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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes |
1 5. | INCOME TAXES
The domestic and foreign components of loss before provision for (benefit from) income taxes consisted of the following (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Domestic |  | $ | (287,569 | ) |  | $ | (289,187 | ) |  | $ | (98,439 | )
Foreign |  |  | 1,104 |  |  |  | 264 |  |  |  | 1,279 |
Total |  | $ | (286,465 | ) |  | $ | (288,923 | ) |  | $ | (97,160 | )
The provision for (benefit from) income taxes is comprised of the following (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
State |  | $ | 442 |  |  | $ | 480 |  |  | $ | 109 |
Foreign |  |  | 307 |  |  |  | 255 |  |  |  | 209 |
Total |  |  | 749 |  |  |  | 735 |  |  |  | 318 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (34 | ) |  |  | (17,841 | ) |  |  | (1,072 | )
State |  |  | 93 |  |  |  | (6,301 | ) |  |  | (297 | )
Foreign |  |  | (342 | ) |  |  | (351 | ) |  |  | 58 |
Total |  |  | (283 | ) |  |  | (24,493 | ) |  |  | (1,311 | )
Provision for (benefit from) income taxes |  | $ | 466 |  |  | $ | (23,758 | ) |  | $ | (993 | )
The following table provides a reconciliation between income taxes computed at the U.S. federal statutory rate and the Company's provision for (benefit from) income taxes (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Computed expected income tax benefit |  | $ | (60,120 | ) |  | $ | (60,674 | ) |  | $ | (20,135 | )
State income taxes - net of federal income tax benefit |  |  | (10,197 | ) |  |  | (17,171 | ) |  |  | (2,450 | )
Change in valuation allowance |  |  | 81,251 |  |  |  | 94,062 |  |  |  | 27,984 |
Non-deductible expenses |  |  | 6,335 |  |  |  | 7,399 |  |  |  | 248 |
Series I warrant |  |  | - |  |  |  | - |  |  |  | 7,767 |
Stock-based compensation |  |  | 135 |  |  |  | (30,523 | ) |  |  | (5,307 | )
Tax credits (federal and state) |  |  | (16,863 | ) |  |  | (16,957 | ) |  |  | (9,039 | )
Foreign rate differential |  |  | 35 |  |  |  | 35 |  |  |  | (92 | )
Other |  |  | (110 | ) |  |  | 71 |  |  |  | 31 |
Provision for (benefit from) income taxes |  | $ | 466 |  |  | $ | (23,758 | ) |  | $ | (993 | )
Significant components of the Company's deferred tax assets and liabilities are presented below (in thousands):
|  | December 31, |
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss |  | $ | 209,795 |  |  | $ | 194,839 |
Tax credits |  |  | 58,724 |  |  |  | 42,845 |
Lease liabilities |  |  | 23,203 |  |  |  | 24,032 |
Stock-based compensation |  |  | 22,181 |  |  |  | 24,461 |
Capitalized software cost |  |  | 39,582 |  |  |  | - |
Other |  |  | 5,013 |  |  |  | 3,871 |
Total deferred tax assets |  |  | 358,498 |  |  |  | 290,048 |
Valuation allowance |  |  | (282,337 | ) |  |  | (204,182 | )
Total deferred tax assets, net |  |  | 76,161 |  |  |  | 85,866 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Lease assets |  |  | (19,296 | ) |  |  | (20,696 | )
Acquired intangible assets |  |  | (39,497 | ) |  |  | (48,163 | )
Capitalized software |  |  | - |  |  |  | (6,724 | )
Contract cost asset |  |  | (15,324 | ) |  |  | (10,179 | )
Prepaid and accrued expenses |  |  | (2,897 | ) |  |  | (2,021 | )
Other |  |  | (1,522 | ) |  |  | (1,015 | )
Total deferred tax liabilities |  |  | (78,536 | ) |  |  | (88,798 | )
Total |  | $ | (2,375 | ) |  | $ | (2,932 | )
In assessing the realizability of deferred tax assets, management considers whether it is "more likely than not" that some portion or all of the deferred tax assets will be realized. Realization of future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Based on all available objective evidence management believes it is "more likely than not" that the net deferred tax assets will not be fully realizable in the U.S. and United Kingdom (“U.K.”) as of December 31, 2022 and 2021. Accordingly, the Company’s U.S. and U.K. net deferred tax assets have been fully offset by a valuation allowance. The Company periodically evaluates the recoverability of the deferred tax assets and when it is determined to be "more likely than not" that the deferred tax assets are realizable, the valuation allowance is reduced. The net deferred tax liability position at December 31, 2022 and 2021 was primarily related to the Company's Australia and Canada tax jurisdictions. The following table summarizes the activity related to the valuation allowance (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Beginning balance |  | $ | 204,182 |  |  | $ | 112,389 |  |  | $ | 85,642 |
