Income Taxes

9 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company’s income tax expense for the three and nine months ended June 30, 2022 was $524.0 million and $1.3 billion, respectively, compared to $299.1 million and $784.1 million in the prior year periods. The effective tax rate was 24.0% and 23.7% for the three and nine months ended June 30, 2022, respectively, compared to 21.1% and 21.6% in the prior year periods. The effective tax rates for all periods include an expense for state income taxes and tax benefits related to stock-based compensation. The effective tax rates for the three and nine months ended June 30, 2022 are higher than the prior year periods due to the expiration of the federal energy efficient homes tax credit for homes closed after December 31, 2021.

The Company’s deferred tax assets, net of deferred tax liabilities, were $177.7 million at June 30, 2022 compared to $159.5 million at September 30, 2021. The Company has a valuation allowance of $20.3 million and $4.2 million at June 30, 2022 and September 30, 2021, respectively, related to deferred tax assets for net operating loss (NOL) and tax credit carryforwards that are more likely than not to expire before being realized. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to the remaining state NOL and tax credit carryforwards. Any reversal of the valuation allowance in future periods will impact the Company’s effective tax rate.

The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets.