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Provision For Income Taxes
 12 Months Ended
Dec. 30, 2022
Income Tax Disclosure [Abstract]  
PROVISION FOR INCOME TAXES PROVISION FOR INCOME TAXES
Our income before income taxes is derived solely from within the U.S. Our provision for income taxes was as follows (in thousands):
 
Year Ended December 31,
 
202220212020
Current:
Federal$100,525 $11,338 $— 
State11,903 5,224 3,791 
Total current tax expense$112,428 $16,562 $3,791 
Deferred:
Federal$(54,223)$46,416 $14,886 
State(6,135)113 379 
Total deferred tax expense(60,358)46,529 15,265 
Provision for income taxes$52,070 $63,091 $19,056 
The provision for income taxes for the years ended December 31, 2022, 2021, and 2020 primarily relates to the utilization of federal tax attributes and state taxes in jurisdictions outside of California, for which we do not have net operating loss carryforwards due to a limited operating history. Our historical net operating losses were sufficient to fully offset any federal taxable income for the year ended December 31, 2020 but were not sufficient to fully offset federal taxable income for the years ended December 31, 2022 and 2021.
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, 2022, 2021 and 2020, respectively, to our provision for income taxes was as follows (in thousands):
 
Year Ended December 31,
 
202220212020
U.S. federal income tax provision at statutory rate$49,213 $61,772 $27,476 
State tax (benefit) expense (2,632)1,336 (2,232)
Change in valuation allowance7,162 2,883 5,525 
Research credits(14,130)(6,263)(11,356)
Stock-based compensation(2,864)(11,831)(20,399)
Non-deductible executive compensation4,549 11,182 18,067 
Branded prescription drug fee3,855 2,897 2,537 
Non-deductible warrant purchase6,300 — — 
Other617 1,115 (562)
Provision for income taxes$52,070 $63,091 $19,056 
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,
 
20222021
Deferred tax assets:
Net operating loss carryforwards$33,635 $17,993 
Tax credit carryforwards40,217 101,460 
Depreciation and amortization176,208 7,764 
Stock-based compensation27,531 23,162 
Lease liabilities46,759 12,385 
Accruals and reserves not currently deductible22,418 19,531 
Deferred revenue7,656 8,040 
Other assets6,746 1,303 
Total deferred tax assets361,170 191,638 
Valuation allowance(77,230)(70,068)
Net deferred tax assets283,940 121,570 
Deferred tax liabilities:
Lease right-of-use assets(52,830)(9,907)
Net deferred taxes$231,110 $111,663 
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, 2022, 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, 2022 and forecasts of future operating results, as well as considering the utilization of net operating losses and tax credits prior to their expiration, management has continued to determine 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, 2022 and 2021, we continue to carry a valuation allowance of $77.2 million and $70.1 million, respectively, against our California state deferred tax assets. The valuation allowance increased by $7.2 million and $2.9 million during the years ended December 31, 2022 and 2021, respectively.
At December 31, 2022, we had state net operating loss carryforwards of approximately $414 million, which expire in the years 2023 through 2036, California research and development tax credits of approximately $52 million, which do not expire, and California Competes Tax Credits of approximately $1 million, which begin to expire in 2028.
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, 2022, 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,
 
202220212020
Beginning balance$83,583 $80,941 $79,078 
Change relating to prior year provision715 728 591 
Change relating to current year provision4,129 2,215 3,305 
Reductions based on the lapse of the applicable statutes of limitations(721)(301)(2,033)
Ending balance$87,706 $83,583 $80,941 
We classify unrecognized tax benefits as a reduction of deferred tax assets or as other long-term liabilities in the accompanying consolidated balance sheets. We do not anticipate that the amount of unrecognized tax benefits existing as of December 31, 2022 will significantly change over the next 12 months. As of December 31, 2022, we had $87.7 million in unrecognized tax benefits, of which $55.4 million would reduce our income tax provision and 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 2022 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.