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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
9. Income Taxes

For the years ended December 31, 2024, 2023, and 2022, our loss before income taxes was comprised of the following (in thousands):

Year Ended December 31,
202420232022
Domestic$(55,183)$(89,925)$(102,434)
Foreign(36,025)(18,307)(47,794)
Total$(91,208)$(108,232)$(150,228)

For the years ended December 31, 2024, 2023, and 2022, our income tax expense was comprised of the following (in thousands):
Year Ended December 31,
202420232022
Current:
Federal$(10)$34 $72 
State149 223 119 
Foreign1,864 4,523 1,409 
Total current expense2,003 4,780 1,600 
Deferred:
Federal— — — 
State— — — 
Foreign(949)(1,571)(908)
Total deferred benefit(949)(1,571)(908)
Total income tax expense$1,054 $3,209 $692 
For the years ended December 31, 2024, 2023, and 2022, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rates to our loss before the provision for income taxes as follows:

Year Ended December 31,
202420232022
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
State tax expense4.3 3.8 4.1 
Foreign rate differential(4.0)(3.1)(3.3)
Nondeductible expenses(1.0)(0.7)(0.3)
Foreign tax expense0.1 (0.4)0.3 
Equity compensation3.7 (2.4)1.0 
Tax credits7.3 9.5 4.7 
Unrecognized tax benefits(1.5)(1.8)(0.9)
Global intangible low-taxed income
(3.0)— — 
Change in tax rate0.8 (0.9)0.3 
Other(0.5)0.2 (0.5)
Return to provision
3.3 — — 
Deferred adjustments(1.4)(3.0)(0.8)
Change in valuation allowance(30.3)(25.2)(26.1)
Total(1.2)%(3.0)%(0.5)%

The effective tax rate of (1.2)% in 2024 includes $27.6 million of tax expense attributable to the change in the valuation allowance in the United States and Switzerland, partially offset by $6.7 million of favorable tax benefits for research credits. In 2023, the effective tax rate of (3.0)% included $27.3 million of tax expense attributable to the change in the valuation allowance in the United States and Switzerland, partially offset by $10.3 million of favorable tax benefits for research credits. In 2022, the effective tax rate of (0.5)% included $39.2 million of tax expense attributable to the change in the valuation allowance in the United States, Switzerland, and Germany partially offset by $8.6 million of favorable tax benefits for research credits.
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
As of December 31, 2024 and 2023, significant components of our deferred tax assets and liabilities were as follows (in thousands):

As of December 31,
20242023
Deferred tax assets:
Net operating losses$107,170 $103,299 
Tax credits34,885 29,582 
Deferred revenue521 861 
Equity compensation3,994 4,879 
Lease liabilities17,465 18,822 
Accrued compensation3,225 3,323 
Bad debt502 447 
Other accrued expense318 218 
Capitalized research and development costs45,820 35,047 
Other4,033 1,369 
Gross deferred tax assets217,933 197,847 
Less: Valuation allowance(187,969)(161,966)
Total deferred tax assets29,964 35,881 
Deferred tax liabilities:
Prepaid expenses(13,298)(16,505)
Right-of-use assets(8,406)(10,626)
Depreciation(3,245)(3,779)
Intangible assets(688)(1,179)
Other(198)(341)
Total deferred tax liabilities(25,835)(32,430)
Net deferred tax assets$4,129 $3,451 

As of December 31, 2024 and 2023, we had $287.5 million and $295.9 million, respectively, of gross net operating loss (“NOL”) carryforwards for U.S. federal tax purposes. U.S. federal NOL carryforwards in the gross amount of $16.6 million and generated prior to 2018 will expire, if unused, in 2037. Under the Tax Cuts and Jobs Act of 2017 (the “TCJA”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely. As of December 31, 2024, we had $270.9 million of gross NOL carryforwards generated after 2017 for U.S. federal tax purposes, which may be used to offset 80% of our taxable income annually.

Section 382 of the Internal Revenue Code limits the utilization of NOL carryforwards when ownership changes occur, as defined by that section. A number of states have similar state laws that limit utilization of state NOL carryforwards when ownership changes occur. We have performed an analysis of our Section 382 ownership changes and have determined all U.S. federal and state NOL carryforwards are available for use as of December 31, 2024.

