NVR INCNVR

NVR INC Income Taxes Disclosure

10-KFiled Feb 11, 20263 min read
Income Taxes
The provision for income taxes consists of the following:
 Year Ended December 31,
 202520242023
Current:   
Federal$329,813 $326,357 $261,481 
State93,746 101,428 79,023 
Deferred:   
Federal(610)5,470 (3,986)
State(833)323 244 
 Income tax expense$422,116 $433,578 $336,762 

Deferred income taxes on our consolidated balance sheets were comprised of the following:
 As of December 31,
 20252024
Deferred tax assets:  
Other accrued expenses and contract land deposit allowance$79,308 $68,784 
Deferred compensation4,351 4,349 
Equity-based compensation expense48,518 47,467 
Inventory16,727 18,468 
Unrecognized tax benefit5,400 6,998 
Other9,833 13,595 
Total deferred tax assets164,137 159,661 
Less: Deferred tax liabilities13,168 10,135 
Net deferred tax asset$150,969 $149,526 
Deferred tax assets arise principally as a result of various accruals required for financial reporting purposes and equity-based compensation expense, which are not currently deductible for tax return purposes.
Management believes that we will have sufficient future taxable income to make it more likely than not that the net deferred tax assets will be realized. Federal taxable income is estimated to be approximately $1,588,000 for the year ended December 31, 2025, and was $1,679,957 for the year ended December 31, 2024.
A reconciliation of our provision for income taxes and effective tax rate to the applicable statutory rates is as follows:
 Year Ended December 31,
 202520242023
 
Amount
Percent
Amount
Percent
Amount
Percent
U.S. federal statutory tax rate
$370,005 21.00 %$444,256 21.00 %$404,958 21.00 %
State and local income taxes, net of federal income tax effect (1)
79,683 4.53 %84,744 4.02 %66,379 3.44 %
Federal tax credits(2,402)(0.14)%(18,443)(0.87)%(12,839)(0.67)%
Changes in valuation allowances— — %— — %— — %
Nontaxable or nondeductible items:
Excess tax benefits from equity-based compensation(22,884)(1.30)%(76,711)(3.63)%(124,018)(6.43)%
Other3,868 0.22 %4,076 0.19 %5,932 0.31 %
Changes in unrecognized tax benefits
(6,154)(0.35)%(4,344)(0.21)%(3,650)(0.19)%
Effective tax rate
$422,116 23.96 %$433,578 20.50 %$336,762 17.46 %
(1)State taxes in Maryland, Pennsylvania, and Virginia made up the majority (greater than 50%) of the tax expense in this category.

Total income taxes paid consists of the following:

 Year Ended December 31,
 202520242023
Federal taxes paid$326,610 $321,700 $265,600 
State and local taxes paid:
Maryland26,098 *32,700 
Pennsylvania**30,596 
Virginia**24,053 
Other86,058 88,153 54,236 
Total Income Taxes Paid$438,766 $409,853 $407,185 
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.

We file a consolidated U.S. federal income tax return, as well as state and local tax returns in all jurisdictions where we maintain operations. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2022.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 Year Ended December 31,
 20252024
Balance at beginning of year$20,909 $25,588 
Additions based on tax positions related to the current year610 572 
Reductions for tax positions of prior years(6,453)(5,251)
Settlements— — 
Balance at end of year$15,066 $20,909 

If recognized, the total amount of unrecognized tax benefits that would affect the effective tax rate (net of the federal tax benefit) is $11,902 as of December 31, 2025.
We recognize interest related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2025 and 2024, we recognized a net reversal of accrued interest on unrecognized tax benefits in the amount of $1,428 and $264, respectively. For the year ended December 31, 2023, we recognized a net addition of accrued interest on unrecognized tax benefits in the amount of $106. As of December 31, 2025 and 2024, we had a total of $8,600 and $10,028, respectively, of accrued interest on unrecognized tax benefits which are included in “Accrued expenses and other liabilities” on the accompanying consolidated balance sheets.
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Historical Timeline

Fiscal YearFiled
2025Feb 11, 2026Showing above
2024Feb 12, 2025
2020Feb 12, 2021

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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