards of $272.1 million have an indefinite carryforward period. The remaining $315.8 million of carryforwards have varying carryforward periods through 2043. A valuation allowance has been recorded against the deferred tax benefit related to a majority of the state net operating loss carryforwards.

The following summarizes tax effects of temporary differences and carryforwards included in the net deferred tax liabilities as of December 31:

thousands	2023		2022
Deferred tax assets:
Operating and Strategic Developments properties and fixed assets	$	204,228	$	22,447
Investments in unconsolidated ventures	11,577		6,698
Accrued expenses	6,924		6,282
Prepaid expenses	2,020		1,972
Other	1,723		—
Operating loss and tax carryforwards	52,317		65,829
Total deferred tax assets	278,789		103,228
Valuation allowance	(62,913)		(39,478)
Total net deferred tax assets	$	215,876	$	63,750
Deferred tax liabilities:
Master Planned Communities properties	$	(208,347)	$	(214,046)
Deferred income	(76,908)		(86,104)
Accounts receivable	(18,686)		(17,761)
Other	—		(175)
Total deferred tax liabilities	(303,941)		(318,086)
Total net deferred tax liabilities	$	(88,065)	$	(254,336)

The deferred tax liability associated with the Company’s MPCs is largely attributable to the difference between the basis and value determined as of the date of the acquisition by its predecessors adjusted for sales that have occurred since that time. The recognition of these deferred tax liabilities is dependent upon the timing and sales price of future land sales and the method of accounting used for income tax purposes. The deferred tax liability related to deferred income represents the difference between the income tax method of accounting and the financial statement method of accounting for prior sales of land in the Company’s MPCs.

Generally, the Company is currently open to audit under the statute of limitations by the Internal Revenue Service as well as state taxing authorities for the years ended December 31, 2020 through 2023. In the Company’s opinion, it has made adequate tax provisions for years subject to examination. However, the final determination of tax examinations and any related litigation could be different from what was reported on the returns.

The Company applies the generally accepted accounting principle related to accounting for uncertainty in income taxes, which prescribes a recognition threshold that a tax position is required to meet before recognition in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition issues.

The Company recognizes and reports interest and penalties related to unrecognized tax benefits, if applicable, within the provision for income tax expense. The Company had no unrecognized tax benefits for the years ended December 31, 2023, 2022, or 2021, and therefore did not recognize any interest expense or penalties on unrecognized tax benefits.