Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14.     Income Taxes

The benefit for income taxes includes the following: 

	Year Ended December 31,
	2020			2019			2018
	(Dollars in thousands)
Current provision (benefit) for income taxes:
Federal	$	(28,644	)	$	(203	)	$	(67	)
State		1			(101	)		304
		(28,643	)		(304	)		237
Deferred provision (benefit) for income taxes:
Federal		6,837			(2,933	)		(4,208	)
State		(4,781	)		(578	)		(2,104	)
		2,056			(3,511	)		(6,312	)
Benefit for income taxes	$	(26,587	)	$	(3,815	)	$	(6,075	)

The effective tax rate differs from the federal statutory rate of 21% for the years ended December 31, 2020, 2019 and 2018 due to the following items:

	Year Ended December 31,
	2020			2019			2018
	(Dollars in thousands)
Loss before taxes of taxable entities	$	(59,456	)	$	(11,816	)	$	(20,305	)
Benefit for income taxes at federal statutory rate	$	12,485		$	2,481		$	4,264
(Increases) decreases in tax resulting from:
Provisional rate adjustment - tax reform		—			—			148
NOL carryback rate differential		9,574			—			—
State income taxes, net of federal benefit		3,980			781			1,396
Tax credits		1,509			1,238			346
Stock compensation		(276	)		(389	)		(12	)
Non-deductible expenses related to Section 162(m)		(48	)		(163	)		—
Other		(637	)		(133	)		(67	)
Benefit for income taxes	$	26,587		$	3,815		$	6,075
Effective tax rate		44.7	%		32.3	%		29.9	%

The Company's effective tax rate for 2020 includes the benefit associated with net operating loss carrybacks to years when the Company was subject to a 35% federal tax rate as permitted by the CARES Act.  The CARES Act was signed into law on March 27, 2020 and allows companies to carry back net operating losses generated in 2018 through 2020 for five years.  

With the enactment of the Tax Cuts and Jobs Act (the "Tax Act"), the corporate federal income tax rate dropped from a maximum of 35% to a flat 21% rate effective January 1, 2018.  As a result of the rate change, the Company was required to revalue its net deferred tax asset at December 31, 2018 and recorded a provisional adjustment to reduce its value by $3.2 million. The Company completed its accounting for the tax effects of the Tax Act in 2018, within the one-year measurement period prescribed by the SEC, and recorded a $0.1 million adjustment to the provisional amount.

The components of our deferred tax asset, net are as follows:

	December 31,
	2020			2019
	(Dollars in thousands)
Net operating loss carryforwards	$	5,808		$	2,227
Tax credit carryforwards		2,401			1,621
Reserves and accruals		2,870			2,563
Share based compensation		1,441			1,392
Inventory		3,142			3,536
Investments in joint ventures		1,226			7,080
Other		26			27
Depreciation and amortization		(653	)		(393	)
Right-of-use lease asset		(814	)		(550	)
Deferred tax asset, net	$	15,447		$	17,503

At December 31, 2020, the $5.8 million deferred tax asset for net operating losses consisted solely of state net operating loss carryforwards. Our state net operating losses may be carried forward 20 years for both California and Arizona, and will begin to expire in 2039, unless previously utilized. The $2.2 million deferred tax asset at December 31, 2019 included 2019 and 2018 federal net operating losses, which were fully carried back during 2020 pursuant to the five year carry back permitted by the CARES Act.   

At December 31, 2020 the Company had federal tax credits of approximately $2.3 million related to tax credits for energy efficient homes sold during 2019 and 2020.  At December 31, 2019, the Company had federal tax credits of approximately $1.6 million related to tax credits for energy efficient homes sold during 2019 and 2018.  The energy credits will begin to expire in 2039, unless previously utilized. 

The Company classifies any interest and penalties related to income taxes assessed as part of income tax provision. The Company has concluded that there were no significant uncertain tax positions requiring recognition in its financial statements, nor has the Company been assessed interest or penalties by any major tax jurisdictions related to any open tax periods. We are subject to U.S. federal income tax examination for calendar tax years ending 2017 through 2019 and various state income tax examinations for 2016 through 2019 calendar tax years.