18.	Income Taxes

We account for income taxes in accordance with ASC Topic

740,

Income Taxes

("ASC

740"

). ASC

740

requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered. Changes to enacted tax rates could materially impact the recorded amount of our deferred tax asset.

Each quarter we assess our deferred tax asset to determine whether all or any portion of the asset is more likely than

not

unrealizable under ASC

740.

We are required to establish a valuation allowance for any portion of the asset we conclude is more likely than

not

to be unrealizable. Our assessment considers, among other things, the nature, frequency and severity of our prior and cumulative losses, forecasts of our future taxable income, the duration of statutory carryforward periods, our utilization experience with operating loss and tax credit carryforwards, and tax planning alternatives.

Our

2017

second

quarter provision for income taxes of

$57.3

million primarily related to our

$156.2

million of pretax income. As of

June 30, 2017,

we had a

$314.4

million deferred tax asset which was partially offset by a valuation allowance of

$1.9

million related to state net operating loss carryforwards that are limited by shorter carryforward periods. As of such date,

$96.1

million of our deferred tax asset related to net operating loss carryforwards is subject to the Internal Revenue Code Section

382

gross annual deduction limitation of

$15.6

million for both federal and state purposes. Additionally,

$15.3

million of our state deferred tax asset related to net operating losses is subject to

382

limitations resulting from our

October 1, 2015

merger with Ryland, and

$4.8

million related to state net operating loss carryforwards that are

not

limited by Section

382.

The remaining deferred tax asset balance of

$198.2

million represented deductible timing differences, primarily related to inventory impairments and financial accruals, which have

expiration date. As of

June 30, 2017

and

December 31, 2016,

our liability for unrecognized tax benefits was

$13.3

million and

$12.1

million, respectively, which is included in accrued liabilities in the accompanying condensed consolidated balance sheets. In addition, as of

June 30, 2017,

we remained subject to examination by various tax jurisdictions for the tax years ended

December 31,

2012

through

2016.