Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 17—Income Taxes

The Company files U.S. federal and state corporate income tax returns for PFSI and partnership returns for PNMAC. The Company’s federal tax returns are subject to examination for 2020 and forward and its state tax returns are generally subject to examination for 2019 and forward. PNMAC’s federal partnership returns are subject to examination for 2020 and forward, and its state tax returns are generally subject to examination for 2019 and forward. The Internal Revenue Service is currently auditing the Company's federal income tax return for 2020. California and various other state jurisdictions have also opened audits for tax years ranging from 2019 to 2021. The Company does not expect any material changes from these examinations as of December 31, 2023.

The following table details the Company’s provision for income taxes:

	Year ended December 31,
	2023		2022		2021
	(in thousands)
Current expense (benefit):
Federal	$	1,436	$	(2,944)	$	101,659
State		620		(249)		39,551
Total current expense (benefit)		2,056		(3,193)		141,210
Deferred expense:
Federal		31,375		131,670		160,587
State		5,544		61,263		53,896
Total deferred expense		36,919		192,933		214,483
Total provision for income taxes	$	38,975	$	189,740	$	355,693

The following table is a reconciliation of the Company’s provision for income taxes at statutory rates to the provision for income taxes at the Company’s effective tax rate:

	Year ended December 31,
	2023	2022	2021
Federal income tax at statutory rate	21.0%	21.0%	21.0%
State income taxes, net of federal benefit	4.7%	5.9%	5.4%
Tax rate revaluation	(2.2)%	1.2%	0.0%
Other	(2.3)%	0.4%	(0.2)%
Effective income tax rate	21.2%	28.5%	26.2%

The components of the Company’s provision for deferred income taxes are as follows:

	Year ended December 31,
	2023		2022		2021
	(in thousands)
Mortgage servicing rights	$	186,628	$	326,378	$	196,697
Net operating loss		(111,496)		(160,605)		—
Reserves and losses		(41,641)		13,480		15,736
Compensation accruals		7,403		10,473		(11,456)
Additional tax basis in partnership from exchanges of partnership units into the Company's common stock		3,803		4,517		4,420
California franchise taxes		—		4,447		10,753
Tax credits		—		—		50
Other		(7,778)		(5,757)		(1,717)
Total provision for deferred income taxes	$	36,919	$	192,933	$	214,483

The components of Income taxes payable are as follows:

	December 31,
	2023		2022
	(in thousands)
Current income tax payable (receivable)	$	1,230	$	(1,993)
Deferred income tax liability, net		1,041,656		1,004,737
Income taxes payable	$	1,042,886	$	1,002,744

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities are presented below:

	December 31,
	2023		2022
	(in thousands)
Deferred income tax assets:
Net operating loss carryforward	$	273,178	$	161,682
Compensation accruals		35,266		42,668
Additional tax basis in partnership from exchanges of partnership units into the Company's common stock		21,957		25,760
Reserves and losses		75,436		33,795
Other		9,943		6,159
Gross deferred income tax assets		415,780		270,064
Deferred income tax liabilities:
Mortgage servicing rights		1,446,810		1,260,181
Other		10,626		14,620
Gross deferred income tax liabilities		1,457,436		1,274,801
Net deferred income tax liability	$	1,041,656	$	1,004,737

The Company recorded a deferred tax asset of $273.2 million for net operating losses, of which $106.2 million related to net operating losses incurred in 2023, $165.9 million related to net operating losses incurred in 2022 and $1.1 million related to net operating losses incurred in 2018. The $213.6 million related to federal net operating loss carry forward has no expiration date but is subject to an annual utilization limitation of up to 80% of taxable income. The remaining $59.6 million in deferred tax assets, relating to state net operating losses, either have no expiration date or expire by 2042. The Company expects to fully utilize these net operating losses before their expiration dates.

At December 31, 2023 and 2022, the Company had no unrecognized tax benefits and does not anticipate any unrecognized tax benefits. Should the recognition of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such expenses in the Company’s income tax accounts. No such accruals existed at December 31, 2023 and 2022.