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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes Components of current and deferred income tax expense (benefit) are as follows ($000’s omitted):
| 2016 |  | 2015 |  | 2014
Current expense (benefit) |  |  |  |  |
Federal | $ | 9,464 |  |  | $ | 8,760 |  |  | $ | 5,619 |
State and other | (13,104 | ) |  | 1,474 |  |  | (13,968 | )
| $ | (3,640 | ) |  | $ | 10,234 |  |  | $ | (8,349 | )
Deferred expense (benefit) |  |  |  |  |
Federal | $ | 312,288 |  |  | $ | 277,895 |  |  | $ | 232,969 |
State and other | 22,499 |  |  | 33,804 |  |  | (9,200 | )
| $ | 334,787 |  |  | $ | 311,699 |  |  | $ | 223,769 |
Income tax expense (benefit) | $ | 331,147 |  |  | $ | 321,933 |  |  | $ | 215,420 |
The following table reconciles the statutory federal income tax rate to the effective income tax rate:
| 2016 |  | 2015 |  | 2014
Income taxes at federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State and local income taxes, net of federal tax | 3.3 |  |  | 2.8 |  |  | 3.0 |
Deferred tax asset valuation allowance | (2.2 | ) |  | 0.4 |  |  | (6.6 | )
Tax contingencies | (1.3 | ) |  | 0.1 |  |  | (1.4 | )
Other | 0.7 |  |  | 1.2 |  |  | 1.2 |
Effective rate | 35.5 | % |  | 39.5 | % |  | 31.2 | %
Our effective tax rate was 35.5%, 39.5% and 31.2% for 2016, 2015, and 2014 respectively. The 2016 effective tax rate differs from the federal statutory rate primarily due to state income taxes, the reversal of a portion of our valuation allowance related to a legal entity restructuring, the favorable resolution of certain state income tax matters, the impact on our net deferred tax assets due to changes in business operations and state tax laws, and recognition of energy efficient home credits. The 2015 effective tax rate exceeds the federal statutory rate primarily due to state income taxes and the impact of changes in business operations and state tax laws to our net deferred tax assets. The 2014 effective tax rate is less than the federal statutory rate primarily due to the reversal of a portion of our valuation allowance related to certain state deferred tax assets, along with the favorable resolution of certain federal and state income tax matters. Deferred tax assets and liabilities reflect temporary differences arising from the different treatment of items for tax and accounting purposes. Components of our net deferred tax asset are as follows ($000’s omitted):
| At December 31,
| 2016 |  | 2015
Deferred tax assets: |  |  |
Accrued insurance | $ | 220,823 |  |  | $ | 237,836 |
Non-deductible reserves and other | 140,987 |  |  | 155,488 |
Inventory valuation reserves | 359,964 |  |  | 476,673 |
Net operating loss ("NOL") carryforwards: |  |  |
Federal | 187,817 |  |  | 367,302 |
State | 224,316 |  |  | 274,686 |
Alternative minimum tax credit carryforwards | 53,917 |  |  | 44,161 |
Energy and other credit carryforwards | 45,673 |  |  | 28,669 |
| 1,233,497 |  |  | 1,584,815 |
Deferred tax liabilities: |  |  |
Capitalized items, including real estate basis differences, deducted for tax, net | (82,445 | ) |  | (39,220 | )
Trademarks and tradenames | (36,781 | ) |  | (41,664 | )
| (119,226 | ) |  | (80,884 | )
Valuation allowance | (64,863 | ) |  | (109,052 | )
Net deferred tax asset | $ | 1,049,408 |  |  | $ | 1,394,879 |
Our gross federal NOL carryforward is approximately $536.6 million and expires between 2030 and 2032. We also have state NOLs in various jurisdictions which may generally be carried forward from 5 to 20 years, depending on the jurisdiction. The $44.2 million reduction in the valuation allowance includes a reduction of $23.6 million for NOL carryforwards expiring in 2016. There was no income statement or tax rate impact from the NOL carryforward expirations because there was a corresponding reduction to the state NOL deferred tax asset. The remaining state NOL carryforwards expire if unused at various dates as follows: of the total state deferred tax assets, $13.4 million from 2017 to 2021 and $210.9 million from 2022 and thereafter. In addition, we have federal energy credit carryforwards that expire, if unused, between 2026 and 2036 and alternative minimum tax credits that can be carried forward indefinitely. We evaluate our deferred tax assets each period to determine if a valuation allowance is required based on whether it is "more likely than not" that some portion of the deferred tax assets would not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. We conduct our evaluation by considering all available positive and negative evidence. This evaluation considers, among other factors, historical operating results, forecasts of future profitability, the duration of statutory carryforward periods, and the outlooks for the U.S. housing industry and broader economy. Our ability to use certain of Centex’s federal losses and credits is limited by Section 382 of the Internal Revenue Code. We do not believe that this limitation will prevent the Company from utilizing these Centex losses and credits. We do believe that full utilization of certain state NOL carryforwards will be limited due to Section 382. 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 our 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. As a result of certain realization requirements of ASC 718, the table of deferred tax assets and liabilities does not include $18.6 million of deferred tax assets as of December 31, 2016 that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. As a result of the adoption of ASU No. 2016-09, we expect the cumulative-effect adjustment to increase the January 1, 2017, opening retained earnings and deferred tax assets by $18.6 million from these previously unrecognized excess tax benefits. 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 $21.5 million and $39.0 million of gross unrecognized tax benefits at December 31, 2016 and 2015, respectively. If recognized, $14.0 million and $25.5 million, respectively, of these amounts would impact our effective tax rate. Additionally, we had accrued interest and penalties of $12.2 million and $17.2 million at December 31, 2016 and 2015, respectively. It is reasonably possible within the next twelve months that our gross unrecognized tax benefits may decrease by up to $17.4 million, excluding interest and penalties, primarily due to potential settlements. A reconciliation of the change in the unrecognized tax benefits is as follows ($000’s omitted):
| 2016 |  | 2015 |  | 2014
Unrecognized tax benefits, beginning of period | $ | 38,992 |  |  | $ | 32,911 |  |  | $ | 173,310 |
Increases related to tax positions taken during a prior period | 224 |  |  | 5,763 |  |  | — |
Decreases related to tax positions taken during a prior period | (13,218 | ) |  | — |  |  | (133,883 | )
Increases related to tax positions taken during the current period | 114 |  |  | 318 |  |  | 237 |
Decreases related to settlements with taxing authorities | (707 | ) |  | — |  |  | (6,753 | )
Reductions as a result of a lapse of the applicable statute of limitations | (3,903 | ) |  | — |  |  | — |
Unrecognized tax benefits, end of period | $ | 21,502 |  |  | $ | 38,992 |  |  | $ | 32,911 |
We continue to participate in the Compliance Assurance Process (“CAP”) with the IRS as an alternative to the traditional IRS examination process. As a result of our participation in CAP, federal tax years 2014 and prior are closed. Tax year 2015 is expected to close by the second quarter of 2017. We are also currently under examination by 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. The statute of limitations for our major tax jurisdictions remains open for examination for tax years 2005 to 2016.

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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 Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 Reference 4: 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=65882285&loc=d3e32639-109319 Reference 5: 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=65882285&loc=d3e32537-109319 + Details
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