Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

13. Income Taxes

Income tax expense consist of the following:

	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	9,005	$	5,146	$	1,070
State		—		—		—
Total		9,005		5,146		1,070
Deferred:
Federal		12,120		6,321		5,903
State		3,857		2,203		2,474
Total		15,977		8,524		8,377
Income tax expense	$	24,982	$	13,670	$	9,447

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

	Year Ended December 31,
	2021		2020		2019
Income tax expense	$	24,982	$	13,670	$	9,447
Income tax recorded in accumulated other comprehensive loss
Income tax expense (benefit)		367		(386)		116
Total income tax expense	$	25,349	$	13,284	$	9,563

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, 2021, 2020 and 2019 to pre-tax income as a result of the following:

	Year Ended December 31,
	2021		2020		2019
Tax at the statutory federal rate	$	20,902	$	12,385	$	7,607
State income taxes (net of federal benefit)		3,581		2,203		1,477
Increase in valuation allowance		275		—		—
Change in US and State tax rates		458		—		1,006
Income tax credits		(186)		(454)		—
Benefit of Qualified Opportunity Zone investments		(195)		(161)		(561)
Dividend received deduction		—		(33)		(188)
Other permanent items		147		(270)		106
Total income tax expense	$	24,982	$	13,670	$	9,447

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,
	2021		2020
Deferred tax assets:
State net operating loss carryforwards	$	10,617	$	13,355
Impairment losses		28,496		33,660
Prepaid income from land sales		6,177		3,812
Capital loss carryforwards		4,090		—
Capitalized costs		2,462		2,851
Reserves and accruals		1,950		1,586
Unrealized losses on investments		359		3,403
Other		1,446		765
Total gross deferred tax assets		55,597		59,432
Valuation allowance		(305)		—
Total net deferred tax assets		55,292		59,432
Deferred tax liabilities:
Investment in real estate and property and equipment basis differences		14,014		5,929
Deferred gain on land sales and involuntary conversions		33,643		29,101
Installment sales		83,498		83,337
Pension Plan assets transferred to the 401(k) plan		—		287
Other		1,396		1,693
Total gross deferred tax liabilities		132,551		120,347
Net deferred tax liabilities	$	(77,259)	$	(60,915)

As of December 31, 2021 and 2020, the Company had state net operating loss carryforwards of $229.3 million and $304.0 million, respectively. As of December 31, 2021 and 2020, the Company had $3.1 million and $2.3 million, respectively, of federal net operating loss carryforwards. The federal net operating loss carryforwards 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 2030. As of December 31, 2021 and 2020, the Company had income tax payable of $0.7 million and $2.7 million, respectively, included within other liabilities on the consolidated balance sheets.

On September 14, 2021, the State of Florida announced the reduction of the 2021 corporate tax rate from 4.5% to 3.5% retroactive to the beginning of 2021. The corporate income tax rate will revert to 5.5% for tax year 2022 and years forward. The impact of this tax rate change for the year ended December 31, 2021, was a $0.5 million increase in income tax expense due to the adjustment to deferred taxes.

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 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 all available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets 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. As of December 31, 2021, the Company’s valuation allowance was $0.3 million. As of December 31, 2020, the Company had a de minimis valuation allowance.

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 the tax returns. The Company has not identified any material unrecognized tax benefits as of December 31, 2021, 2020 and 2019. There were no penalties required to be accrued as of December 31, 2021 and 2020. 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. 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. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted also in response to the COVID-19 pandemic. While each of these pieces of legislation resulted in changes to the federal tax law, the impact on the Company’s cash payments and effective tax rate are immaterial.

The Company is currently open to examination by taxing authorities for the tax years ended December 31, 2018 through 2020.