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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Tax Disclosure [Abstract] |
Income Taxes | Income taxes Components of current and deferred income tax expense (benefit) are as follows ($000’s omitted):
| 2012 |  | 2011 |  | 2010
Current provision (benefit) |  |  |  |  |
Federal | $ | (8,523 | ) |  | $ | (71,796 | ) |  | $ | (114,617 | )
State and other | (14,068 | ) |  | (28,116 | ) |  | (23,200 | )
| $ | (22,591 | ) |  | $ | (99,912 | ) |  | $ | (137,817 | )
Deferred provision (benefit) |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State and other | — |  |  | — |  |  | — |
| $ | — |  |  | $ | — |  |  | $ | — |
Income tax expense (benefit) | $ | (22,591 | ) |  | $ | (99,912 | ) |  | $ | (137,817 | )
The following table reconciles the statutory federal income tax rate to the effective income tax rate:
| 2012 |  | 2011 |  | 2010
Income taxes at federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Effect of state and local income taxes, net of federal tax | 3.0 |  |  | 3.0 |  |  | 3.0 |
Deferred tax asset valuation allowance | (37.7 | ) |  | (7.0 | ) |  | (12.4 | )
Tax contingencies | (10.6 | ) |  | 28.4 |  |  | 5.0 |
Goodwill impairment | — |  |  | (28.7 | ) |  | (19.7 | )
Other | (2.0 | ) |  | 1.5 |  |  | 0.3 |
Effective rate | (12.3 | )% |  | 32.2 | % |  | 11.2 | %
The net deferred tax asset (liability) is as follows ($000’s omitted):
| At December 31,
| 2012 |  | 2011
Deferred tax assets: |  |  |
Non-deductible reserves and other | $ | 486,990 |  |  | $ | 446,605 |
Inventory valuation reserves | 953,266 |  |  | 1,197,271 |
Net operating loss ("NOL") carryforwards: |  |  |
Federal | 785,302 |  |  | 663,733 |
State | 320,831 |  |  | 299,292 |
Alternative minimum tax credits | 25,338 |  |  | 25,193 |
Energy credit and charitable contribution carryforward | 38,895 |  |  | 38,586 |
| 2,610,622 |  |  | 2,670,680 |
Deferred tax liabilities: |  |  |
Capitalized items, including real estate basis differences, deducted for tax, net | (84,637 | ) |  | (91,399 | )
Trademarks and tradenames | (56,714 | ) |  | (61,692 | )
| (141,351 | ) |  | (153,091 | )
Valuation allowance | (2,469,271 | ) |  | (2,517,589 | )
Net deferred tax asset (liability) | $ | — |  |  | $ | — |
Due to the effects of the deferred tax valuation allowance and changes in unrecognized tax benefits, our effective tax rates in 2012, 2011, and 2010 are not correlated to the amount of our income or loss before income taxes. The income tax benefits for 2012, 2011, and 2010 resulted primarily from the favorable resolution of certain federal and state income tax matters. We had income taxes receivable of $31.9 million and $27.2 million at December 31, 2012 and 2011, respectively. The income taxes receivable at December 31, 2012 related primarily to federal and state carryback claims and amended income tax returns. We evaluate our deferred tax assets to determine if a valuation allowance is required. We had net deferred tax assets of $2.5 billion at December 31, 2012 and 2011. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. Changes in existing tax laws could also affect actual tax results and the valuation of deferred tax assets over time. Based on our evaluation, we fully reserved the net deferred tax assets due to the uncertainty of realizing such deferred tax assets. The accounting for deferred taxes is based upon an estimate of future results. Differences between the estimated and actual results could have a material impact on our consolidated results of operations or financial position. We continue to analyze all available positive and negative evidence in determining the continuing need for a valuation allowance. This evaluation considers, among other factors, historical operating results, forecasts of future profitability, and the duration of statutory carryforward periods. One of the primary pieces of negative evidence we consider is the significant losses we have incurred in recent years, including being in a significant three-year cumulative pre-tax loss position at December 31, 2012. Other negative evidence includes a challenging U.S. macroeconomic environment and uncertainty regarding the timing of a broad, sustainable recovery in the homebuilding industry. However, we earned a profit before income taxes for the year ended December 31, 2012 and have seen significant increases in new orders, backlog, and home sale gross margin. If current business trends continue, including continued improvements in the homebuilding industry, and we continue to be profitable, we believe that there could be sufficient positive evidence to support reducing a large portion of the valuation allowance during 2013. Realization of a portion of our deferred tax assets for state NOL carryforwards and other items, however, is more unlikely than the realization of federal deferred tax assets. This is due to the need to generate sufficient taxable income in each of the respective jurisdictions prior to the expirations of the various state carryforward periods, some of which expire sooner than the 20-year federal NOL carryforwards. As a result of our merger with Centex in August 2009, our ability to use certain of Centex’s pre-ownership change NOL carryforwards and built-in losses or deductions is limited by Section 382 of the Internal Revenue Code. Our Section 382 limitation is approximately $67.4 million per year for NOLs, losses realized on built-in loss assets that are sold within 60 months of the ownership change (i.e. before August 2014), and certain deductions. We do not believe that the Section 382 limitation will prevent the Company from using Centex’s pre-ownership change NOL carryforwards and built-in losses or deductions. Our gross federal NOL carryforward is approximately $2.2 billion, a significant portion of which is subject to the provisions of Internal Revenue Code Section 382. We also have significant gross state NOLs in various tax jurisdictions. These NOLs may be carried forward from 5 to 20 years, depending on the tax jurisdiction, with NOLs expiring between 2013 and 2032. At December 31, 2012 we had $170.4 million of gross unrecognized tax benefits, of which $166.3 million would impact the effective tax rate if recognized. At December 31, 2011, we had $171.9 million of gross unrecognized tax benefits, of which $170.6 million would impact the effective rate if recognized. Additionally, we had accrued interest and penalties of $31.5 million and $36.9 million at December 31, 2012 and 2011, respectively. In 2012 and 2011, our income tax expense (benefit) included tax related interest and penalties. Such amounts totaled a benefit of $5.4 million in 2012 and $11.4 million in 2011. We are currently under examination by the IRS and various state taxing jurisdictions and anticipate finalizing certain of the examinations within the next twelve months. The final outcome of these examinations is not yet determinable. It is reasonably possible, within the next twelve months, that unrecognized tax benefits may decrease by up to $24.9 million, excluding interest and penalties, primarily due to expirations of certain statutes of limitations and potential settlements. The statute of limitations for our major tax jurisdictions remains open for examination for tax years 2003 to 2012. A reconciliation of the change in the unrecognized tax benefits is as follows ($000’s omitted):
| 2012 |  | 2011 |  | 2010
Unrecognized tax benefits, beginning of period | $ | 171,863 |  |  | $ | 258,016 |  |  | $ | 326,088 |
Decreases related to tax positions taken during the current period | — |  |  | — |  |  | — |
Increases related to tax positions taken during a prior period | 8,782 |  |  | 2,699 |  |  | 55,385 |
Decreases related to tax positions taken during a prior period | (9,373 | ) |  | (79,719 | ) |  | (14,025 | )
Increases related to tax positions taken during the current period | 11,797 |  |  | 1,620 |  |  | 1,441 |
Decreases related to settlements with taxing authorities | — |  |  | — |  |  | (94,779 | )
Reductions as a result of a lapse of the applicable statute of limitations | (12,644 | ) |  | (10,753 | ) |  | (16,094 | )
Unrecognized tax benefits, end of period | $ | 170,425 |  |  | $ | 171,863 |  |  | $ | 258,016 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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