TopBuild Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2020

12. INCOME TAXES


(In thousands)	2020		2019		2018
Income before income taxes:
U.S.	$	323,090	$	253,778	$	180,824
Income tax expense (benefit):
Currently payable:
U.S. Federal	$	66,792	$	46,320	$	25,980
State and local		13,345		7,575		7,156
Deferred:
U.S. Federal		(8,087)		(543)		9,939
State and local		4,017		9,431		2,997
	$	76,067	$	62,783	$	46,072
Deferred tax assets at December 31:
Receivables, net	$	2,819	$	1,720
Inventories, net		2,347		1,388
Other assets, principally share-based compensation		3,396		2,894
Accrued liabilities		12,119		5,278
Lease liability		8,474		9,167
Long-term liabilities		9,712		9,971
Long-term lease liability		13,533		13,645
Net operating loss carryforward		7,577		12,803
		59,977		56,866
Deferred tax liabilities at December 31:
Right of use assets		21,064		22,062
Property and equipment, net		33,111		32,103
Intangibles, net		169,710		172,265
Other		1,932		1,440
		225,817		227,870
Net deferred tax liability at December 31	$	165,840	$	171,004

A valuation allowance must be established for deferred tax assets when it is more-likely-than-not that they will not be realized. After review of all available positive and negative evidence, the Company has determined that no valuation allowance was required for the deferred tax assets as of December 31, 2020 or December 31, 2019. As of December 31, 2020, there are no valuation allowances in place.

At December 31, 2020, the net deferred tax liability of $165.8 million consisted of net long-term deferred tax assets of $2.7 million and net long-term deferred tax liabilities of $168.6 million. At December 31, 2019, the net deferred tax liability of $171.0 million consisted of net long-term deferred tax assets of $4.3 million and net long-term deferred tax liabilities of $175.3 million. The deferred assets and deferred liabilities show the State deferreds net of Federal benefit.

Of the deferred tax asset related to the net operating loss at December 31, 2020, $7.5 million will expire between 2021 and 2039. Of the deferred tax asset related to the net operating loss at December 31, 2019, $12.7 million will expire between 2021 and 2038.

A reconciliation of the U.S. Federal statutory tax rate to the income tax expense (benefit) on income was as follows:


	2020		2019		2018
U.S. Federal statutory tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of U.S. Federal tax benefit	4.2		5.3		4.5
Share based compensation	(2.1)		(2.2)		(1.4)
Non-deductible meals & entertainment	0.2		0.3		0.4
Non-deductible transaction costs	—		—		0.3
Other, net	0.2		0.3		0.7
Effective tax rate	23.5	%	24.7	%	25.5	%

A tax benefit of $7.8 million, $6.3 million and $3.2 million related to share based compensation was recognized in income tax expense for the years ended December 31, 2020, 2019, and 2018, respectively.

We file income tax returns in the U.S. Federal jurisdiction and various state and local jurisdictions. With few exceptions, we are no longer subject to income tax examinations on filed returns for years before 2017.

As of December 31, 2020, there are no liabilities related to uncertain tax positions.

- 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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