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Income Taxes | 12 Months Ended
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Nov. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxe s Income Tax Expense. The components of the income tax expense in our consolidated statements of operations are as follows (in thousands):
| Federal |  | State |  | Total
2024 |  |  |  |  |
Current | $(147,300) |  | $(31,500) |  | $(178,800)
Deferred | (3,100) |  | (14,000) |  | (17,100)
Income tax expense | $(150,400) |  | $(45,500) |  | $(195,900)
2023 |  |  |  |  |
Current | $(123,200) |  | $(17,200) |  | $(140,400)
Deferred | (8,400) |  | (32,300) |  | (40,700)
Income tax expense | $(131,600) |  | $(49,500) |  | $(181,100)
2022 |  |  |  |  |
Current | $(194,400) |  | $(49,500) |  | $(243,900)
Deferred | (2,900) |  | (8,600) |  | (11,500)
Income tax expense | $(197,300) |  | $(58,100) |  | $(255,400)
Our effective tax rates were 23.0% for 2024, 23.5% for 2023 and 23.8% for 2022. In 2024, our income tax expense and effective tax rate included the favorable impacts of $19.3 million of Section 45L tax credits we recognized primarily from building energy-efficient homes and $7.9 million of excess tax benefits related to stock- based compensation, partly offset by $10.7 million of non-deductible executive compensation expense. In 2023, our income tax expense and effective tax rate reflected the favorable impacts of $25.2 million of Section 45L tax credits and $5.5 million of excess tax benefits related to stock-based compensation, partly offset by $12.2 million of non-deductible executive compensation expense. In 2022, our income tax expense and effective tax rate reflected the favorable impacts of $22.6 million of Section 45L tax credits and $1.8 million of excess tax benefits related to stock-based compensation, partly offset by $9.7 million of non-deductible executive compensation expense. The IRA tied Section 45L tax credit qualification for energy-efficient homes built on and after January 1, 2023 to new homes achieving ENERGY STAR certification. Based on guidance the IRS issued in September 2023, fewer of the ENERGY STAR homes we build in California meet the heightened qualification standard the IRS selected for homes built in that state relative to other states. 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,
| 2024 |  | 2023
Deferred tax liabilities: |  |  |
Capitalized expenses | $26,792 |  | $29,395
State taxes | 9,680 |  | 12,152
Depreciation and amortization | 8,055 |  | 8,179
Other | 308 |  | 374
Total | 44,835 |  | 50,100
Deferred tax assets: |  |  |
Warranty, legal and other accruals | 50,360 |  | 53,805
Employee benefits | 53,282 |  | 51,325
Capitalized expenses | 21,861 |  | 22,538
NOLs from 2006 through 2023 | 21,811 |  | 33,827
Inventory impairment and land option contract abandonment charges | 7,653 |  | 15,878
Partnerships and joint ventures | 5,879 |  | 6,193
Tax credits | 2,019 |  | 1,857
Other | 1,191 |  | 1,052
Total | 164,056 |  | 186,475
Valuation allowance | (16,800) |  | (16,900)
Total | 147,256 |  | 169,575
Deferred tax assets, net | $102,421 |  | $119,475
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,
| 2024 |  | 2023 |  | 2022
| $ |  | % |  | $ |  | % |  | $ |  | %
Income tax expense computed at statutory rate | $(178,692) |  | (21.0)% |  | $(161,982) |  | (21.0)% |  | $(225,121) |  | (21.0)%
Tax credits | 19,321 |  | 2.3 |  | 25,218 |  | 3.3 |  | 22,565 |  | 2.1
Stock compensation | 6,405 |  | .7 |  | 4,471 |  | .6 |  | 1,442 |  | .2
Dividend received deduction | 986 |  | .1 |  | — |  | — |  | — |  | —
Valuation allowance for deferred tax assets | 100 |  | — |  | 200 |  | — |  | 300 |  | —
Non-deductible compensation | (8,703) |  | (1.0) |  | (9,975) |  | (1.3) |  | (7,905) |  | (.7)
State taxes, net of federal income tax benefit | (36,028) |  | (4.2) |  | (39,307) |  | (5.1) |  | (46,139) |  | (4.3)
Other, net | 711 |  | .1 |  | 275 |  | — |  | (542) |  | (.1)
Income tax expense | $(195,900) |  | (23.0)% |  | $(181,100) |  | (23.5)% |  | $(255,400) |  | (23.8)%
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 $119.2 million at November 30, 2024 and $136.4 million at November 30, 2023 were partially offset in each year by valuation allowances of $16.8 million and $16.9 million, respectively. The deferred tax asset valuation allowances at November 30, 2024 and 2023 were primarily related to certain state NOL s that had not met the “more likely than not” realization standard at those dates. As a result of our utilization of certain state NOL s, we reduced the valuation allowance by $.1 million in 2024. As of November 30, 2024, we would need to generate approximately $408.0 million of pretax income in future periods before 2043 to realize our deferred tax assets. Based on the evaluation of our deferred tax assets as of November 30, 2024 and 2023, we determined that most of our deferred tax assets would be realized. 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 NOL s can be carried forward for 20 years and applied to offset future taxable income. Depending on their applicable statutory period, the state NOL s of $21.8 million, if not utilized, will begin to expire between 2025 and 2043. No state NOL s expired in 2024 or 2023. State NOL s of $.1 million expired in 2022. 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, including interest and penalties, is as follows (in thousands):
| Years Ended November 30,
| 2024 |  | 2023 |  | 2022
Balance at beginning of year | $2,376 |  | $975 |  | $930
Increase related to prior years’ tax positions | 546 |  | 1,401 |  | 45
Balance at end of year | $2,922 |  | $2,376 |  | $975
Our unrecognized tax benefits are included in accrued expenses and other liabilities in our consolidated balance sheets. 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. If these unrecognized tax benefits reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is possible that the amount of unrecognized tax benefits will change, but we are not able to provide a range of such change. The potential change, if any, will be related to increases due to new tax positions taken and the accrual of interest and penalties. Our total accrued interest and penalties related to unrecognized income tax benefits was approximately $.2 million at November 30, 2024 and approximately $.1 million at November 30, 2023. 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. As of November 30, 2024, the fiscal years ending 2021 and later remain open to federal examinations, while 2020 and later remain open to state examinations. The benefits of our deferred tax assets, including our NOL s, built-in losses and tax credits would be reduced or potentially eliminated if we experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). Based on our analysis performed as of November 30, 2024, we do not believe that we have experienced an ownership change as defined by Section 382, and, therefore, the NOL s, built-in losses and tax credits we have generated should not be subject to a Section 382 limitation as of this reporting date.

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