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Income Taxes
12 Months Ended
Dec. 31, 2021
Income Taxes [Abstract]  
Income Taxes
14.
Income Taxes

As a result of the IPO and the Corporate Reorganization completed in January 2021, we own all of the Common Units of DFH LLC, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, DFH LLC is generally not subject to U.S. federal and certain state and local income taxes.  Any taxable income or loss generated by DFH LLC is passed through to and included in the taxable income or loss of its member, Dream Finders Homes, Inc., in accordance with the terms of the Operating Agreement. The Company is a corporation subject to U.S. federal income taxes, in addition to state and local income taxes, based on our share of DFH LLC’s pass-through taxable income.  As of the 2021 tax year, the Company will file a consolidated U.S. federal corporate income tax return, as well as state and local tax returns in all jurisdictions where it maintains operations.  As the Company became subject to tax as a corporation in 2021, no provision for federal or state income taxes was made prior to 2021 and therefore, there are no comparative balances relating to corporate income taxes for the 2020 or 2019 periods herein.

Income tax expense for the year ended December 31, 2021 consists of the following:

 
 
2021
 
Current expense:
     
Federal
 
$
26,336,096
 
State
   
5,087,506
 
 Total current expense
 
$
31,423,602
 
Deferred expense:
       
Federal
 
$
(3,304,766
)
State
   
(664,194
)
 Total deferred (benefit)
 
$
(3,968,960
)
Total income tax expense
 
$
27,454,642
 

The following table reconciles the statutory federal income tax rate to the effective income tax rate:

 
 
2021
 
Income taxes at federal statutory rate
   
21.0
%
State and local income taxes, net of federal tax
   
2.4
 
Federal tax credits
   
(5.9
)
Non-deductible executive compensation
   
0.8
 
Other
   
0.2
Effective rate
   
18.5
%

The significant components of deferred income tax assets and liabilities as of December 31, 2021 consist of the following:

 
 
2021
 
Deferred tax assets:
     
Property and equipment, net
 
$
238,283
 
Intangible assets
   
262,177
 
Contingent consideration valuation
   
1,804,773
 
Stock options
   
1,265,160
 
Warranty reserve
   
1,249,846
 
 
   
4,820,239
 
Deferred tax liabilities:
       
Property and equipment, net
 
$
(588,719
)

   
(588,719
)
Net deferred income tax asset
 
$
4,231,520
 

Deferred tax assets arise principally as a result of various accruals required for financial reporting purposes which are not currently deductible for tax return purposes.  Management believes that we will have sufficient future taxable income to make it more likely than not that the net deferred tax assets will be realized. As of December 31, 2021, the Company had no valuation allowance recorded against deferred tax assets. the Company did not exist at such time and DFH LLC was treated as a partnership generally not subject to U.S. federal and most applicable state and local income taxes.

As of December 31, 2021and 2020, we have no uncertain tax positions that qualify for inclusion in our consolidated financial statements.