Note 13 - Income Taxes

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

1 3 . Income Taxes

Our overall effective income tax rates were

20.8%

and

19.8%

for the

three

and

nine

months ended

September 30, 2018,

respectively, and

31.8%

and

34.1%

for the

three

and

nine

months ended

September 30, 2017,

respectively. The rates for the

three

and

nine

months ended

September 30, 2018

resulted in income tax expense of

$14.0

million and

$38.5

million, respectively, compared to income tax expense of

$28.5

million and

$60.7

million for the

three

and

nine

months ended

September 30, 2017,

respectively. The year-over-year decrease in our effective tax rate for the

three

and

nine

months ended

September 30, 2018

was impacted by the following items:

(

1

) The net impact from the enactment of the Act, which reduced the U.S. federal corporate income tax rate from

35%

to

21%

but also reduced the deductibility of certain executive based compensation and eliminated the domestic manufacturing deduction.

(

2

) Our estimated effective tax rate for the

2017

full year as of

September 30, 2017

included

no

estimate for energy tax credits as the tax provision had expired and had

not

been extended for

2017.

However, in

February 2018,

the Bipartisan Budget Act of

2018

was signed into law, retroactively extending energy tax credits for

2017.

As a result, for the

three

and

nine

months ended

September 30, 2018,

we recorded discrete tax adjustments for energy tax credits of

$3.2

million and

$11.3

million, respectively. The majority of the tax credits recognized during

2018

relate to certificates associated with

2017

closings that have been received throughout the

first

nine

months of

2018.

The remaining credits are related to certificates received from closings in other open tax years prior to

2017.

As of

September 30, 2018,

energy tax credits for

2018

were

not

approved and as a result,

no

such estimate has been included in our estimated effective tax rate for

2018.

(

3

) In the

2017

first

quarter, we established a discrete valuation allowance against certain state net operating loss carryforwards.

No

such valuation allowances were established during the

nine

months ended

September 30, 2018.

At

September 30, 2018

and

December 31, 2017

we had deferred tax assets, net of valuation allowances and deferred tax liabilities, of

$36.8

million and

$41.5

million, respectively. The valuation allowances were primarily related to various state net operating loss carryforwards where realization is more uncertain at this time due to the limited carryforward periods that exist in certain states.

On

August 21, 2018

the Internal Revenue Service issued Notice

2018

-

68

providing initial guidance on the application of Section

162

(m) regarding performance-based executive compensation provisions that were changed as a result of the Act. During the quarter ended

September 30, 2018,

there were

no

changes to the provisional amounts recorded in our

December 31, 2017

financial statements. As of

September 30, 2018,

we are still analyzing the impact the changes to performance-based executive compensation provisions will have on our estimates. The Company continued to apply the guidance in SAB

118

when accounting for the enactment date effects of the Act.