Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company historically reported income taxes on the consolidated income tax returns of Landsea Holdings since it has historically been a wholly owned subsidiary of Landsea Holdings. Subsequent to the Merger, the Company will file standalone income tax returns. The income tax provision and related balances in these consolidated financial statements have been calculated as if the Company filed a separate tax return for all periods and was operating as a separate business from Landsea Holdings. Under this method, the Company determines its income tax provision as if the Company filed a separate income tax return. The Company does not have tax sharing agreements with the other members within the consolidated Landsea Holdings group. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of the Company's actual tax balances.
The (benefit) provision for income taxes are as follows:
Year Ended December 31,
2021 2020 2019
(dollars in thousands)
Current:
Federal $ 11,507  $ 833  $ 4,766 
State 5,314  1,104  2,505 
Current tax provision 16,821  1,937  7,271 
 
Deferred:
Federal (2,425) (3,602) (705)
State (401) (1,416) (407)
Deferred tax benefit (2,826) (5,018) (1,112)
 
Total income tax (benefit) provision, net $ 13,995  $ (3,081) $ 6,159 
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,
2021 2020 2019
Federal income tax expense 21.0  % 21.0  % 21.0  %
State income tax expense, net of federal tax effect 5.6  5.7  6.9 
Permanent differences (0.6) (0.3) 0.1 
162(m) limitation (1.3) —  — 
PPP loan 1.8  —  — 
Energy efficient home credit (6.2) 5.6  (5.4)
Return to provision adjustment 0.4  (3.5) (1.2)
Rate change 0.1  (3.2) 0.2 
Change of valuation allowance 0.2  —  — 
Effective tax rate 21.0  % 25.3  % 21.6  %
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, 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, 2020 is primarily related to state income taxes net of federal income tax benefits, a limitation related to section 162(m), the forgiveness of the PPP loan, and the energy efficient home credit. The energy efficient home credit is an increase to our income tax benefit in 2020 compared to a decrease to our income tax expense in 2021 and 2019. The difference between the statutory tax rate and the effective tax rate for the year ended December 31, 2019 is primarily related to state income taxes net of federal income tax benefits, partially offset by the energy efficient home credit.
At December 31, 2021 and 2020, 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, Massachusetts, New Jersey, New York, and Pennsylvania and will start filing in Florida and Texas for tax year 2021.
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,
2021 2020
(dollars in thousands)
Deferred tax assets
Accrued expenses $ 3,764  $ 15,208 
Lease liability 3,479  1,748 
Allowance, reserves, and other 1,118  225 
Net operating loss and credit carryforward 87  25 
Stock compensation 905  — 
UNICAP 1,677  — 
Goodwill and intangibles 606  — 
Basis difference in investments 108  — 
Deferred tax asset 11,744  17,206 
Less: Valuation allowance (128) — 
Deferred tax asset, net 11,616  17,206 
 
Deferred tax liabilities
Right-of-use asset (3,321) (1,635)
Basis difference in fixed assets and intangible assets (1,025) (1,457)
Basis difference in investments —  (866)
Deferred tax liability (4,346) (3,958)
 
Net deferred tax asset $ 7,270  $ 13,248 
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 current year income 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, 2021 except for certain deferred tax assets related to one of the Company's consolidated joint ventures.
At December 31, 2021, the Company had $0.3 million federal NOL carryforwards, and various state NOL carryforwards totaling $0.4 million. The federal NOLs may be carried forward indefinitely. The state NOLs may be carried forward up to 20 years to offset future taxable income and begin to expire in 2035.
The statute of limitations is three years for federal income tax purposes and four years for state income tax purposes. The Company's federal and state tax returns from 2013 and forward are open for examination under statute due to losses claimed in those periods utilized in 2018 and 2017.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act, among other things, includes certain income tax provisions for individuals and corporations; however, these benefits do not impact the Company's current tax provision.