Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31,
	2023		2022		2021
Current:
Federal	$	261,481	$	412,036	$	272,971
State	79,023		126,686		80,650
Deferred:
Federal	(3,986)		(6,753)		873
State	244		(4,350)		(810)
Income tax expense	$	336,762	$	527,619	$	353,684

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

	As of December 31,
	2023		2022
Deferred tax assets:
Other accrued expenses and contract land deposit reserve	$	71,466	$	73,555
Deferred compensation	4,347		4,728
Equity-based compensation expense	48,088		47,605
Inventory	18,181		13,981
Unrecognized tax benefit	8,049		8,849
Other	14,703		11,364
Total deferred tax assets	164,834		160,082
Less: Deferred tax liabilities	9,515		8,505
Net deferred tax asset	$	155,319	$	151,577

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.

Deferred tax assets include $3,293 of Federal Alternative Minimum Tax Credits (CAMT) for the year ended December 31, 2023 that may be carried forward indefinitely.

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 $1,302,200 for the year ended December 31, 2023, and was $2,001,717 for the year ended December 31, 2022.

A reconciliation of income taxes computed at the federal statutory rate (21% in 2023, 2022, and 2021) to income tax expense is as follows:

	Year Ended December 31,
	2023		2022		2021
Income taxes computed at the federal statutory rate	$	404,958	$	473,171	$	333,985
State income taxes, net of federal income tax benefit (1)	92,163		105,867		72,082
Excess tax benefits from equity-based compensation	(153,554)		(50,324)		(48,369)
Other, net (2)	(6,805)		(1,095)		(4,014)
Income tax expense	$	336,762	$	527,619	$	353,684

(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, 2023, 2022 and 2021.

Our effective tax rate in 2023, 2022 and 2021 was 17.46%, 23.42% and 22.24%, 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 2020.

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

	Year Ended December 31,
	2023		2022
Balance at beginning of year	$	29,526	$	33,490
Additions based on tax positions related to the current year	782		1,326
Reductions for tax positions of prior years	(4,720)		(5,290)
Settlements	—		—
Balance at end of year	$	25,588	$	29,526

If recognized, the total amount of unrecognized tax benefits that would affect the effective tax rate (net of the federal tax benefit) is $20,215 as of December 31, 2023.

We recognize interest related to unrecognized tax benefits as a component of income tax expense. For the year ended December 31, 2023, we recognized a net addition of accrued interest on unrecognized tax benefits in the amount of $106. For the years ended December 31, 2022, and 2021, we recognized a net reversal of accrued interest on unrecognized tax benefits in the amount of $3,662 and $1,455, respectively. As of December 31, 2023 and 2022, we had a total of $10,292 and $10,186, 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, excluding interest, as of December 31, 2023 will be reduced by approximately $4,150 due to statute expiration and effectively settled positions in various state jurisdictions.