Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	272,971	$	151,532	$	115,610
State	80,650		42,769		34,586
Deferred:
Federal	873		(13,289)		(2,195)
State	(810)		(4,227)		(745)
Income tax expense	$	353,684	$	176,785	$	147,256

Deferred income taxes on our consolidated balance sheets were comprised of the following:

	As of December 31,
	2021		2020
Deferred tax assets:
Other accrued expenses and contract land deposit reserve	$	64,123	$	67,520
Deferred compensation	4,682		4,608
Equity-based compensation expense	46,020		41,839
Inventory	13,014		13,118
Unrecognized tax benefit	10,634		11,705
Other	9,876		8,639
Total deferred tax assets	148,349		147,429
Less: Deferred tax liabilities	7,874		7,184
Net deferred tax asset	$	140,475	$	140,245

Deferred tax assets arise principally as a result of various accruals required for financial reporting purposes and equity-based compensation expense, which are not currently deductible for tax return purposes.

Management believes that we will have sufficient future taxable income to make it more likely than not that the net deferred tax assets will be realized. Federal taxable income is estimated to be approximately $1,334,100 for the year ended December 31, 2021, and was $770,000 for the year ended December 31, 2020.

A reconciliation of income taxes computed at the federal statutory rate (21% in 2021, 2020, and 2019) to income tax expense is as follows:

	Year Ended December 31,
	2021		2020		2019
Income taxes computed at the federal statutory rate	$	333,985	$	226,387	$	215,417
State income taxes, net of federal income tax benefit (1)	72,082		47,469		45,770
Excess tax benefits from equity-based compensation	(48,369)		(92,234)		(101,466)
Other, net (2)	(4,014)		(4,837)		(12,465)
Income tax expense	$	353,684	$	176,785	$	147,256

(1)Excludes state excess tax benefits from equity-based compensation included in the line below.

(2)Primarily attributable to tax benefits from certain energy credits for the years ended December 31, 2021, 2020 and 2019.

Our effective tax rate in 2021, 2020 and 2019 was 22.24%, 16.40% and 14.36%, respectively.

We file a consolidated U.S. federal income tax return, as well as state and local tax returns in all jurisdictions where we maintain operations. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2018.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2021		2020
Balance at beginning of year	$	36,817	$	39,356
Additions based on tax positions related to the current year	3,436		3,155
Reductions for tax positions of prior years	(6,763)		(5,694)
Settlements	—		—
Balance at end of year	$	33,490	$	36,817

If recognized, the total amount of unrecognized tax benefits that would affect the effective tax rate (net of the federal tax benefit) is $26,456 as of December 31, 2021.

We recognize interest related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2021, 2020, and 2019, we recognized a net reversal of accrued interest on unrecognized tax benefits in the amount of $1,455, $420 and $1,467, respectively. As of December 31, 2021 and 2020, we had a total of $13,849 and $15,304, respectively, of accrued interest on unrecognized tax benefits which are included in “Accrued expenses and other liabilities” on the accompanying consolidated balance sheets.

We believe that within the next 12 months, it is reasonably possible that the unrecognized tax benefits as of December 31, 2021 will be reduced by approximately $6,464 due to statute expiration and effectively settled positions in various state jurisdictions.