LOS ANGELES (AP) -- Shares of U.S. homebuilders were trading lower on Friday, as some investors weighed the possibility that a move to cut corporate tax rates could force companies with deferred tax assets to take big write-downs.
Deferred tax assets are losses that companies carry on their books to reduce their future tax payments. Builders in particular have built up sizeable DTAs in recent years after racking up hefty losses following the housing market crash.
A report in the Wall Street Journal outlined how a reduction in the U.S. corporate tax rate from its current level of 35 percent — something President Barack Obama has advocated — would lower many companies' tax bills. But it could also make deferred tax assets lose some of their value, prompting companies to take write-downs.
Deutsche Bank analyst Nishu Sood notes that it's debatable whether a reduction in builders' DTAs would have an economic impact on the companies, whose sales have steadily picked up this year.
"You can make a pretty strong case that it's just an accounting event," he said. "Economics aside, a write-off isn't likely to be viewed positively."
Beazer Homes USA Inc. led the sector decline, falling 69 cents, or 4.1 percent, to $16.31 in afternoon trading.
Among other builders, PulteGroup Inc. fell 53 cents, or 3.1 percent, to $16.84; D.R. Horton Inc. slipped 32 cents, or 1.6 percent, to $20.65; Lennar Corp. shed 10 cents to $38.31; KB Home slid 46 cents, or 2.8 percent, to $15.77; Toll Brothers Inc. fell 80 cents, or 2.4 percent, to $31.96; and, Hovnanian Enterprises Inc. declined 21 cents, or 3.9 percent, to $5.19.
Elsewhere in the sector, Ryland Group Inc. fell 45 cents, or 1.3 percent, to $34.06; Meritage Homes Corp. slipped 81 cents, or 2.2 percent, to $36.38; Standard Pacific Corp. declined 8 cents, or 1.3 percent, to $6.67; M.D.C. Holdings Inc. slid 66 cents, or 1.8 percent, to $36.54; M/I Homes Inc. fell 26 cents, or 1.2 percent, to $22.39; and, NVR Inc. declined $19.57, or 2.1 percent, to $894.93.