Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following:

	Years Ended December 31,
	2021		2020		2019
	(in thousands)
Current	$	6,755	$	9,939	$	7,282
Deferred	3,669		13,027		6,038
Total	$	10,424	$	22,966	$	13,320

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before the provision for income taxes.

The reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 

	Years Ended December 31,
	2021		2020		2019
Federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	1.8	%	5.3	%	5.2	%
Change in valuation allowance	1.0	%	—	%	—	%
Excess tax benefits related to share-based compensation	(7.8)	%	(3.2)	%	(2.6)	%
Return to provision	—	%	0.1	%	(1.4)	%
Oklahoma amended tax returns	—	%	—	%	(1.3)	%
Other	(0.9)	%	(0.7)	%	(0.9)	%
	15.1	%	22.5	%	20.0	%

On May 21, 2021, the State of Oklahoma enacted House Bill 2960, effectively reducing the corporate income tax rate in Oklahoma from 6% to 4%. As a result of these changes, the Company adjusted its state deferred tax assets and liabilities in the second quarter of 2021 using the newly enacted rate for the periods when they are expected to be realized. This resulted in a benefit of $0.8 million included in the table above under State income taxes, net of Federal benefit, for the year ending December 31, 2021.

During the year ending December 31, 2021, the Company recorded an excess tax benefit of $5.4 million as compared to $3.2 million during 2020, an increase of 68.8%. The increase was primarily due to timing of stock option exercises as a result of our high stock price during the three months ended March 31, 2021 and three months ended December 31, 2021.

We earn investment tax credits from the state of Oklahoma’s investment tax credit program for generally 1% of the qualified assets to be taken over 5 years. We use the flow-through method of accounting for the investment tax credits. We have credit carryforwards totaling $3.7 million that have estimated expirations starting in 2035.

Upon completion of the Company's 2018 tax return in 2019, the Company recorded additional benefit due to higher than expected research and development credit of $0.6 million. Additionally in 2019, the Company determined it could take advantage of an additional 1% tax credit in Oklahoma for years in which the Company's location was deemed to be within an enterprise zone. The additional Oklahoma credit for being in an enterprise zone, or otherwise allowable under Oklahoma law, resulted in a benefit of $1.2 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.

The significant components of the Company’s deferred tax assets and liabilities are as follows:

 

	December 31,
	2021		2020
	(in thousands)
Deferred income tax assets (liabilities):
Accounts receivable and inventory reserves	$	625	$	1,052
Warranty accrual	3,675		3,776
Other accruals	1,406		1,044
Share-based compensation	7,568		4,102
Intangibles	993		(33)
Oklahoma investment credit carryforward	3,404		—
Other, net	3,119		2,608
	20,790		12,549
Valuation allowance	(3,404)		—
Net deferred income tax assets	17,386		12,549
Property & equipment	(49,379)		(40,873)
Total deferred income tax liabilities	(49,379)		(40,873)
Net deferred income tax liabilities	$	(31,993)	$	(28,324)

Realization of deferred tax assets, including the associated credit carryforwards, is dependent upon generating sufficient taxable income in the appropriate tax jurisdiction. We believe that it is more likely than not that we may not realize the benefit of our Oklahoma investment tax credit carryforward and, accordingly, have established a valuation allowance against this deferred tax asset.

The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions. These deductions can vary from year to year and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years.

We file income tax returns in the U.S. and state tax returns jurisdictions. We are subject to U.S. examinations for tax years 2018 to present. In addition, we are subject to state and local income tax examinations for tax years 2017 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.