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Income Taxes
 12 Months Ended
Nov. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for income taxes consisted of the following:
Years Ended November 30,
(In thousands)202120202019
Current:
Federal$924,474 428,907 298,701 
State245,941 135,246 53,400 
$1,170,415 564,153 352,101 
Deferred:
Federal$149,349 59,065 165,080 
State42,745 33,017 74,992 
192,094 92,082 240,072 
$1,362,509 656,235 592,173 
A reconciliation of the statutory rate and the effective tax rate was as follows:
Percentage of Pretax Income
202120202019
Statutory rate21.00 %21.00 %21.00 %
State income taxes, net of federal income tax benefit4.03 4.00 4.17 
Tax credits (1)(1.73)(4.46)(1.49)
Nondeductible compensation0.49 0.57 0.45 
Tax reserves and interest expense, net0.03 — (0.03)
Deferred tax asset valuation allowance, net(0.01)— (0.02)
Other(0.29)(0.09)0.18 
Effective rate23.52 %21.02 %24.26 %
(1)During fiscal year 2020, Congress extended the new energy efficient home tax credit for homes delivered from 2018 to 2021, with retroactive effect for 2018 and 2019.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax assets were as follows:
November 30,
(In thousands)20212020
Deferred tax assets:
Inventory valuation adjustments$94,624 136,868 
Reserves and accruals187,466 161,984 
Net operating loss carryforwards74,902 88,021 
Capitalized expenses174,405 130,910 
Investments in unconsolidated entities48,913 67,405 
Employee stock incentive plan37,813 25,060 
Other assets49,828 51,655 
Total deferred tax assets667,951 661,903 
Valuation allowance(2,693)(4,411)
Total deferred tax assets after valuation allowance665,258 657,492 
Deferred tax liabilities:
Capitalized expenses187,332 181,729 
Deferred income272,827 240,903 
Unrealized gains on investments in equity securities164,534 — 
Other liabilities44,810 47,478 
Total deferred tax liabilities669,503 470,110 
Net deferred tax assets (liabilities)$(4,245)187,382 
The detail of the Company's net deferred tax assets (liabilities) was as follows:
November 30,
(In thousands)20212020
Net deferred tax assets (liabilities): (1)
Homebuilding$84,198 119,467 
Financial Services(1,431)1,024 
Multifamily64,247 38,155 
Lennar Other(151,259)28,736 
Net deferred tax assets (liabilities)$(4,245)187,382 
(1)Net deferred tax assets and net deferred tax liabilities detailed above are included within other assets and other liabilities in the respective segments.
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives.
November 30,
(In thousands)20212020
Valuation allowance (1)$(2,693)(4,411)
Federal tax effected NOL carryforwards (2)32,968 36,264 
State tax effected NOL carryforwards (3)41,935 51,757 
(1)As of November 30, 2021 and 2020, the deferred tax assets included valuation allowances primarily related to state net operating loss ("NOL") carryforwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states.
(2)At November 30, 2021 and 2020, the Company had federal tax effected NOL carryforwards that may be carried forward to offset future taxable income and begin to expire in 2029.
(3)At November 30, 2021 and 2020, the Company had state tax effected NOL carryforwards that may be carried forward from 10 to 20 years or indefinitely, depending on the tax jurisdiction, with certain losses expiring between 2022 and 2039.
The following table summarizes the changes in gross unrecognized tax benefits:
Years Ended November 30,
(In thousands)202120202019
Gross unrecognized tax benefits, beginning of year$12,285 12,856 14,667 
Lapse of statute of limitations— (349)(1,811)
Decreases due to settlements with tax authorities— (222)— 
Gross unrecognized tax benefits, end of year$12,285 12,285 12,856 
If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2021, $9.7 million would affect the Company’s effective tax rate. The Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease by up to $12.3 million within the following twelve months.
The following summarizes the changes in interest and penalties accrued with respect to gross unrecognized tax benefits:
November 30,
(In thousands)20212020
Accrued interest and penalties, beginning of the year$57,764 55,333 
Accrual of interest and penalties (primarily related to state audits)2,173 2,802 
Reduction of interest and penalties— (371)
Accrued interest and penalties, end of the year$59,937 57,764 
The IRS is currently examining the Company's federal tax income tax returns for fiscal year 2020, and certain state taxing authorities are examining various fiscal years. The final outcome of these examinations is not yet determinable. The statute of limitations for the Company's major tax jurisdictions remains open for examination for fiscal year 2005 and subsequent years. The Company participates in an IRS examination program, Compliance Assurance Process, "CAP". This program operates as a contemporaneous exam throughout the year in order to keep exam cycles current and achieve a higher level of compliance.