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Income Taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Our provision for income taxes for the years ended December 31, 2021, 2020 and 2019 consisted of the following:
Year Ended December 31,
202120202019
(Dollars in thousands)
Current tax provision:
Federal$148,741 $63,224 $50,870 
State35,784 16,018 2,137 
Total current184,525 79,242 53,007 
Deferred tax provision:
Federal(6,699)6,380 5,175 
State211 4,308 8,495 
Total deferred(6,488)10,688 13,670 
Provision for income taxes$178,037 $89,930 $66,677 
The provision for income taxes differs from the amount that would be computed by applying the statutory federal income tax rate of 21% in 2021, 2020 and 2019 to income before income taxes as a result of the following:
Year Ended December 31,
202120202019
(Dollars in thousands)
Tax expense computed at federal statutory rate$157,856 $96,077 $64,048 
State income tax expense, net of federal benefit26,441 17,535 9,810 
Limitation on executive compensation14,915 8,102 4,463 
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits(4,044)473 (1,571)
Stock based compensation (windfall)/shortfall(1,830)(7,907)(2,828)
Federal energy credits(14,558)(23,331)(7,649)
Rate changes81 (291)190 
Change in valuation allowance(1,054)(2,128)121 
Other230 1,400 93 
Provision for income taxes$178,037 $89,930 $66,677 
Effective tax rate23.7 %19.7 %21.9 %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows:
December 31,
20212020
(Dollars in thousands)
Deferred tax assets:
State net operating loss carryforwards$3,361 $5,739 
Stock-based compensation expense4,350 4,546 
Warranty, litigation and other reserves14,785 12,686 
Accrued compensation8,602 2,958 
Asset impairment charges468 1,416 
Inventory, additional net costs capitalized for tax purposes8,298 8,938 
Other, net1,526 3,441 
Total deferred tax assets41,390 39,724 
Valuation allowance(3,316)(4,370)
Total deferred tax assets, net of valuation allowance38,074 35,354 
Deferred tax liabilities:
Property, equipment and other assets10,871 11,654 
Deferral of profit on home sales4,668 7,144 
Other, net4,593 5,102 
Total deferred tax liabilities20,132 23,900 
Net deferred tax asset$17,942 $11,454 
At December 31, 2021, we had no federal net operating loss or alternative minimum tax carryforwards. However, we had $3.4 million in tax-effected state net operating loss carryforwards. The state operating loss carryforwards, if unused, begin expiring in 2024.
At December 31, 2021, we had a valuation allowance of $3.3 million, a decrease of $1.1 million from the prior year. The valuation allowance is related to various state net operating loss carryforwards where realization is uncertain at this time due to the limited carryforward periods coupled with minimal activity that exists in certain states.
At December 31, 2021 and 2020, our total liability for uncertain tax positions including interest and penalties was $0.4 million and $9.3 million, respectively. The following table summarizes activity for the gross unrecognized tax benefit component of our total liability for uncertain tax positions for the years ended December 31, 2021, 2020 and 2019:
Year Ended December 31,
202120202019
(Dollars in thousands)
Gross unrecognized tax benefits at beginning of year$8,497 $8,515 $8,579 
Increases related to prior year tax positions162 121 75 
Decreases related to prior year tax positions— — — 
Lapse of applicable statute of limitations(8,276)(139)(139)
Gross unrecognized tax benefits at end of year$383 $8,497 $8,515 
During the year ended December 31, 2021, we experienced a reduction in the uncertain tax positions due to the lapse of the statute of limitations of $8.3 million, of which approximately $3.2 million reduced our effective tax rate. Interest and penalties associated with the statute of limitations lapse were approximately $0.9 million. At December 31, 2021 and 2020, there was $0.4 million and $3.5 million, respectively, of unrecognized tax benefits that if recognized, would reduce our effective tax rate.
The interest and penalties, net of federal benefit for the years ended December 31, 2021, 2020 and 2019 was $(0.8) million, $0.5 million and $(1.5) million, respectively, and are included in provision for income taxes in the consolidated statements of operations and comprehensive income. We are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to U.S. federal income tax examination for calendar tax years ending 2018 through 2021. Additionally, we are subject to various state income tax examinations for the 2017 through 2021 calendar tax years.