|12 Months Ended|
Dec. 31, 2014
|Income Tax Disclosure [Abstract]|
Components of income tax expense/(benefit) are as follows (in thousands):
Income taxes differ for the years ended December 31, 2014, 2013 and 2012, from the amounts computed using the expected federal statutory income tax rate of 35% as a result of the following (in thousands):
The effective tax rate was 31.8% and 29.9% for 2014 and 2013, respectively. The effective tax rate for both 2014 and 2013 reflect the benefit of energy tax credits and the homebuilder manufacturing deduction for qualified domestic production activities. A reduction in the valuation allowance on deferred tax assets that occurred in 2013 contributed to the lower effective tax rate for that year as compared to 2014. The effective tax rate for 2012 is not a meaningful percentage due to a reduction of the valuation allowance on deferred tax assets and the carryback of net operating losses (“NOLs”) which produced significant income tax benefits which do not correlate to pre-tax income when calculating the effective tax rate for that year.
Deferred tax assets and liabilities are netted on our balance sheet by tax jurisdiction. Net overall tax assets for all jurisdictions are grouped and included as a separate asset. Net overall deferred tax liabilities for all jurisdictions are grouped and included in other liabilities. At December 31, 2014, we have a net deferred tax asset of $64.1 million. We also have net deferred tax liabilities of $3.6 million. Deferred tax assets and liabilities are comprised of timing differences at December 31 (in thousands) as follows:
At December 31, 2014 and December 31, 2013, we have no unrecognized tax benefits due to the lapse of the statute of limitations and completion of audits for prior years. We believe that our current income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Our policy is to accrue interest and penalties on unrecognized tax benefits and include them in federal income tax expense.
In accordance with ASC 740-10, Income Taxes ("ASC 740"), we determine our deferred tax assets and liabilities by taxing jurisdiction. We evaluate our deferred tax assets, including the benefit from NOLs, by jurisdiction to determine if a valuation allowance is required. Companies must assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency and severity of cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, experiences with operating losses and experiences of utilizing tax credit carryforwards and tax planning alternatives.
We recorded a full non-cash valuation allowance against all of our deferred tax assets during 2008 due to economic conditions and the weight of negative evidence at that time. During 2012 and 2013, we determined that the positive evidence exceeded the negative evidence in all tax jurisdictions and that it was more likely than not that our deferred tax assets and NOL carryovers would be realized. At the end of 2013, we reversed the remaining valuation allowance on our deferred tax assets and NOL carryovers in all tax jurisdictions based on the weight of the positive evidence. We have no valuation allowance on our deferred tax assets and NOL carryovers at December 31, 2014.
Our future NOL and deferred tax asset realization depends on sufficient taxable income in the carryforward periods under existing tax laws. Federal NOL carryforwards may be used to offset future taxable income for 20 years. State NOL carryforwards may be used to offset future taxable income for a period of time ranging from 5 to 20 years, depending on the state jurisdiction. At December 31, 2014, we had no remaining un-utilized federal NOL carryforward or federal tax credits. At December 31, 2014, we also had tax benefits for state NOL carryforwards of $4.6 million that begin to expire in 2015 depending on the state jurisdiction.
At December 31, 2014, we have income taxes payable of $5.9 million, which primarily consists of current federal and state tax accruals, net of estimated tax payments. This amount is recorded in Accrued liabilities in the accompanying balance sheet at December 31, 2014.
We conduct business and are subject to tax in the U.S. and several states. With few exceptions, we are no longer subject to U.S. federal, state, or local income tax examinations by taxing authorities for years prior to 2010. We have one state income tax examination pending resolution at this time.
The tax benefits from NOLs, built-in losses, and tax credits would be materially reduced or potentially eliminated if we experience an “ownership change” as defined under Internal Revenue Code (“IRC”) §382. Based on our analysis performed as of December 31, 2014 we do not believe that we have experienced an ownership change. As a protective measure, our stockholders held a Special Meeting of Stockholders on February 16, 2009 and approved an amendment to our Articles of Incorporation that restricts certain transfers of our common stock. The amendment is intended to help us avoid an unintended ownership change and thereby preserve the value of any tax benefit for future utilization.
On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (the “Act”), which the President signed into law on January 2, 2013. The Act extended certain tax provisions which had a retroactive effect on 2012. Among other things, the Act extended for two years the availability of a business tax credit under IRC §45L for building new energy efficient homes which originally was set to expire at the end of 2011. On December 16, 2014, Congress passed the Tax Increase Prevention Act of 2014 (the "Extenders Act"), which the President signed into law on December 19, 2014. The Extenders Act extended the availability of the IRC §45L new energy efficient homes credit to the end of 2014. Under ASC 740, the effects of new legislation are recognized in the period that includes the date of enactment, regardless of the retroactive benefit. In accordance with this guidance, we recorded tax effected benefits based on estimates for qualifying new energy efficient homes that we sold in 2012, 2013 and 2014. The estimated tax effected benefits as adjusted for actual experience are reflected in our effective tax rate reconciliation as the benefit from federal tax credits.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef