Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our provision for income taxes for the years ended December 31, 2022, 2021 and 2020 consisted of the following:

	Year Ended December 31,
	2022		2021		2020
	(Dollars in thousands)
Current tax provision:
Federal	$	174,965	$	148,741	$	63,224
State	54,060		35,784		16,018
Total current	229,025		184,525		79,242
Deferred tax provision:
Federal	(26,030)		(6,699)		6,380
State	(5,280)		211		4,308
Total deferred	(31,310)		(6,488)		10,688
Provision for income taxes	$	197,715	$	178,037	$	89,930

The provision for income taxes differs from the amount that would be computed by applying the statutory federal income tax rate of 21% in 2022, 2021 and 2020 to income before income taxes as a result of the following:

	Year Ended December 31,
	2022			2021			2020
	(Dollars in thousands)
Tax expense computed at federal statutory rate	$	159,569		$	157,856		$	96,077
State income tax expense, net of federal benefit	30,213			26,441			17,535
Limitation on executive compensation	23,778			14,915			8,102
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits	215			(4,044)			473
Stock based compensation (windfall)/shortfall	(2,553)			(1,830)			(7,907)
Federal energy credits	(15,265)			(14,558)			(23,331)
Rate changes	19			81			(291)
Change in valuation allowance	(1,065)			(1,054)			(2,128)
Other	2,804			230			1,400
Provision for income taxes	$	197,715		$	178,037		$	89,930
Effective tax rate	26.0		%	23.7		%	19.7		%

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,
	2022		2021
	(Dollars in thousands)
Deferred tax assets:
State net operating loss carryforwards	$	2,296	$	3,361
Stock-based compensation expense	2,896		4,350
Warranty, litigation and other reserves	17,134		14,785
Accrued compensation	8,554		8,602
Asset impairment charges	30,319		468
Inventory, additional net costs capitalized for tax purposes	11,399		8,298
Other, net	1,861		1,526
Total deferred tax assets	74,459		41,390
Valuation allowance	(2,251)		(3,316)
Total deferred tax assets, net of valuation allowance	72,208		38,074
Deferred tax liabilities:
Property, equipment and other assets	11,714		10,871
Deferral of profit on home sales	5,592		4,668
Other, net	5,650		4,593
Total deferred tax liabilities	22,956		20,132
Net deferred tax asset	$	49,252	$	17,942

At December 31, 2022, we had no federal net operating loss or alternative minimum tax carryforwards. However, we had $2.3 million in tax-effected state net operating loss carryforwards. The state operating loss carryforwards, if unused, begin expiring in 2028.

At December 31, 2022, we had a valuation allowance of $2.3 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, 2022 and 2021, our total liability for uncertain tax positions including interest and penalties was $0.6 million and $0.4 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, 2022, 2021 and 2020:

	Year Ended December 31,
	2022		2021		2020
	(Dollars in thousands)
Gross unrecognized tax benefits at beginning of year	$	383	$	8,497	$	8,515
Increases related to prior year tax positions	357		162		121
Decreases related to prior year tax positions	—		—		—
Lapse of applicable statute of limitations	(94)		(8,276)		(139)
Gross unrecognized tax benefits at end of year	$	646	$	383	$	8,497

During the year ended December 31, 2022, we experienced an increase of $0.4 million in the uncertain tax positions related to state tax filings. At December 31, 2022 and 2021, there was $0.6 million and $0.4 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, 2022, 2021 and 2020 was $(0.1) million, $(0.8) million and $0.5 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 2019 through 2022. Additionally, we are subject to various state income tax examinations for the 2018 through 2022 calendar tax years.