Forestar Group Inc.FOR

Forestar Group Inc. Income Taxes Disclosure

10-KFiled Nov 19, 20253 min read
Income Taxes
The components of the Company's income tax expense are as follows:
Year Ended September 30,
202520242023
 (In millions)
Current tax expense:
Federal$30.0 $40.8 $33.9 
State and other2.8 9.1 7.0 
32.8 49.9 40.9 
Deferred tax expense:
Federal14.2 13.4 11.5 
State and other4.4 3.4 2.3 
18.6 16.8 13.8 
Income tax expense$51.4 $66.7 $54.7 


A reconciliation of the federal statutory rate to the Company's effective income tax rate follows:
Year Ended September 30,
202520242023
Federal statutory rate21.0 %21.0 %21.0 %
State, net of federal benefit2.6 3.7 3.4 
Valuation allowance(0.1)— (0.1)
Other(0.1)— 0.4 
Effective tax rate23.4 %24.7 %24.7 %

The effective tax rate for all years includes an expense for state income taxes and non-deductible expenses as well as a benefit for nontaxable income in fiscal 2025.
Significant components of deferred taxes are:
September 30,
 20252024
 (In millions)
Deferred tax assets:
Real estate$16.7 $11.9 
Corporate AMT credit carryforwards
16.5 — 
Employee benefits4.4 3.8 
Net operating loss carryforwards0.7 0.9 
Accruals not deductible until paid1.2 0.8 
Total deferred tax assets39.5 17.4 
Valuation allowance(0.6)(0.8)
Total deferred tax assets, net of valuation allowance38.9 16.6 
Deferred tax liabilities:
Deferral of profit on lot sales(125.1)(84.1)
Total deferred tax liabilities(125.1)(84.1)
Deferred tax liability, net$(86.2)$(67.5)

At September 30, 2025, the Company had tax benefits of $0.7 million related to state NOL carryforwards, of which $0.3 million will expire between 2030 and 2037 while the remaining $0.4 million do not have an expiration date. The Company has $16.5 million of corporate alternative minimum tax credit carryforwards which do not have an expiration date.

The Company had a valuation allowance of $0.6 million and $0.8 million at September 30, 2025 and 2024, respectively, because it is more likely than not that a portion of the Company's state deferred tax assets, primarily NOL carryforwards, will not be realized because the Company is no longer operating in some states or the NOL carryforward periods are too brief to realize the related deferred tax asset. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on its deferred tax assets. Any reversal of the valuation allowance in future periods will impact the effective tax rate.

The Company is subject to a Tax Sharing Agreement with D.R. Horton. The agreement sets forth an equitable method for reimbursements of tax liabilities or benefits between the Company and D.R. Horton related to state and local income, margin or franchise tax returns that are filed on a unitary basis with D.R. Horton. In accordance with the agreement, the Company reimbursed D.R. Horton $0.9 million, $2.2 million and $1.7 million in fiscal 2025, 2024 and 2023, respectively, for its tax expense generated in fiscal 2024, 2023 and 2022.

The Company files income tax returns in the U.S. and in various state jurisdictions. The statute of limitations for the majority of the Company's tax jurisdictions remains open for examination for fiscal years 2022 through 2025. The Company is not currently under audit for federal income taxes. The Company is under audit by various states; however, the Company is not aware of any significant findings by the state taxing authorities.

The Company had no unrecognized tax benefits at September 30, 2025, 2024 and 2023.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law (the new law). None of the tax provisions enacted by the new law have a significant impact on the Company's financial statements.
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Historical Timeline

Fiscal YearFiled
2025Nov 19, 2025Showing above
2024Nov 19, 2024
2023Nov 17, 2023
2022Nov 17, 2022
2021Nov 18, 2021
2020Nov 19, 2020
2019Nov 21, 2019
2017Feb 28, 2018
2016Mar 3, 2017
2015Mar 4, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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