Income Taxes

12 Months Ended

Dec. 31, 2020

15.	INCOME TAXES

Income tax provision (benefit) consists of the following (in thousands):


	Year Ended December 31,
	2020		2019		2018
Current income tax provision:
Federal	$	35,423	$	30,306	$	33,578
State		10,455		6,952		7,674

		45,878		37,258		41,252

Deferred income tax provision:
Federal		12,603		6,928		988
State		522		778		49

		13,125		7,706		1,037

Total income tax provision	$	59,003	$	44,964	$	42,289

The income tax provision differs from the amount of income tax determined by applying the U.S. Federal statutory rate to income before taxes as a result of the following (in thousands):


	Year Ended December 31,
	2020			2019			2018
U.S. Federal statutory taxes	$	49,273		$	39,838		$	37,141
State and local taxes, net of U.S. Federal benefit		10,641			8,412			7,716
Permanent items		1,198			1,266			470
Excess tax benefits from vesting or settlement of stock compensation awards		(1,635	)		(3,540	)		(2,368	)
Federal credits		(565	)		(654	)		(662	)
Other		91			(358	)		(8	)

Total income tax provision	$	59,003		$	44,964		$	42,289

Deferred tax assets and liabilities consist of the following (in thousands):


	As of December 31,
	2020			2019
Deferred tax assets:
Net operating losses	$	43		$	88
Residential product warranty reserve		7,532			6,486
Stock-based compensation		1,071			1,055
Accruals not currently deductible and other		2,041			2,245
Inventories		5,548			5,780
Operating lease liability		9,081			10,618
State tax credit carryforwards		3,345			3,461

Gross deferred tax assets, before valuation allowance		28,661			29,733
Valuation allowance		(2,775	)		(2,988	)

Gross deferred tax assets, after valuation allowance		25,886			26,745

Deferred tax liabilities:
Depreciation		(29,792	)		(17,267	)
Operating lease right-of-use asset		(8,755	)		(10,162	)
Goodwill amortization		(5,775	)		(4,782	)
Inventories and other		(4,520	)		(4,365	)

Gross deferred tax liabilities		(48,842	)		(36,576	)

Net deferred tax liability	$	(22,956	)	$	(9,831	)

The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. In accordance with accounting standards, the Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. As of December 31, 2020, the Company had a valuation allowance of $2.8 million against deferred tax assets it estimates will not be realized. The Company will analyze its position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred tax assets.

The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. As of December 31, 2020, the Company has identified no uncertain tax position and, accordingly, has not recorded any unrecognized tax benefits or associated interest and penalties.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with accounting standards. As of December 31, 2020, for certain tax jurisdictions, tax years 2016 through 2019 remain subject to examination. The Company’s returns filed with the state of Utah for the tax years 2014 through 2018 are currently under examination. No material adjustments are expected as a result of the audit. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdictions as the Company does not have a taxable presence.

- 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.

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