|12 Months Ended|
Dec. 31, 2013
|Income Tax Disclosure [Abstract]|
NOTE 9 — INCOME TAXES
Components of income tax expense/(benefit) are as follows (in thousands):
Income taxes differ for the years ended December 31, 2013, 2012 and 2011, from the amounts computed using the expected federal statutory income tax rate of 35% as a result of the following (in thousands):
Due to the effects of the deferred tax asset valuation allowance and reversal, carrybacks of net operating losses (“NOLs”), and changes in unrecognized tax benefits, the effective tax rates in 2013, 2012 and 2011 are not meaningful percentages as there is no correlation between the effective tax rates and the amount of pretax income or losses for those periods.
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, 2013, we have a net deferred tax asset of $70.4 million. We also have net deferred tax liabilities of $2.8 million. Deferred tax assets and liabilities are comprised of timing differences at December 31 (in thousands) as follows:
At December 31, 2013 and December 31, 2012, 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 the second quarter of 2012, we determined that the positive evidence exceeded the negative evidence in the tax jurisdiction of Florida and that it was more likely than not that most of the deferred tax assets and NOL carryovers for the Florida tax jurisdiction would be realized. In the fourth quarter of 2012, we reversed the valuation allowance against our federal deferred tax assets and those in most of our state jurisdictions because the weight of the positive evidence in those jurisdictions exceeded that of the negative evidence. During 2013, we reversed and utilized $8.7 million of additional state allowances. At December 31, 2013, we have no remaining non-cash valuation allowance.
In evaluating the need for a non-cash valuation allowance against our deferred tax assets at December 31, 2013, we considered all available and objectively verifiable positive and negative evidence. The remaining valuation allowance at December 31, 2012 was for certain state jurisdictions which have a shorter NOL carryforward utilization period or a large NOL carryforward relative to their current earnings. In 2013, the remaining valuation allowance for these state jurisdictions was evaluated for additional positive evidence. Based on strong current and expected earnings, it was determined that if was more likely than not that our state NOL carryforwards would be utilized, and the valuation allowance was reversed.
At December 31, 2013 and December 31, 2012, we had a valuation allowance against deferred tax assets as follows (in thousands):
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, 2013, we had no remaining un-utilized federal NOL carryforward or federal tax credits. At December 31, 2013, we also had tax benefits for state NOL carryforwards of $11.5 million that begin to expire in 2014 depending on the state jurisdiction.
At December 31, 2013, we have income taxes payable of $18.2 million, which primarily consists of current federal and state tax accruals as well as interest that we expect to pay within one year for having amended prior-year state tax returns. This amount is recorded in accrued liabilities in the accompanying balance sheet at December 31, 2013.
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 2009. We are not subject to any federal or state income tax examination at this time.
The tax benefits from our 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, 2013 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 our tax benefits 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 have 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. 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 a tax effected benefit of approximately $1.7 million in 2013 related to the extension of the IRC §45L tax credit for the qualifying new energy efficient homes that we sold in 2012. Additional IRC §45L credits for qualifying homes sold in 2013 produced a net benefit of $2.0 million.
On September 13, 2013, the Internal Revenue Service issued final regulations regarding capitalization of tangible personal property. Under ASC 740, this is considered to be a change in tax law. Although the final regulations are generally effective beginning on or after January 1, 2014, ASC 740 requires that the effect of a change in tax law be recognized as of the enactment date. Our review and analysis indicates that there was no impact on our deferred tax balances for 2013.
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