XML 1044 R19.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Nov. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes TCJA. On December 22, 2017, the TCJA was enacted into law. The TCJA made significant changes to U.S. tax laws, including, but not limited to, the following: (a) reducing the federal corporate income tax rate from 35% to 21%, effective January 1, 2018; (b) eliminating the federal corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; and (c) eliminating several business deductions and credits, including deductions for certain executive compensation in excess of $1 million. Overall, we expect the TCJA to favorably impact our effective tax rate, net income and cash flows in future periods. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the income tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting relating to the TCJA under Accounting Standards Codification Topic 740, “Income Taxes” (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for TCJA-related income tax effects is incomplete, but the company is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA. We have completed our analysis of the TCJA’s income tax effects. In total, we recorded a non-cash charge of $112.5 million to income tax expense for TCJA-related impacts, comprised of provisional estimates of $111.2 million recorded in the 2018 first quarter and an additional $1.3 million charge when our analysis was completed in the 2018 fourth quarter. In accordance with SAB 118, the TCJA-related income tax effects that we initially reported as provisional estimates were refined as additional analysis was performed. In addition, the provisional amounts were affected by our results for the year ended November 30, 2018 as well as additional regulatory guidance/interpretations issued by the Internal Revenue Service, changes in accounting standards, or federal or state legislative actions. The following TCJA-related impacts were reflected in our consolidated financial statements for the year ended November 30, 2018:
• | We recorded a non-cash charge of $106.7 million in income tax expense due to the accounting re-measurement of our deferred tax assets based on the lower federal corporate income tax rate under the TCJA.
• | We have AMT credit carryforwards that do not expire and can be used to offset regular income taxes in future years. Under the TCJA, we may claim a refund of 50% of our remaining AMT credits in 2019, 2020, and 2021 to the extent the credits exceed regular tax for any such year. Any AMT credits remaining after our fiscal year ending November 30, 2021 will be refunded in 2022. We currently estimate our refund will total approximately $50.0 million. As the refund is subject to a sequestration reduction rate of approximately 6.6%, we established a federal deferred tax valuation allowance of $3.3 million for 2018. Our accounting policy regarding the balance sheet presentation of the AMT credits is to maintain the balance in deferred tax assets until a tax return is filed claiming a refund of a portion of the credit, at which time such amount will be presented in receivables.
• | We recorded a non-cash charge of $2.5 million for disallowed executive compensation due to the TCJA’s eliminating the deductibility of certain performance-based compensation. The TCJA also modified who is a covered employee with respect to the deduction limitation, and provided a transition rule that would preserve the deductibility of certain 2018 performance-based compensation payable under written binding contracts in place prior to November 2, 2017 that have not been modified in any material respect.
Income Tax Expense. The components of the income tax expense in our consolidated statements of operations are as follows (in thousands):
| Federal |  | State |  | Total
2018 |  |  |  |  |
Current | $ | (3,600 | ) |  | $ | (4,800 | ) |  | $ | (8,400 | )
Deferred | (170,700 | ) |  | (18,500 | ) |  | (189,200 | )
Income tax expense | $ | (174,300 | ) |  | $ | (23,300 | ) |  | $ | (197,600 | )
2017 |  |  |  |  |
Current | $ | (2,800 | ) |  | $ | (3,000 | ) |  | $ | (5,800 | )
Deferred | (86,300 | ) |  | (17,300 | ) |  | (103,600 | )
Income tax expense | $ | (89,100 | ) |  | $ | (20,300 | ) |  | $ | (109,400 | )
2016 |  |  |  |  |
Current | $ | (1,900 | ) |  | $ | (1,000 | ) |  | $ | (2,900 | )
Deferred | (28,700 | ) |  | (12,100 | ) |  | (40,800 | )
Income tax expense | $ | (30,600 | ) |  | $ | (13,100 | ) |  | $ | (43,700 | )
