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Provision For (Benefit From) Income Taxes | 12 Months Ended
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Jan. 01, 2021
Income Tax Disclosure [Abstract] |
Provision For (Benefit From) Income Taxes | PROVISION FOR (BENEFIT FROM) INCOME TAXES Our income before income taxes is derived solely from within the U.S. Our provision for (benefit from) income taxes was as follows (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | 3,791 |  |  | 6,095 |  |  | 6,133 |
Total current tax expense | $ | 3,791 |  |  | $ | 6,095 |  |  | $ | 6,133 |
Deferred: |  |  |  |  |
Federal | $ | 14,886 |  |  | $ | 71,580 |  |  | $ | (238,675) |
State | 379 |  |  | (578) |  |  | (5,436) |
Total deferred tax expense (benefit) | 15,265 |  |  | 71,002 |  |  | (244,111) |
Provision for (benefit from) income taxes | $ | 19,056 |  |  | $ | 77,097 |  |  | $ | (237,978) |
The provision for income taxes for the years ended December 31, 2020 and 2019 primarily relates to the utilization of federal net operating loss and state taxes in jurisdictions outside of California, for which w e do not have net operating loss carryforwards due to a limited operating history. The benefit from income taxes for the year ended December 31, 2018 primarily relates to the release of our valuation allowance against significantly all of our deferred tax assets offset by state taxes in jurisdictions outside of California. Our historical net operating losses were sufficient to fully offset any federal taxable income for the years ended December 31, 2020, 2019 and 2018. The reconciliation of the U.S. federal income tax provision at the statutory federal income tax rate of 21% for each of the years ended December 31, 2020, 2019 and 2018, respectively, to our provision for (benefit from) income taxes was as follows (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
U.S. federal income tax provision at statutory rate | $ | 27,476 |  |  | $ | 83,603 |  |  | $ | 94,939 |
State tax (benefit) expense | (2,232) |  |  | 1,148 |  |  | 4,690 |
Change in valuation allowance | 5,525 |  |  | 3,208 |  |  | (315,394) |
Research credits | (11,356) |  |  | (8,299) |  |  | (18,308) |
Stock-based compensation | (20,399) |  |  | (9,177) |  |  | (5,998) |
Non-deductible executive compensation | 18,067 |  |  | 4,228 |  |  | 1,111 |
Branded prescription drug fee | 2,537 |  |  | 1,099 |  |  | 371 |
Other | (562) |  |  | 1,287 |  |  | 611 |
Provision for (benefit from) income taxes | $ | 19,056 |  |  | $ | 77,097 |  |  | $ | (237,978) |
Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Our deferred tax assets and liabilities were as follows (in thousands):
| December 31,
| 2020 |  | 2019
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 37,454 |  |  | $ | 65,131 |
Tax credit carryforwards | 126,625 |  |  | 110,037 |
Depreciation and amortization | 18,414 |  |  | 26,792 |
Stock-based compensation | 19,818 |  |  | 14,966 |
Lease liabilities | 11,908 |  |  | 11,211 |
Accruals and reserves not currently deductible | 12,207 |  |  | 8,248 |
Deferred revenue | 7,637 |  |  | 6,547 |
Other assets | — |  |  | 345 |
Total deferred tax assets | 234,063 |  |  | 243,277 |
Valuation allowance | (67,185) |  |  | (61,659) |
Net deferred tax assets | 166,878 |  |  | 181,618 |
Deferred tax liabilities: |  |  |
Lease right-of-use assets | (9,510) |  |  | (9,244) |
Other liabilities | (657) |  |  | — |
Total deferred tax liabilities | (10,167) |  |  | (9,244) |
Net deferred taxes | $ | 156,711 |  |  | $ | 172,374 |
ASC Topic 740: Income Taxes (Topic 740) requires that the tax benefit of net operating losses, temporary differences and credit carry forwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carry forward period. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2020, based on the evaluation and weighting of both positive and negative evidence, including our achievement of a cumulative three-year income position as of December 31, 2020 and forecasts of future operating results, as well as considering the utilization of net operating losses and tax credits prior to their expiration, management determined that there is sufficient positive evidence to conclude that it is more likely than not the deferred tax assets are realizable. As of December 31, 2020 and 2019, we continue to carry a valuation allowance of $67.2 million and $61.7 million, respectively, against our California state deferred tax assets. The valuation allowance increased by $5.5 million and $3.5 million during the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, we had federal net operating loss carryforwards of approximately $92.6 million, which will begin to expire in 2036, and federal business tax credits of approximately $127.4 million which expire in the years 2021 through 2040. We also had state net operating loss carryforwards of approximately $427.9 million, which expire in the years 2021 through 2036, and California research and development tax credits of approximately $42.9 million, which do not expire, and California Competes Tax Credits of approximately $1.6 million, which expire in 2026. Under the Internal Revenue Code and similar state provisions, certain substantial changes in our ownership could result in an annual limitation on the amount of net operating loss and credit carryforwards that can be utilized in future years to offset future taxable income. The annual limitation may result in the expiration of net operating losses and credit carryforwards before utilization. We completed a Section 382 analysis through December 31, 2020, and concluded that an ownership change, as defined under Section 382, had not occurred. The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Beginning balance | $ | 79,078 |  |  | $ | 76,060 |  |  | $ | 79,342 |
Change relating to prior year provision | 591 |  |  | 589 |  |  | (4,254) |
Change relating to current year provision | 3,305 |  |  | 2,429 |  |  | 1,083 |
Reductions based on the lapse of the applicable statutes of limitations | (2,033) |  |  | — |  |  | (111) |
Ending balance | $ | 80,941 |  |  | $ | 79,078 |  |  | $ | 76,060 |
We do not anticipate that the amount of unrecognized tax benefits existing as of December 31, 2020 will significantly change over the next 12 months. As of December 31, 2020, we had $80.9 million in unrecognized tax benefits, of which 50.1 million would reduce our provision for income taxes and the effective tax rate, if recognized. Interest and penalties were nominal or zero for all periods presented. We have elected to record interest and penalties in the accompanying Consolidated Statements of Income as a component of income taxes. We file U.S. and state income tax returns in jurisdictions with varying statues of limitations during which such tax returns may be audited and adjusted by the relevant tax authorities. The 2001 through 2020 tax years generally remain subject to examination by federal and most state tax authorities to the extent net operating losses and credits generated during these periods are being utilized in the open tax periods.

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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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