Beginning in 2022, the TCJA eliminated the option to deduct research and development expenditures immediately in the year incurred and requires companies to amortize such expenditures over five or fifteen years for tax purposes, depending on whether the activities were incurred in the U.S. or outside of the U.S. The new research and development expenditures rules resulted in a tax-effected deferred tax asset (before valuation allowance) of approximately $45.8 million and $35.0 million as of December 31, 2024 and 2023, respectively. Due
to the full valuation allowance recorded against our U.S. deferred tax assets, there was no impact to net deferred tax assets. Additionally, there was no cash tax impact for 2024 due to our ability to use NOL carryforwards to fully offset taxable income generated by the changes to research and development expenditures.

As of December 31, 2024 and 2023, we had $32.5 million and $27.2 million, respectively, of U.S. federal tax credit carryforwards which will expire, if unused, between 2031 and 2044.

As of December 31, 2024 and 2023, we had U.S. gross state NOL carryforwards of $297.5 million and $306.8 million, respectively. We had tax-effected state NOL carryforwards of $17.8 million and $17.0 million as of December 31, 2024 and 2023, respectively. The rules regarding carryforwards vary from state to state, and the ability to utilize NOLs varies based on timing and amount. The majority of state NOL carryforwards generated prior to 2018 will expire, if unused, in 2037. Due to the TCJA, certain state NOL carryforwards generated after 2017 have an indefinite carryforward period.

As of December 31, 2024 and 2023, we had foreign gross NOL carryforwards of $230.1 million and $192.3 million, respectively, primarily attributable to our subsidiary in Switzerland. We had tax-effected foreign NOL carryforwards of $29.0 million and $21.8 million as of December 31, 2024 and 2023, respectively. In 2024, $1.0 million of tax-effected Swiss NOLs expired related to the 2017 tax year. An additional portion of those NOL carryforwards will expire each year, if unused, between 2025 and 2031.

As of December 31, 2024 and 2023 we had a total valuation allowance of $188.0 million and $162.0 million, respectively. The following table summarizes the activity related to our valuation allowances for the years ended December 31, 2024, 2023, and 2022 (in thousands):

Year Ended December 31,
202420232022
Beginning balance
$161,966 $132,581 $94,399 
Charged to expense
27,605 27,267 39,203 
Foreign currency translation adjustments
(1,602)2,118 (1,021)
Deductions from reserve
— — — 
Ending balance
$187,969 $161,966 $132,581 

As of December 31, 2024, we continued to maintain a full valuation allowance against U.S. deferred tax assets based on our cumulative operating results as of December 31, 2024, three-year cumulative loss, and an assessment of our expected future results of operations. We have evaluated all evidence, both positive and negative, in assessing the likelihood of realizability, and we determined the negative evidence outweighed the positive evidence.

As of December 31, 2024, we have a valuation allowance of $26.2 million against foreign deferred tax assets at our subsidiary in Switzerland. Based on our cumulative operating results as of December 31, 2024 and assessment of our expected future results of operations, we determined it was not more likely than not we would be able to realize the deferred tax assets prior to expiration.

We plan to distribute previously undistributed earnings of our foreign subsidiaries back to the United States in future years. Upon repatriation of those earnings, if any, we may be subject to taxes, including withholding taxes, net of any applicable foreign tax credits. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable.
As of December 31, 2024 and 2023, we had unrecognized tax benefits of $7.8 million and $6.5 million, respectively, none of which would affect our effective tax rate if recognized due to the valuation allowance. The following table summarizes the activity related to our unrecognized tax benefit from December 31, 2021 to December 31, 2024 (in thousands):

Balance as of December 31, 2021
$3,089 
Additions for tax positions in current years 1,399 
Additions for tax positions in prior years — 
Reductions due to lapse in statutes of limitations — 
Settlements — 
Balance as of December 31, 2022
4,488 
Additions for tax positions in current years 1,740 
Additions for tax positions in prior years 256 
Reductions due to lapse in statutes of limitations — 
Settlements — 
Balance as of December 31, 2023
6,484 
Additions for tax positions in current years 1,374 
Reductions for tax positions in prior years
(18)
Reductions due to lapse in statutes of limitations — 
Settlements — 
Balance as of December 31, 2024
$7,840 

We recognize interest and penalties related to uncertain tax positions in income tax expense. Our uncertain tax positions primarily relate to federal research and development tax credits. During the years ended December 31, 2024, 2023, and 2022, we recognized nominal amounts in interest. The cumulative balances of interest and penalties as of December 31, 2024 and 2023 were immaterial. We anticipate total unrecognized tax benefits will not decrease over the next year.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Due to the NOL carryforward, tax years 2016 through 2024 remain open to examination by the major taxing jurisdictions to which we are subject. There are no open examinations that would have a meaningful impact to our consolidated financial statements.