v3.26.1
Income Taxes
 6 Months Ended
May 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income Tax Expense. Our income tax expense and effective tax rates were as follows (dollars in thousands):
 Three Months Ended May 31,Six Months Ended May 31,
 2026202520262025
Income tax expense $9,900 $34,500 $16,800 $64,300 
Effective tax rate
26.6 %24.2 %21.7 %22.8 %
Our income tax expense and effective tax rate for the three months ended May 31, 2026 reflected $1.6 million of non-deductible executive compensation expense, partly offset by the favorable impact of $1.1 million of Internal Revenue Code Section 45L (“Section 45L”) tax credits we recognized primarily from building energy-efficient homes. Our income tax expense and effective tax rate for the three months ended May 31, 2025 included the favorable impact of $3.1 million of Section 45L tax credits, partly offset by $2.8 million of non-deductible executive compensation expense.
For the six months ended May 31, 2026, our income tax expense and effective tax rate included the favorable impact of $3.8 million of excess tax benefits related to stock-based compensation and $1.5 million of Section 45L tax credits, partly offset by $2.7 million of non-deductible executive compensation expense. Our income tax expense and effective tax rate for the six months ended May 31, 2025 reflected the favorable impact of $5.4 million of excess tax benefits related to stock-based compensation and $4.8 million of Section 45L tax credits, partly offset by $5.2 million of non-deductible executive compensation expense.
On July 4, 2025, H.R.1, the One Big Beautiful Bill Act (“OBBBA”), was signed into law. Among its provisions is the repeal of Section 45L tax credits for new energy-efficient homes delivered after June 30, 2026. As a result, our income tax expense and effective tax rate take into account the anticipated lower Section 45L benefit for the homes delivered after the effective date. The other tax-related provisions of the OBBBA did not have a material impact on our consolidated financial statements.
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. 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.
As of both May 31, 2026 and November 30, 2025, we had deferred tax assets of $104.2 million that were partly offset by valuation allowances of $15.5 million. The deferred tax asset valuation allowances at May 31, 2026 and November 30, 2025 were primarily related to certain state net operating losses that had not met the “more likely than not” realization standard at those dates. Based on the evaluation of our deferred tax assets as of May 31, 2026, we determined that most of our deferred tax assets would be realized. Therefore, no adjustments to our deferred tax asset valuation allowance were needed for the six months ended May 31, 2026.
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.