Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for income taxes are as follows:
Year Ended December 31,
2023 2022 2021
(dollars in thousands)
Current:
Federal $ 12,418  $ 22,350  $ 11,507 
State 4,394  9,350  5,314 
Current tax provision 16,812  31,700  16,821 
 
Deferred:
Federal (3,967) (4,681) (2,425)
State (950) (1,619) (401)
Deferred tax benefit (4,917) (6,300) (2,826)
 
Total income tax provision, net $ 11,895  $ 25,400  $ 13,995 
The provision for income taxes varies from the U.S. federal statutory rate. The following reconciliation shows the significant differences in the tax at statutory and effective rates:
Year Ended December 31,
2023 2022 2021
Federal income tax expense 21.0  % 21.0  % 21.0  %
State income tax expense, net of federal tax effect 5.6  6.4  5.6 
162(m) limitation 1.9  1.0  (1.3)
PPP loan —  —  1.8 
Fair market value of warrant —  1.5  (0.7)
Noncontrolling interest (1.8) (0.5) — 
Energy efficient home credits (1.4) (3.6) (6.2)
Other permanent differences 0.4  —  0.1 
Return to provision adjustment (0.4) (0.7) 0.4 
Rate change 1.0  (0.1) 0.1 
Change of valuation allowance —  (0.1) 0.2 
Other 0.4  0.2  — 
Effective tax rate 26.7  % 25.1  % 21.0  %
The difference between the statutory tax rate and the effective tax rate for the year ended December 31, 2023 is primarily related to state income taxes net of federal income tax benefits, estimated deduction limitations for executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and tax credits for energy-efficient homes. The difference between the statutory tax rate and the effective tax rate for the year ended December 31, 2022, is primarily related to state income taxes net of federal income tax benefits, estimated deduction limitations for executive compensation under Section 162(m) of the Code, and the fair value adjustment of the Private Placement Warrants, offset by the energy-efficient home credit. The difference between the statutory tax rate and the effective tax rate for the year ended December 31, 2021 is primarily related to state income taxes net of federal income tax benefits and the energy-efficient home credits. At December 31, 2023, 2022 and 2021, the Company did not have any gross uncertain tax positions or unrecognized tax benefits, and did not require an accrual for interest or penalties. The Company files income tax returns in the U.S. federal jurisdiction and in the states of Arizona, California, Colorado, Florida, Massachusetts, New Jersey, New York, and Texas.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the deferred tax assets, net of deferred tax liabilities, are as follows:
December 31,
2023 2022
(dollars in thousands)
Deferred tax assets
Accrued expenses $ 16,519  $ 14,279 
Lease liability 3,371  4,384 
State tax liability 963  1,963 
Allowances, reserves, and other 244  — 
Stock compensation 948  1,009 
UNICAP 6,967  4,489 
Goodwill and intangibles —  331 
Basis difference in investments 2,699  499 
Deferred tax asset 31,711  26,954 
 
Deferred tax liabilities
Right-of-use asset (3,061) (4,160)
Basis difference in fixed assets and intangible assets (3,097) (1,990)
Warranty receivables (7,067) (7,235)
Deferred tax liability (13,225) (13,385)
 
Net deferred tax asset $ 18,486  $ 13,569 
Based on the Company’s policy on deferred tax valuation allowances as discussed in Note 2 – Summary of Significant Accounting Policies and its analysis of positive and negative evidence, management believed that there was enough evidence, including cumulative income over the past three years and projections of future taxable income, for the Company to conclude that it was more likely than not that it would realize all of its deferred tax assets as of December 31, 2023.
At December 31, 2023, the Company did not have any federal or state NOL carryforwards.
The statute of limitations is three years for federal income tax purposes and four years for state income tax purposes. The Company’s federal tax returns for years 2020 through 2022 and state tax returns for years 2019 through 2022 are subject to examination under statute.
The Inflation Reduction Act (“IRA”) of 2022 was enacted into law on August 16, 2022. The IRA introduces a 15% corporate alternative minimum tax on average annual adjusted financial statement income for applicable corporations, and a 1% excise tax on stock repurchases made by publicly traded US corporations after December 31, 2022. The IRA also retroactively extended the federal tax credit for building new energy-efficient homes for homes delivered from January 1, 2022 through December 31, 2032. For homes delivered in 2023 through 2032, the credit amount is up to $5,000 based on the applicable program and program requirements under which the home was built (i.e. Energy Star or Zero Energy Ready Home). The federal energy tax credits were recognized for the year ended December 31, 2023. There were no other material effects of the IRA on the Company’s consolidated financial statements.