Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

12. Income Taxes

Our income tax expense for the years ended December 31, 2023, 2022 and 2021 comprises the following current and deferred amounts (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current
Federal	$	73,003	$	119,255	$	120,448
State and local		14,745		32,136		30,871
Total current		87,748		151,391		151,319
Deferred
Federal		3,020		361		(7,151)
State and local		838		22		(1,550)
Total deferred		3,858		383		(8,701)
Income tax expense	$	91,606	$	151,774	$	142,618

Total income tax expense differed from the amounts computed by applying the federal statutory income tax rate of 21% for the years ended December 31, 2023, 2022, and 2021, to income before income taxes as a result of the following items (in thousands):

	Year Ended December 31,
	2023		2022		2021
Federal statutory income tax expense	$	73,652	$	142,149	$	134,636
State income tax expense, net of federal income tax expense benefit		12,966		26,284		24,123
Executive compensation		9,507		5,889		3,520
Excess tax benefits upon vesting of share based payment awards		(311)		(675)		(764)
Federal energy credits		(2,596)		(18,324)		(16,451)
State tax credits		(185)		(635)		(1,220)
Other		(1,427)		(2,914)		(1,226)
Income tax expense	$	91,606	$	151,774	$	142,618

Income tax expense for the years ended December 31, 2023, 2022, and 2021 was impacted by benefits of $2.6 million, $18.3 million, and $16.5 million, respectively, associated with the Energy Efficient Home Credit under Internal Revenue Code Section 45L (which we refer to as “Federal Energy Credits”). During prior year period, the Federal Energy Credits provided eligible contractors a federal income tax credit of $2,000 for each home delivered that met the energy saving and certification requirements under the statute for homes delivered through December 31, 2022. The Inflation Reduction Act of 2022 modified the Federal Energy Credits beginning January 1, 2023 requiring a more rigorous certification process and provides a $2,500 or $5,000 tiered credit for new single-family homes meeting designated “Energy Star” or “Zero Energy” program requirements, respectively.

Deferred income tax assets and liabilities are recognized for the future tax consequences of temporary differences. Temporary differences arise when revenues and expenses for financial reporting are recognized for tax purposes in a different period. ASC 740 requires that a valuation allowance be recorded against deferred tax assets unless it is more likely than not that the deferred tax assets will be utilized. As a result of this analysis, the Company has not recorded a valuation allowance against its deferred tax assets. The Company will continue to evaluate the need to record valuation allowances against deferred tax assets and will make adjustments in accordance with the accounting standard.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2023 and 2022 (in thousands):

	As of December 31,
	2023		2022
Deferred tax assets
Warranty reserves	$	2,775	$	3,221
Stock-based compensation		1,682		1,320
Accrued compensation and other		12,812		13,614
Inventories, additional costs capitalized for tax		18,896		13,301
Lease liabilities		4,130		3,587
Other		6,518		4,443
Deferred tax asset		46,813		39,486
Deferred tax liabilities
Prepaid expenses		(284)		(362)
Property and equipment		(13,061)		(7,791)
Mortgage servicing rights		(7,449)		(5,925)
Right of use assets		(3,909)		(3,302)
Other		(5,112)		(1,250)
Deferred tax liability		(29,815)		(18,630)
Net deferred tax asset	$	16,998	$	20,856

The uncertainty provisions of ASC 740 also require the Company to recognize the impact of a tax position in its consolidated financial statements only if the technical merits of that position indicate that the position is more likely than not of being sustained upon audit. During the years ended December 31, 2023 and 2022, the Company did not record a reserve for uncertain tax positions. We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to U.S. federal income tax and various state income tax examinations for calendar tax years ending 2018 through 2023. An audit by the Internal Revenue Service of a federal refund claim related to the retroactive extension of energy efficient homes tax credits for tax year 2018 and additional energy efficient tax credits for tax year 2019 and 2020 was completed during 2023 with no adjustments. The Company is under audit by various taxing authorities; however, the Company is not aware of any significant findings by the state taxing authorities.