Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

Our effective tax rate was 24.6% and 24.4% for the three and nine months ended September 30, 2023, respectively, compared with 22.6% and 23.8%, respectively, for the same periods in 2022. Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense. The 2023 effective income tax rate for each of these periods was higher than the rate for the same period in 2022 due to the change in qualification standards for federal energy efficient home tax credits. On August 16, 2022, the Inflation Reduction Act of 2022 (the "Inflation Reduction Act") was signed into law. Notably, the Inflation Reduction Act retroactively extended the federal energy efficient home tax credits to January 1, 2022 using the same standards as prior years. For 2023 through 2032, the credit is based on EnergyStar or Zero Energy Ready standards.

At September 30, 2023 and December 31, 2022, we had net deferred tax liabilities of $265.5 million and $133.1 million, respectively. The accounting for deferred taxes is based upon estimates of future results. Differences between estimated and actual results could result in changes in the valuation of deferred tax assets that could have a material impact on our consolidated results of operations or financial position. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. We had $58.7 million and $23.6 million of gross unrecognized tax benefits at September 30, 2023 and December 31, 2022, respectively. Additionally, we had accrued interest and penalties of $5.7 million and $4.1 million at September 30, 2023 and December 31, 2022, respectively.