Current year change |  |  | 78,155 |  |  |  | 114,639 |  |  |  | 28,123 |
Release of valuation allowance as a result of purchase accounting for business combinations |  |  | - |  |  |  | (22,846 | ) |  |  | (1,376 | )
Ending balance |  | $ | 282,337 |  |  | $ | 204,182 |  |  | $ | 112,389 |
At the date of acquisition of Levelset and LaborChart in 2021, each entity was in a net deferred tax liability position, primarily as a result of acquired intangible assets. These net deferred tax liabilities are an available source of income to realize the Company’s deferred tax assets. Accordingly, the Company released $24.2 million of valuation allowance which resulted in an income tax benefit in the consolidated statements of operations and comprehensive loss for 2021. The Company did not provide for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries as they are considered indefinitely reinvested outside the U.S. At December 31, 2022 and 2021, the amount of temporary differences related to undistributed earnings and other outside temporary differences upon which U.S. income taxes have not been provided is immaterial to these consolidated financial statements. As of December 31, 2022, the Company had federal net operating loss carryforwards (“NOL carryforwards”) of $842.6 million, which are comprised of definite and indefinite net operating losses. At December 31, 2022 the Company had federal NOL carryforwards of approximately $156.5 million, which expire at various intervals from the years 2025 through 2037 and had NOL carryforwards of $686.1 million which do not expire. As of December 31, 2022, the Company has state net operating losses of $567.2 million, which will begin to expire in 2029. The Internal Revenue Code (the “IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses and credits when a Company experiences a cumulative change in ownership of more than 50% over a three-year period. As of December 31, 2022, the Company completed an analysis to determine if the Company was subject to the provisions of IRC Section 382. Although a portion of the net operating losses and credit carryovers are subject to annual limitations, the Company has determined that it should be able to fully utilize these net operating losses and credit carryovers before they expire, provided the Company generates sufficient taxable income. As of December 31, 2022, the Company had credits for research activities available for carryforward for federal income tax purposes of $54.2 million and for state income tax purposes of $27.5 million, which are available to offset future income tax in those jurisdictions and which began to expire in 2022 for federal and have no expiration for state. The following table summarizes the activity related to unrecognized tax benefits (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Beginning balance |  | $ | 17,010 |  |  | $ | 8,369 |  |  | $ | 6,749 |
Increases related to current period positions |  |  | 5,915 |  |  |  | 7,158 |  |  |  | 2,439 |
(Decreases) increases related to prior period positions |  |  | (1,198 | ) |  |  | 1,483 |  |  |  | (819 | )
Ending balance |  | $ | 21,727 |  |  | $ | 17,010 |  |  | $ | 8,369 |
Due to the Company’s full valuation allowance on federal and state taxes, none of the unrecognized tax benefits would affect the Company’s effective tax rate, if recognized. The Company does not anticipate any significant increases or decreases to its unrecognized tax positions within the next 12 months. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2022 and 2021, accrued interest and penalties related to income tax positions were immaterial. The Company files U.S. federal, various state, and foreign income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. The tax years from 2003 forward remain subject to examination for federal purposes. Generally, state and foreign tax authorities may examine the Company’s tax returns for four years and five years, respectively, from the date an income tax return is filed. However, the taxing authorities may continue to examine the Company’s federal and state NOL carryforwards until the statute of limitations closes on the tax years in which the federal and state net operating losses are utilized. The Company is not currently under exam in any jurisdiction.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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