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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For the years ended December 31, 2023, 2022 and 2021 income (loss) before income taxes included the following components:
Year Ended December 31,
202320222021
Domestic
$16,501 $(60,099)$(59,737)
Foreign1,276 1,463 (221)
Total$17,777 $(58,636)$(59,958)
For the years ended December 31, 2023, 2022 and 2021 the Company recognized the following provision for income taxes:
Year Ended December 31,
202320222021
Current:
Federal$895 $302 $— 
State607 327 80 
Foreign341 524 97 
Total$1,843 $1,153 $177 
Deferred:
Federal$— $— $— 
State— — — 
Foreign(133)(215)— 
Total$(133)$(215)$— 
Total provision for income taxes$1,710 $938 $177 
The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the years ended December 31, 2023, 2022 and 2021:
202320222021
Expected income tax expense at federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of Federal income tax effect(35.1)6.7 6.5 
Section 162(m) limitation56.5 (15.2)(13.5)
Equity compensation(208.4)28.4 53.8 
Meals and entertainment5.6 (1.2)(0.5)
Foreign-Derived Intangible Income deduction(13.4)— — 
Other permanent adjustments2.2 0.3 — 
Research and development credit(76.4)11.7 15.9 
Valuation allowance257.6 (53.3)(83.5)
Effective income tax rate9.6 %(1.6)%(0.3)%
The 2023 effective tax rate differs from the statutory rate as a result of an increase in tax deductible stock-based compensation and the generation of research and development tax credits offset by an increase in the valuation allowance for the Company’s net deferred tax assets. For 2022 and 2021, the effective tax
rate is less than the statutory rate primarily as a result of the valuation allowance for the Company’s net deferred tax assets.
The Company has the following deferred tax assets (liabilities) as of December 31, 2023 and 2022:
20232022
Net operating loss carryforwards$15,533 $42,861 
Stock-based compensation5,207 3,605 
Research and development credits38,146 22,386 
Lease liability5,739 6,487 
Section 174 research and development capitalization102,055 42,429 
Marketing and advertising766 633 
Sales tax / Value added tax ("VAT") reserve397 210 
Other deferred tax assets65 140 
Valuation allowance(156,870)(108,504)
Total deferred tax assets11,038 10,247 
ROU asset(4,354)(5,122)
Property and equipment(2,164)(2,569)
Capitalized software(3,716)(1,913)
Other deferred tax liabilities(38)(10)
Total deferred tax liabilities(10,272)(9,614)
Net deferred taxes$766 $633 
The Company has provided a full valuation allowance for its U.S. federal and state net deferred tax asset as it is not more likely than not that the asset will be realized. The movement in valuation allowance of $48,366 is primarily related to the:
•increase to the deferred tax assets for the capitalization of research and development expenditures under Section 174, which was a change in tax law from the Tax Cuts and Job Acts of 2017, which went into effect in January 2022,
•an increase in the generation of research and development tax credits, and
•a reduction in the Company’s net operating losses.
The Company has a deferred tax asset with respect to its China subsidiary, against which no valuation allowance has been recorded.
The following table represents the activity in our valuation allowance for the years ended December 31, 2023 and 2022:
Year Ended December 31,
20232022
Beginning balance—January 1$(108,504)$(76,293)
Valuation allowances established(48,366)(32,211)
Release of valuation allowances— — 
Ending balance—December 31$(156,870)$(108,504)
The Company has approximately $48,866 in federal net operating loss carryforwards and approximately $71,422 in state net operating loss carryforwards. Certain of these loss carryforwards have an indefinite
life and other amounts are available to offset future taxable income through 2043. The Company has approximately $38,146 in federal and state general business credits that are available to offset future taxable income through 2043. The Company has analyzed the impact of Internal Revenue Code (“IRC”) Sections 382 and 383 on these tax attributes and has determined that no prior ownership changes have occurred which would limit the Company’s ability to utilize the NOLs and research and development tax credits.
The Company’s tax years through the 2023 tax year remain subject to examination by federal and state tax authorities.
The Company utilizes a more-likely-than-not standard in recognizing a tax benefit in its financial statements. No uncertain tax benefits have been recorded in 2023, 2022, and 2021, respectively.