Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

13. Income Taxes

Income tax expense consist of the following:

	Year Ended December 31,
	2022		2021		2020
Current:
Federal	$	19,067	$	9,005	$	5,146
State		832		—		—
Total		19,899		9,005		5,146
Deferred:
Federal		661		12,120		6,321
State		3,829		3,857		2,203
Total		4,490		15,977		8,524
Income tax expense	$	24,389	$	24,982	$	13,670

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

	Year Ended December 31,
	2022		2021		2020
Income tax expense	$	24,389	$	24,982	$	13,670
Income tax recorded in accumulated other comprehensive income (loss)
Income tax expense (benefit)		957		367		(386)
Total income tax expense	$	25,346	$	25,349	$	13,284

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, 2022, 2021 and 2020 to pre-tax income as a result of the following:

	Year Ended December 31,
	2022		2021		2020
Tax at the statutory federal rate	$	20,016	$	20,902	$	12,385
State income taxes (net of federal benefit)		4,495		3,581		2,203
(Decrease) increase in valuation allowance		(21)		275		—
Change in US and State tax rates		—		458		—
Income tax credits		(150)		(186)		(454)
Benefit of Qualified Opportunity Zone investments		—		(195)		(161)
Dividend received deduction		—		—		(33)
Other permanent items		49		147		(270)
Total income tax expense	$	24,389	$	24,982	$	13,670

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,
	2022		2021
Deferred tax assets:
State net operating loss carryforwards	$	5,965	$	10,617
Impairment losses		26,714		28,496
Prepaid income from land sales		6,871		6,177
Capital loss carryforwards		—		4,090
Capitalized costs		2,121		2,462
Reserves and accruals		1,975		1,950
Unrealized losses on investments		—		359
Other		2,685		1,446
Total gross deferred tax assets		46,331		55,597
Valuation allowance		(290)		(305)
Total net deferred tax assets		46,041		55,292
Deferred tax liabilities:
Investment in real estate and property and equipment basis differences		21,713		14,014
Deferred gain on land sales and involuntary conversions		36,977		33,643
Installment sales		67,418		83,498
Other		2,639		1,396
Total gross deferred tax liabilities		128,747		132,551
Net deferred tax liabilities	$	(82,706)	$	(77,259)

As of December 31, 2022 and 2021, the Company had state NOLs of $121.1 million and $229.3 million, respectively. As of December 31, 2022 and 2021, the Company had $3.4 million and $3.1 million, respectively, of federal NOLs. The federal NOLs are applicable to a specific QOF entity 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 2031. As of December 31, 2022 and 2021, the Company had income tax payable of $3.5 million and $0.7 million, respectively, included within other liabilities on the consolidated balance sheets.

The Inflation Reduction Act (“IRA”) was signed into law on August 16, 2022. The IRA extended the Internal Revenue Code Section 45L credit, a credit for the installation of energy efficient appliances and equipment in both single family and multi-family homes, to tax year 2032 with retroactive effect to tax year 2022. While the tax year 2022 credit is the same as in years prior on a per unit basis, the credit is increased marginally for tax years 2023 forward.

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 both December 31, 2022 and 2021, the Company’s valuation allowance was $0.3 million against certain state NOLs.

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 either December 31, 2022 or 2021. There were no penalties required to be accrued as of December 31, 2022 and 2021. The Company records interest related to unrecognized tax benefits, if any, in interest expense and penalties in other income, net.

The Company is currently open to examination by taxing authorities for the tax years 2019 through 2021.