Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

14.           Income Taxes

Our provision for (benefit from) income taxes for the years ended December 31, 2014, 2013 and 2012 consisted of the following:

	Year Ended December 31,
	2014		2013			2012
	(Dollars in thousands)
Current tax provision (benefit)
Federal	$	1,631	$	2,611		$	(374	)
State		1,475		-			(1,210	)
Total current		3,106		2,611			(1,584	)
Deferred tax provision (benefit)
Federal		28,630		(171,037	)		-
State		5,596		(16,134	)		-
Total deferred		34,226		(187,171	)		-
Provision for (benefit from) income taxes	$	37,332	$	(184,560	)	$	(1,584	)

The provision for (benefit from) income taxes differs from the amount that would be computed by applying the statutory federal income tax rate of 35% to income before income taxes as a result of the following:

	Year Ended December 31,
	2014			2013			2012
	(Dollars in thousands)
Tax expense computed at federal statutory rate	$	35,166		$	45,439		$	21,390
State income tax expense, net of federal benefit		3,340			4,544			2,139
Permanent differences		(1,435	)		(358	)		1,771
Expiration of state net operating loss		3,030			3,874			2,634
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits		559			(552	)		(1,857	)
Write-off of deferred tax asset for deferred compensation retirement plans		-			11,856			-
Charitable contributions statute expiration		181			-			-
Federal energy credits		(1,131	)		(6,530	)		-
Rate changes		866			-			-
Change in valuation allowance		(1,665	)		(242,833	)		(27,661	)
Other		(1,579	)		-			-
Provision for (benefit from) income taxes	$	37,332		$	(184,560	)	$	(1,584	)
Effective tax (benefit) rate		37.2%			(142.2%	)		(2.6%	)

We recorded income tax expense of $37.3 million for the year ended December 31, 2014 while we recorded income tax benefits of $184.6 million and $1.6 million for the years ended December 31, 2013 and 2012, respectively.

The income tax benefit for the year ended December 31, 2013 was due primarily to a $187.6 million reversal of a portion of our deferred tax asset valuation allowance in the 2013 second quarter in addition to a $6.5 million benefit from energy credits relating to current and prior years. These amounts were slightly offset by an $11.9 million write-off of a deferred tax asset related to the termination of certain post-retirement pension benefits contained in the employment agreements of our Chief Executive Officer and Chief Operating Officer as discussed in Note 13 to the Consolidated Financial Statements. We concluded that the reversal of a portion of our valuation allowance during the 2013 second quarter was appropriate after determining that it was more likely than not, after our evaluation of all relevant positive and negative evidence, that we would be able to realize most of our deferred tax assets within the applicable carry forward periods.

The income tax benefit for the year ended December 31, 2012 was due primarily to the release of reserves related to settlements with various taxing authorities.

Due to the effects of the deferred tax valuation allowance and changes in unrecognized tax benefits, our effective tax rates in 2013 and 2012 were not meaningful as the income tax benefit is not directly correlated to the amount of pretax income or loss generated in such periods.

At December 31, 2014 we had a valuation allowance of $13.0 million. $6.7 million of the total valuation allowance is related to various state net operating loss carryforwards where realization is more uncertain at this time due to the more limited carryforward periods that exist in certain states. The remaining $6.3 million is related to the amount by which the carrying value of our Metro Bonds for tax purposes exceeds our carrying value for book purposes that we believe realization is more uncertain at this time.

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,
	2014			2013
	(Dollars in thousands)
Deferred tax assets:
Federal net operating loss carryforwards	$	47,200		$	72,700
State net operating loss carryforwards		36,100			38,082
Alternative minimum tax and other tax credit carryforwards		27,582			24,196
Stock-based compensation expense		22,545			26,651
Warranty, litigation and other reserves		12,364			15,543
Receivables from related party		10,273			12,132
Accrued compensation		6,442			11,136
Asset impairment charges		2,785			5,496
Inventory, additional costs capitalized for tax purposes		3,257			1,700
Other, net		1,806			3,446
Total deferred tax assets		170,354			211,082
Valuation allowance		(13,027	)		(14,669	)
Total deferred tax assets, net of valuation allowance		157,327			196,413
Deferred tax liabilities:
Property, equipment and other assets		5,025			5,512
Discount on notes receivable		4,149			4,204
Deferred revenue		4,306			3,985
Unrealized gain on marketable securities		1,737			4,915
Other, net		1,624			1,535
Total deferred tax liabilities		16,841			20,151
Net deferred tax asset	$	140,486		$	176,262

At December 31, 2014, we had $47.2 million in tax effected federal net operating loss carryforwards. These operating loss carryforwards, if unused, will begin to expire in 2030. Additionally, we had $36.1 million in tax-effected state net operating loss carryforwards and $0.2 million of these operating loss carryforwards are at risk to expire in 2015 if they remain unused. The remaining operating loss carryforwards, if unused, will begin to expire in 2018.

At December 31, 2014 and 2013, our total liability for uncertain tax positions was $0.8 million and $0.3 million, respectively, which has been either included in accrued liabilities in the homebuilding section of our consolidated balance sheets or, in accordance with ASU 2013-11, offset against our state net operating loss carryforward deferred tax asset. 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, 2014, 2013 and 2012:

	Year Ended December 31,
	2014			2013			2012
	(Dollars in thousands)
Gross unrecognized tax benefits at beginning of year	$	371		$	575		$	2,712
Increases related to prior year tax positions		633			124			63
Decreases related to prior year tax positions		(85	)		(53	)		(84	)
Increases related to current year tax positions		-			-			-
Decreases related to current year tax positions		-			-			-
Settlements with taxing authorities		-			-			-
Lapse of applicable statute of limitations		(14	)		(275	)		(2,116	)
Gross unrecognized tax benefits at end of year	$	905		$	371		$	575

Our liability for gross unrecognized tax benefits was $0.9 million and $0.4 million at December 31, 2014 and 2013, respectively, all of which, if recognized, would reduce our effective tax rate.

The net expense (benefit) for interest and penalties reflected in the consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012 was $0.2 million, $0 and ($0.4) million, respectively. The corresponding liabilities in the consolidated balance sheets were $0.3 million and $0.3 million at December 31, 2014 and 2013, respectively.

We have taken positions in certain taxing jurisdictions for which it is reasonably possible that the total amounts of unrecognized tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of various statutes of limitation and the finalization of various state income tax matters. The estimated range of the reasonably possible decrease is $0 to $0.2 million.

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 2011 through 2014. Additionally, we are subject to various state income tax examinations for the 2010 through 2014 calendar tax years.