Our effective tax rates were 53.7% for 2018, 37.7% for 2017 and 29.3% for 2016. Our income tax expense and effective tax rate for 2018 included the above-described charge of $112.5 million for TCJA-related impacts; the favorable effect of the reduction in the federal corporate income tax rate under the TCJA; the favorable net impact of federal energy tax credits of $10.7 million that we earned from building energy efficient homes; a $2.1 million net tax benefit from a reduction in our deferred tax asset valuation allowance; and excess tax benefits of $1.0 million related to stock-based compensation due to our adoption of ASU 2016-09, as further described in Note 1 – Summary of Significant Accounting Policies. The TCJA requires us to use a blended federal tax rate for our 2018 fiscal year by applying a prorated percentage of days before and after the January 1, 2018 effective date. As a result, our 2018 annual federal statutory tax rate has been reduced to approximately 22%. The federal energy tax credits for 2018 resulted from legislation enacted on February 9, 2018, which among other things, extended the availability of a business tax credit for building new energy efficient homes through December 31, 2017. Prior to this legislation, the tax credit expired on December 31, 2016. In 2017 and 2016, our income tax expense and effective tax rates reflected the favorable net impact of $4.9 million and $15.2 million, respectively, of federal energy tax credits we earned from building energy-efficient homes. Most of the federal energy tax credits for 2017 and 2016 resulted from legislation enacted in 2015 that extended the availability of a business tax credit for building new energy-efficient homes through December 31, 2016. Deferred Tax Assets, Net. Deferred income taxes result from temporary differences in the financial and tax basis of assets and liabilities. Significant components of our deferred tax liabilities and assets are as follows (in thousands):
| November 30,
| 2018 |  | 2017
Deferred tax liabilities: |  |  |
Capitalized expenses | $ | 51,660 |  |  | $ | 98,147 |
State taxes | 31,246 |  |  | 59,174 |
Other | 225 |  |  | 313 |
Total | 83,131 |  |  | 157,634 |
Deferred tax assets: |  |  |
NOLs from 2006 through 2018 | 121,432 |  |  | 236,273 |
Tax credits | 231,100 |  |  | 208,841 |
Inventory impairment and land option contract abandonment charges | 67,416 |  |  | 139,737 |
Employee benefits | 45,802 |  |  | 100,200 |
Warranty, legal and other accruals | 43,213 |  |  | 60,238 |
Capitalized expenses | 27,894 |  |  | 39,195 |
Partnerships and joint ventures | 6,368 |  |  | 14,784 |
Depreciation and amortization | 1,869 |  |  | 7,333 |
Other | 3,457 |  |  | 8,270 |
Total | 548,551 |  |  | 814,871 |
Valuation allowance | (23,600 | ) |  | (23,600 | )
Total | 524,951 |  |  | 791,271 |
Deferred tax assets, net | $ | 441,820 |  |  | $ | 633,637 |
Reconciliation of Expected Income Tax Expense. The income tax expense computed at the statutory U.S. federal income tax rate and the income tax expense provided in our consolidated statements of operations differ as follows (dollars in thousands):
| Years Ended November 30,
| 2018 |  | 2017 |  | 2016
| $ |  | % |  | $ |  | % |  | $ |  | %
Income tax expense computed at statutory rate | $ | (81,689 | ) |  | (22.2 | )% |  | $ | (101,499 | ) |  | (35.0 | )% |  | $ | (52,260 | ) |  | (35.0 | )%
Tax credits | 14,177 |  |  | 3.9 |  |  | 6,227 |  |  | 2.2 |  |  | 4,447 |  |  | 3.0 |
Valuation allowance for deferred tax assets | 2,000 |  |  | .5 |  |  | 1,200 |  |  | .4 |  |  | 12,982 |  |  | 8.7 |
Depreciation and amortization | 1,223 |  |  | .3 |  |  | 362 |  |  | .1 |  |  | 1,842 |  |  | 1.2 |
State taxes, net of federal income tax benefit | (20,155 | ) |  | (5.5 | ) |  | (14,450 | ) |  | (4.9 | ) |  | (7,511 | ) |  | (5.0 | )
TCJA adjustment | (112,458 | ) |  | (30.5 | ) |  | — |  |  | — |  |  | — |  |  | — |
NOL reconciliation | — |  |  | — |  |  | (2,210 | ) |  | (.8 | ) |  | (3,691 | ) |  | (2.5 | )
Other, net | (698 | ) |  | (.2 | ) |  | 970 |  |  | .3 |  |  | 491 |  |  | .3 |
Income tax expense | $ | (197,600 | ) |  | (53.7 | )% |  | $ | (109,400 | ) |  | (37.7 | )% |  | $ | (43,700 | ) |  | (29.3 | )%
Deferred Tax Asset Valuation Allowance. We evaluate our deferred tax assets quarterly to determine if adjustments to our valuation allowance are required 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. Our evaluation considers, among other factors, our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward periods, and conditions in the housing market and the broader economy. In our evaluation, we give more significant weight to evidence that is objective in nature as compared to subjective evidence. Also, more significant weight is given to evidence that directly relates to our then-current financial performance as compared to indirect or less current evidence. The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in which the related deferred tax assets become deductible. The value of our deferred tax assets depends on applicable income tax rates. Our deferred tax assets of $465.4 million at November 30, 2018, after the above-described accounting re-measurement, and $657.2 million at November 30, 2017 were partially offset in each year by valuation allowances of $23.6 