Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

13. Income Taxes

Income tax expense (benefit) consist of the following:

	Year Ended December 31,
	2020		2019		2018
Current:
Federal	$	5,146	$	1,070	$	4,305
State		—		—		—
Total		5,146		1,070		4,305
Deferred:
Federal		6,321		5,903		488
State		2,203		2,474		(5,529)
Total		8,524		8,377		(5,041)
Income tax expense (benefit)	$	13,670	$	9,447	$	(736)

Total income tax expense (benefit) was allocated in the consolidated financial statements as follows:

	Year Ended December 31,
	2020		2019		2018
Income tax expense (benefit)	$	13,670	$	9,447	$	(736)
Income tax recorded in accumulated other comprehensive loss
Income tax (benefit) expense		(386)		116		685
Total income tax expense (benefit)	$	13,284	$	9,563	$	(51)

Income tax expense (benefit) attributable to income from operations differed from the amount computed by applying the statutory federal income tax rate of 21% as of December 31, 2020, 2019 and 2018 to pre-tax income as a result of the following:

	Year Ended December 31,
	2020		2019		2018
Tax at the statutory federal rate	$	12,385	$	7,607	$	6,643
State income taxes (net of federal benefit)		2,203		1,477		1,392
Decrease in valuation allowance, net		—		—		(4,993)
Decrease in uncertain tax positions		—		—		(2,165)
Change in US and State tax rates		—		1,006		(1,035)
Income tax credits		(454)		—		—
Benefit of Qualified Opportunity Zone investment		(161)		(561)		—
Dividend received deduction		(33)		(188)		(322)
Other permanent items		(270)		106		(256)
Total income tax expense (benefit)	$	13,670	$	9,447	$	(736)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are presented below:

	December 31,		December 31,
	2020		2019
Deferred tax assets:
State net operating loss carryforwards	$	13,355	$	14,316
Impairment losses		33,660		36,751
Prepaid income from land sales		3,812		3,180
Capitalized costs		2,851		2,468
Reserves and accruals		1,586		1,672
Unrealized losses on investments		3,403		2,282
Other		765		765
Total gross deferred tax assets		59,432		61,434
Deferred tax liabilities:
Investment in real estate and property and equipment basis differences		5,929		4,000
Deferred gain on land sales and involuntary conversions		29,101		24,956
Installment sales		83,337		83,275
Pension Plan assets transferred to the 401(k) plan		287		580
Other		1,693		1,431
Total gross deferred tax liabilities		120,347		114,242
Net deferred tax liabilities	$	(60,915)	$	(52,808)

As of December 31, 2020 and 2019, the Company had state net operating loss carryforwards of $304.0 million and $341.4 million, respectively. As of December 31, 2020, the Company had $2.3 million of federal net operating loss carryforwards and no federal net operating loss carryforwards as of December 31, 2019. The federal net operating loss carryforwards as of December 31, 2020 are applicable to a specific QOF entity of the Company and do not expire. The majority of state net operating losses are available to offset future taxable income through 2036 and will begin expiring in 2029. As of December 31, 2020, the Company had income tax payable of $2.7 million, included within other liabilities on the consolidated balance sheets. As of December 31, 2019, the Company had an income tax receivable of $2.8 million, included in other assets on the consolidated balance sheets that included a federal AMT credit receivable of $2.2 million, which was converted to a tax deposit and partially utilized on the federal income tax return filed for the tax year ended December 31, 2019.

On September 12, 2019, the Florida Department of Revenue announced that the corporate income tax rate for tax years 2019, 2020, and 2021 was reduced from 5.5% to 4.5%. As a result, the Company has recorded $1.0 million of

income tax expense during 2019 to adjust its deferred tax balances due to the impact on the Company’s existing Florida net operating loss carryforward in addition to other temporary differences.

In general, a valuation allowance is recorded if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in future years in the appropriate tax jurisdictions to obtain a benefit from the reversal of deductible temporary differences and from loss carryforwards. In 2018, the Company reassessed its need for a valuation allowance by evaluating all available evidence, including but not limited to historical and projected pre-tax income. Based on this assessment, the Company determined it had the ability to fully realize the future benefit of its net operating loss carryforward and released the valuation allowance in full resulting in a $5.0 million tax benefit in 2018.

Significant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. The Company regularly assesses the likelihood of adverse outcomes resulting from potential examinations to determine the adequacy of its provision for income taxes and applies a “more-likely-than-not” in determining the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has not identified any material unrecognized tax benefits as of December 31, 2020, 2019 and 2018. During 2018, the Company recognized a $2.1 million income tax benefit due to the expiration of the statute of limitations for the tax year covering the previously unrecognized tax benefits. There were no penalties required to be accrued as of December 31, 2020 and 2019. The Company records interest related to unrecognized tax benefits, if any, in interest expense and penalties in other income, net.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows net operating loss carryovers and carrybacks incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act also contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. Based upon current facts and circumstances, the Company does not expect that these provisions would result in a material cash benefit or impact to the effective tax rate.

On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020, a part of the Consolidated Appropriations Act, 2021, was enacted also in response to the COVID-19 pandemic. This legislation provided extensions on several federal tax credits and the expansion of the Employee Retention Credit, in addition to many other provisions. Based upon current facts and circumstances, the Company does not expect that these provisions would result in a material cash benefit or impact to the effective tax rate.

The Company is currently open to examination by taxing authorities for the years ended December 31, 2017 through 2019.