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Note 11 - Income Taxes | 12 Months Ended
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Oct. 31, 2024
Income Taxes |
Income Taxes | 11. Income Taxes Income taxes (receivable) payable, including deferred benefits, consists of the following:
|  | October 31, |
(In thousands) |  | 2024 |  |  | 2023 |
State income taxes: |  |  |  |  |  |  |  |
Current |  | $ | 5,479 |  |  | $ | 1,861 |
Deferred |  |  | (76,571 | ) |  |  | (74,110 | )
Federal income taxes: |  |  |  |  |  |  |  |
Current |  |  | - |  |  |  | - |
Deferred |  |  | (164,493 | ) |  |  | (228,723 | )
Total |  | $ | (235,585 | ) |  | $ | (300,972 | )
The (benefit) provision for income taxes is composed of the following:
|  | Year Ended October 31, |
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Current income tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal (1) |  | $ | - |  |  | $ | - |  |  | $ | - |
State (2) |  |  | 13,312 |  |  |  | 8,101 |  |  |  | 13,377 |
Total current income tax expense: |  |  | 13,312 |  |  |  | 8,101 |  |  |  | 13,377 |
Federal |  |  | 64,230 |  |  |  | 46,821 |  |  |  | 60,064 |
State |  |  | (2,461 | ) |  |  | (4,862 | ) |  |  | 20,822 |
Total deferred income tax expense: |  |  | 61,769 |  |  |  | 41,959 |  |  |  | 80,886 |
Total |  | $ | 75,081 |  |  | $ | 50,060 |  |  | $ | 94,263 |
(1) | The current federal income tax expense is net of the use of federal net operating losses totaling $290.1 million (tax effected $60.9 million), $221.2 million (tax effected $46.4 million) and $306.0 million (tax effected $64.3 million) for the years ended October 31, 2024, 2023 and 2022, respectively.
(2) | The current state income tax expense is net of the use of state net operating losses totaling $110.0 million (tax effected $8.6 million), $113.3 million (tax effected $8.3 million) and $80.1 million (tax effected $5.8 million) for the years ended October 31, 2024, 2023 and 2022, respectively.
The total income tax expense of $75.1 million, $50.1 million and $94.3 million for the years ended October 31, 2024, 2023 and 2022, respectively, was primarily driven by federal and state tax expense on income before income taxes and non-deductible executive compensation, partially offset by the generation of energy efficient home tax credits. Income tax expense for fiscal years 2024 and 2023 also includes the favorable impact of releasing state valuation allowances. The federal tax expense for all periods presented was not paid in cash as it was offset by the use of our existing net operating loss (“NOL”) carryforwards. As of October 31, 2024, we have remaining federal NOL carryforwards of $398.8 million that expire between 2031 and 2038, and $15.7 million have an indefinite carryforward period. Our total remaining state NOL carryforwards are $1.9 billion: $853.6 million that expire between 2025 through 2029; $694.4 million that expire between 2030 through 2034; $254.0 million that expire between 2035 through 2039; $5.6 million that expire between 2040 through 2044; and $45.0 million that have an indefinite carryforward period. The Company recognizes deferred income taxes for deferred tax benefits arising from NOL carryforwards and temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income. As part of our analysis, we considered both positive and negative factors that impact profitability and whether those factors would lead to a change in estimate of our deferred tax assets (“DTAs”) that may be realized in the future. As of October 31, 2024, the Company has determined that it is more likely than not that sufficient taxable income will be generated in the future to realize its DTAs, net of any valuation allowance. Deferred tax assets and liabilities have been recognized on the Consolidated Balance Sheets as follows:
|  | October 31, |
(In thousands) |  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |  |  |
Impairments |  | $ | 22,742 |  |  | $ | 26,168 |
Capitalized expenses |  |  | 4,420 |  |  |  | 3,692 |
Warranty reserves |  |  | 4,319 |  |  |  | 4,439 |
Incentive compensation |  |  | 13,777 |  |  |  | 15,252 |
Provision for losses |  |  | 15,236 |  |  |  | 16,915 |
Federal net operating losses |  |  | 87,041 |  |  |  | 147,841 |
State net operating losses |  |  | 123,673 |  |  |  | 136,257 |
Tax credit carryforwards |  |  | 27,482 |  |  |  | 21,260 |
Other |  |  | 10,699 |  |  |  | 9,631 |
Total deferred tax assets |  |  | 309,389 |  |  |  | 381,455 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Inventory valuation differences |  |  | (8,610 | ) |  |  | - |
Joint ventures |  |  | (4,017 | ) |  |  | (6,743 | )
Total deferred tax liabilities |  |  | (12,627 | ) |  |  | (6,743 | )
Valuation allowance |  |  | (55,698 | ) |  |  | (71,879 | )
Deferred tax assets, net |  | $ | 241,064 |  |  | $ | 302,833 |
Our effective tax rate varied from the statutory federal income tax rate. The effective tax rate is affected by a number of factors. The sources of these factors were as follows:
|  | Year Ended October 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Federal statutory income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State income taxes, net of federal income tax benefit |  |  | 6.6 |  |  |  | 6.1 |  |  |  | 5.0 |
Non-deductible compensation |  |  | 2.3 |  |  |  | 1.4 |  |  |  | 1.2 |
Permanent differences, net |  |  | (0.1 | ) |  |  | (0.4 | ) |  |  | (0.4 | )
Deferred tax asset valuation allowance |  |  | (4.1 | ) |  |  | (6.3 | ) |  |  | 4.8 |
Tax credits |  |  | (2.0 | ) |  |  | (2.2 | ) |  |  | (2.0 | )
Other |  |  | - |  |  |  | - |  |  |  | (0.1 | )
Effective tax rate |  |  | 23.7 | % |  |  | 19.6 | % |  |  | 29.5 | %
At October 31, 2024, and 2023, we do not have any unrecognized tax benefits or open tax positions. Our policy is to accrue interest and penalties on unrecognized tax benefits and include them in the provision for income taxes. The consolidated federal tax returns have been audited through October 31, 2023 and these years are closed. We are also subject to various income tax examinations in the states in which we do business. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit, appeal, and in some cases, litigation process. As each audit is concluded, adjustments, if any, are recorded in the period determined. To provide for potential exposures, tax reserves are recorded, if applicable, based on reasonable estimates of potential audit results. However, if the reserves are insufficient upon completion of an audit, there could be an adverse impact on our financial position and results of operations. The statute of limitations for our major tax jurisdictions remains open for examination for tax years 2020 to 2023.

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