million. The deferred tax asset valuation allowances at November 30, 2018 and 2017 were primarily related to certain state NOLs that had not met the “more likely than not” realization standard at those dates. As of November 30, 2018, we would need to generate approximately $1.6 billion of pretax income in future periods before 2038 to realize our deferred tax assets. Based on the evaluation of our deferred tax assets as of November 30, 2018, we determined that most of our deferred tax assets would be realized. In 2018, we established a federal deferred tax asset valuation allowance of $3.3 million due to the sequestration of refundable AMT credits, which was offset by a reduction of $3.3 million in our state deferred tax asset valuation allowance primarily to account for state NOLs that met the “more likely than not” standard or have expired. The net tax benefit related to the reduction in the state deferred tax asset valuation allowance was $2.1 million. In 2017, we reduced our valuation allowance by $1.2 million primarily to account for state NOLs that met the “more likely than not” realization standard. In 2016, we reduced our valuation allowance by $13.0 million, which reflected the expiration of foreign tax credits and the release of a valuation allowance associated with state NOLs that met the “more likely than not” realization standard, partly offset by the establishment of a valuation allowance for state NOLs related to the wind down of our Metro Washington, D.C. operations. We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. The accounting for deferred tax assets is based upon estimates of future results. Changes in positive and negative evidence, including 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 financial statements. Changes in existing federal and state tax laws and corporate income tax rates could also affect actual tax results and the realization of deferred tax assets over time. The majority of the tax benefits associated with our NOLs can be carried forward for 20 years and applied to offset future taxable income. Our federal NOL carryforwards of $5.6 million, if not utilized, will begin to expire in 2032 through 2033. Depending on their applicable statutory period, the state NOL carryforwards of $115.8 million, if not utilized, will begin to expire between 2019 and 2038. State NOL carryforwards of $1.2 million and $.5 million expired in 2018 and 2016, respectively. In addition, $128.5 million of our tax credits, if not utilized, will begin to expire in 2026 through 2037. Included in the $128.5 million are $3.2 million of investment tax credits, of which $2.4 million and $.8 million will expire in 2026 and 2027, respectively. Unrecognized Tax Benefits. Gross unrecognized tax benefits are the differences between a tax position taken or expected to be taken in a tax return, and the benefit recognized for accounting purposes. A reconciliation of the beginning and ending balances of gross unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
| Years Ended November 30,
| 2018 |  | 2017 |  | 2016
Balance at beginning of year | $ | 56 |  |  | $ | 56 |  |  | $ | 56 |
Reductions due to lapse of statute of limitations | (56 | ) |  | — |  |  | — |
Balance at end of year | $ | — |  |  | $ | 56 |  |  | $ | 56 |
We recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of the provision for income taxes. As of November 30, 2018, we had no gross unrecognized tax benefits. As of both November 30, 2017 and 2016, our gross unrecognized tax benefits (including interest and penalties) totaled $.1 million. Our liabilities for unrecognized tax benefits at November 30, 2018 and 2017 are included in accrued expenses and other liabilities in our consolidated balance sheets. As of November 30, 2018 and 2017, there were no tax positions for which the ultimate deductibility is highly certain but the timing of such deductibility is uncertain. Our total accrued interest and penalties related to unrecognized income tax benefits was zero at both November 30, 2018 and 2017. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect our annual effective tax rate, but would accelerate the payment of cash to a tax authority to an earlier period. The fiscal years ending 2015 and later remain open to federal examinations, while 2014 and later remain open to state examinations. The benefits of our deferred tax assets, including our NOLs, built-in losses and tax credits would be reduced or potentially eliminated if we experienced an “ownership change” under Section 382. Based on our analysis performed as of November 30, 2018, we do not believe that we have experienced an ownership change as defined by Section 382, and, therefore, the NOLs, built-in losses and tax credits we have generated should not be subject to a Section 382 limitation as of this reporting date.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration