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Income taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The components of income (loss) before provision for income taxes are as follows (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
United States | $ | 20,713 |  |  | $ | 29,108 |  |  | $ | 331,447 |
Foreign | (37,153) |  |  | (115,052) |  |  | (10,476) |
Income (loss) before provision for income taxes | $ | (16,440) |  |  | $ | (85,944) |  |  | $ | 320,971 |
Provision for income taxes consists of the following (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 7,833 |  |  | $ | 1,681 |  |  | $ | — |
State | 6,698 |  |  | 7,385 |  |  | 2,303 |
Foreign | 6,477 |  |  | 4,381 |  |  | 2,957 |
Total current tax expense | 21,008 |  |  | 13,447 |  |  | 5,260 |
Deferred: |  |  |  |  |
Federal | 6 |  |  | (1,861) |  |  | 6 |
State | 3 |  |  | (356) |  |  | 6 |
Foreign | (1,847) |  |  | (1,127) |  |  | (739) |
Total deferred tax expense (benefit) | (1,838) |  |  | (3,344) |  |  | (727) |
Provision for income taxes | $ | 19,170 |  |  | $ | 10,103 |  |  | $ | 4,533 |
The difference between income taxes computed at the statutory federal income tax rate and the provision for income taxes is attributable to the following (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Tax at U.S. statutory rate | $ | (3,453) |  |  | $ | (18,048) |  |  | $ | 67,404 |
State income taxes, net of benefit | 5,111 |  |  | 5,502 |  |  | 2,307 |
Foreign operations | 12,018 |  |  | 26,985 |  |  | 4,448 |
Permanent book/tax differences | 6,809 |  |  | 6,598 |  |  | 409 |
Share-based compensation | (18,925) |  |  | (20,663) |  |  | (269,009) |
Change in valuation allowance | 111,497 |  |  | 62,048 |  |  | 278,761 |
Tax credits | (93,887) |  |  | (52,319) |  |  | (79,787) |
Provision for income taxes | $ | 19,170 |  |  | $ | 10,103 |  |  | $ | 4,533 |
The primary difference between our effective tax rate and the federal statutory rate is the full valuation allowance we have established on our federal, state and foreign net operating losses and credits and for the years ended December 31, 2023 and December 31, 2022 includes the effects of the capitalization and amortization of research and development expenses as required by the 2017 Tax Cuts and Jobs Act. Significant components of our deferred tax assets and liabilities are as follows (in thousands):
| December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 751,273 |  |  | $ | 900,200 |
Research tax credits | 570,061 |  |  | 473,248 |
Reserves, accruals, and other | 26,855 |  |  | 31,502 |
Lease obligation | 44,676 |  |  | 56,185 |
Share-based compensation | 30,146 |  |  | 40,976 |
Research capitalization and amortization | 411,113 |  |  | 208,373 |
Total deferred tax assets | 1,834,124 |  |  | 1,710,484 |
Less: valuation allowance | (1,821,027) |  |  | (1,660,609) |
Deferred tax assets, net of valuation allowance | 13,097 |  |  | 49,875 |
Deferred tax liabilities: |  |  |
Depreciation and amortization | (7,467) |  |  | (44,790) |
Prepaid expenses | (2,682) |  |  | (4,190) |
Total deferred tax liabilities | (10,149) |  |  | (48,980) |
Deferred tax assets (liabilities) | $ | 2,948 |  |  | $ | 895 |
Due to our history of losses, we believe it is more likely than not that our U.S. and Irish deferred tax assets will not be realized as of December 31, 2023. Accordingly, we have established a full valuation allowance on our U.S. and Irish deferred tax assets. Our valuation allowance increased by $160.4 million and $120.7 million during the years ended December 31, 2023 and 2022, respectively, primarily due to U.S. federal and state tax credits and the effects of the capitalization and amortization of research and development expenses as required by the 2017 Tax Cuts and Job Act, offset by the utilization of net operating loss. As of December 31, 2023, we had federal, California and other state net operating loss carryforwards of $2,914.6 million, $555.0 million and $1,387.5 million, respectively. Our federal carryforwards do not expire. If not utilized, our California and other state carryforwards will begin to expire in 2028 and 2026, respectively. Utilization of our net operating loss carryforwards may be subject to annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. Our net operating loss carryforwards could expire before utilization if subject to annual limitations. As of December 31, 2023, we had $208.5 million and $10.2 million of Irish and Other Foreign net operating loss carryforwards, respectively that can be carried forward indefinitely. As of December 31, 2023, we had federal and California research and development credit carryforwards of $491.4 million and $365.7 million, respectively. If not utilized, our federal carryforwards will begin to expire in 2037. Our California carryforwards do not expire. Changes in gross unrecognized tax benefits were as follows (in thousands):
| Gross Unrecognized Tax Benefits
Balance as of December 31, 2021 | $ | 205,059 |
Increases for tax positions of prior years | — |
Decreases for tax positions of prior years | (3,347) |
Increases for tax positions of current year | 38,226 |
Balance as of December 31, 2022 | $ | 239,938 |
Increases for tax positions of prior years | 3,736 |
Decreases for tax positions of prior years | (119) |
Increases for tax positions of current year | 44,377 |
Audit Settlement | (37,027) |
Balance as of December 31, 2023 | $ | 250,905 |
Recognizing the $250.9 million of gross unrecognized tax benefits we had as of December 31, 2023 would affect our effective tax rate by $5.3 million. The remaining $245.6 million of gross unrecognized tax benefits would be offset by the reversal of related deferred tax assets, which primarily are subject to a full valuation allowance. We do not expect our gross unrecognized tax benefits to change significantly within the next 12 months. We recognize interest and penalties related to uncertain tax positions in provision for income taxes. Accrued interest and penalties are not material as of December 31, 2023 and 2022. We are subject to taxation in the U.S. and various other state and foreign jurisdictions. As we have net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years. For material foreign jurisdiction, the tax years open to examination include the years 2019 and forward.

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