v3.20.4

Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 13. INCOME TAXES The components of loss before income taxes consist of the following (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
United States |  | $ | (21,107 | ) |  | $ | (63,453 | ) |  | $ | (11,128 | )
Foreign |  |  | 2,655 |  |  |  | 2,534 |  |  |  | 1,795 |
Net loss before income taxes |  | $ | (18,452 | ) |  | $ | (60,919 | ) |  | $ | (9,333 | )
The income tax (benefit) expense consisted of the following (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (219 | ) |  | $ | (47 | ) |  | $ | — |
State |  |  | 620 |  |  |  | 244 |  |  |  | 114 |
Foreign |  |  | 743 |  |  |  | 108 |  |  |  | 184 |
|  |  | 1,144 |  |  |  | 305 |  |  |  | 298 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Foreign |  |  | (2,089 | ) |  |  | (1,287 | ) |  |  | (774 | )
Total |  | $ | (945 | ) |  | $ | (982 | ) |  | $ | (476 | )
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. federal income tax at statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
U.S. state and local income taxes |  |  | (3.2 | ) |  |  | (0.4 | ) |  |  | (1.3 | )
Change in valuation allowance |  |  | (698.4 | ) |  |  | (213.4 | ) |  |  | (1,039.4 | )
Federal research and development tax credit |  |  | 102.9 |  |  |  | 30.8 |  |  |  | 166.2 |
Stock-based compensation |  |  | 577.8 |  |  |  | 158.0 |  |  |  | 859.4 |
Meals and Entertainment |  |  | (1.6 | ) |  |  | (1.4 | ) |  |  | (6.6 | )
Permanent items |  |  | — |  |  |  | — |  |  |  | (1.1 | )
Foreign rate differential |  |  | — |  |  |  | (0.6 | ) |  |  | (1.5 | )
Acquisition costs |  |  | — |  |  |  | (1.3 | ) |  |  | — |
Section 162(m) limitation |  |  | (7.2 | ) |  |  | (1.4 | ) |  |  | — |
State apportionment change |  |  | 4.4 |  |  |  | 1.3 |  |  |  | — |
Tax rate change |  |  | — |  |  |  | (0.4 | ) |  |  | 2.4 |
Provision to return true-up |  |  | 9.4 |  |  |  | 9.9 |  |  |  | 5.9 |
Other |  |  | 0.1 |  |  |  | (0.5 | ) |  |  | 0.1 |
Effective tax rate |  |  | 5.2 | % |  |  | 1.6 | % |  |  | 5.1 | %
Significant components of the Company’s deferred income tax assets and liabilities consist of the following (in thousands):
|  | As of December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 379,613 |  |  | $ | 263,512 |
Reserves and accruals |  |  | 14,131 |  |  |  | 10,425 |
Research and development credits |  |  | 104,110 |  |  |  | 73,442 |
Lease Obligation |  |  | 91,373 |  |  |  | 81,639 |
Stock-based compensation |  |  | 28,318 |  |  |  | 17,494 |
Total deferred tax assets |  |  | 617,545 |  |  |  | 446,512 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right-of-use asset |  |  | (70,755 | ) |  |  | (72,243 | )
Depreciation and amortization |  |  | (11,707 | ) |  |  | (10,916 | )
Total deferred tax liabilities |  |  | (82,462 | ) |  |  | (83,159 | )
Valuation allowance |  |  | (530,887 | ) |  |  | (361,233 | )
Net deferred tax assets |  | $ | 4,196 |  |  | $ | 2,120 |
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized through future operations. As a result of the Company’s analysis of all available objective evidence, both positive and negative, as of December 31, 2020, management believes it is more likely than not that the U.S. deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its U.S. deferred tax assets. The Company's valuation allowance increased by $169.7 million and $178.9 million during the years ended December 31, 2020 and 2019, respectively, primarily due to U.S. federal and state tax losses and credits incurred during the period. For federal and state income tax reporting purposes, respective net operating loss carryforwards of $1,423.1 million and $1,273.9 million are available to reduce future taxable income, if any. These net operating loss carryforwards will begin to expire in 2028 for federal and certain state net operating losses have expired in 2020. The federal net operating loss generated subsequent to 2017 can be carried forward indefinitely. For U.K. and Denmark income tax reporting purposes, the net operating loss carryforward of $17.6 million and $0.8 million, respectively, is available to reduce the future taxable income, if any. U.K. and Denmark net operating loss can be carried forward indefinitely. The Company also has U.K. research and development tax credit carryforwards of $0.3 million. The credit can be carried forward indefinitely. As of December 31, 2020, the Company has research and development tax credit carryforwards of $82.6 million and $59.4 million for federal and state income tax purposes, respectively. If not utilized, the federal and state carryforwards will begin to expire in 2028 and 2035, respectively. The Internal Revenue Code of 1986, as amended (the “Code”), contains provisions that may limit the net operating loss and credit carryforwards available for use in any given period upon the occurrence of certain events, including a statutorily defined significant change in ownership. Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to an ownership change, as defined by section 382 of the Code. The Company has assessed whether any section 382 ownership change has occurred since its formation and determined that a section 382 ownership change occurred on December 18, 2009 and tax attributes generated by the Company through the ownership change date are subject to the limitation. A section 382 study was completed for dataxu covering the period from inception beginning May 1, 2008 through acquisition date of November 8, 2019. Based on the study, the Company identified four ownership changes for Section 382 purposes. As such, tax attributes generated by dataxu through the ownership change dates are subject to the limitation. The total amount of unrecognized tax benefits as of December 31, 2020 is $29.2 million, of which $28.3 million is composed of research and development credits and $0.9 million is related international activities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | As of December 31, |
|  | 2020 |  |  | 2019 |
Unrecognized tax benefits at beginning of year |  | $ | 19,487 |  |  | $ | 14,541 |
Gross increase for tax positions of current year |  |  | 9,959 |  |  |  | 10,378 |
Gross decrease due to statue expiration |  |  | (75 | ) |  |  | (88 | )
Gross decrease for tax positions of prior years |  |  | (196 | ) |  |  | (5,344 | )
Unrecognized tax benefits balance at end of year |  | $ | 29,175 |  |  | $ | 19,487 |
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of its income tax expense. As of December 31, 2020, the Company recorded $0.2 million of accrued interest and penalties related to uncertain tax positions. Change in the Company’s unrecognized tax benefits, if any, would have an immaterial impact on its effective tax rate. The Company does not expect its gross unrecognized tax benefits to change significantly within the next 12 months. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is currently under examination by Texas Comptroller for calendar tax years 2015, 2016, and 2017. All tax years remain subject to examination by federal and state authorities. These audits include questioning the timing and amount of deductions; the nexus of income among various tax jurisdictions; and compliance with federal, state, and local tax laws. The Company will continue to indefinitely reinvest earnings from its foreign subsidiaries, which are not significant. While federal income tax expense has been recognized as a result of the Tax Cuts and Jobs Act of 2017, the Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss. It is not practicable for the Company to determine the amount of unrecognized tax expense on these reinvested international earnings.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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