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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

 

The components of loss before income taxes were as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Domestic

 

$

(347,552

)

 

$

(234,905

)

 

$

(97,714

)

Foreign

 

 

7,925

 

 

 

4,870

 

 

 

2,667

 

Loss before income taxes

 

$

(339,627

)

 

$

(230,035

)

 

$

(95,047

)

 

The components of provision for (benefit from) income taxes were as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Current

 

 

 

 

 

 

 

 

 

State

 

$

251

 

 

$

87

 

 

$

53

 

Foreign

 

 

1,588

 

 

 

1,041

 

 

 

336

 

Total

 

 

1,839

 

 

 

1,128

 

 

 

389

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

-

 

 

 

-

 

 

 

(72

)

State

 

 

-

 

 

 

-

 

 

 

(11

)

Foreign

 

 

1,335

 

 

 

(1,335

)

 

 

(311

)

Total

 

 

1,335

 

 

 

(1,335

)

 

 

(394

)

Provision for (benefit from) income taxes

 

$

3,174

 

 

$

(207

)

 

$

(5

)

 

The reconciliation of the income tax benefit computed at the federal statutory tax rate to the Company’s provision for (benefit from) income taxes was as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Income tax benefit computed at federal statutory rate

 

$

(71,322

)

 

$

(48,307

)

 

$

(19,960

)

Foreign rate differential

 

 

1,214

 

 

 

(1,317

)

 

 

(144

)

Stock-based compensation expense

 

 

(104,993

)

 

 

24,004

 

 

 

1,612

 

Change in valuation allowance

 

 

192,301

 

 

 

27,446

 

 

 

18,958

 

Research and development credits

 

 

(14,483

)

 

 

(2,432

)

 

 

(1,112

)

Other

 

 

457

 

 

 

399

 

 

 

641

 

Provision for (benefit from) income taxes

 

$

3,174

 

 

$

(207

)

 

$

(5

)

 

 

 

The significant components of net deferred tax balances were as follows (in thousands):

 

 

 

December 31,

 

 

 

2021

 

 

2020(1)

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

277,453

 

 

$

72,332

 

Tax credit carryforwards

 

 

30,777

 

 

 

7,386

 

Stock-based compensation expense

 

 

14,885

 

 

 

3,250

 

Operating lease liabilities

 

 

9,398

 

 

 

12,080

 

Accruals and reserves

 

 

6,781

 

 

 

2,627

 

Deferred revenue

 

 

4,095

 

 

 

2,471

 

Other

 

 

3,258

 

 

 

-

 

Total deferred tax assets

 

 

346,647

 

 

 

100,146

 

Less: Valuation allowance

 

 

(316,056

)

 

 

(73,809

)

Deferred tax assets, net of valuation allowance

 

 

30,591

 

 

 

26,337

 

Deferred tax liabilities:

 

 

 

 

 

 

Deferred contract acquisition costs

 

$

(18,783

)

 

$

(11,670

)

Operating lease right-of-use assets

 

 

(8,559

)

 

 

(11,471

)

Property and equipment

 

 

(2,558

)

 

 

(898

)

Other

 

 

(214

)

 

 

(487

)

Total deferred tax liabilities

 

 

(30,114

)

 

 

(24,526

)

Net deferred tax assets

 

$

477

 

 

$

1,811

 

 

(1) Revised to correct for immaterial adjustments in the disclosure, which had previously understated the net operating loss carryforwards deferred tax asset, accruals and reserves deferred tax asset, and deferred contract acquisition costs deferred tax liability as of December 31, 2020 by $7.2 million, $0.9 million, and $8.1 million, respectively. These adjustments had no impact to the consolidated balance sheets, consolidated statements of operations, or consolidated statements of cash flows as of and for the years ended December 31, 2021, 2020, or 2019. The Company evaluated the effect of the errors on the Company’s notes to the consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, Materiality, and concluded that the adjustments were not material to the previously issued 2020 consolidated financial statements.

 

The Company recognizes a valuation allowance on its deferred tax assets if it is more likely than not that some or all the deferred tax assets will not be realized. Due to a history of losses in the United States, U.S. deferred tax assets have been fully offset by a valuation allowance. During the year ended December 31, 2021, the Company also recorded a full valuation allowance on its U.K. deferred tax assets. As of December 31, 2021, the valuation allowance of $316.1 million was primarily related to U.S. federal and state and U.K. net operating loss carryforwards and tax credit carryforwards. As of December 31, 2020, the valuation allowance of $73.8 million was primarily related to U.S. federal and state net operating loss carryforwards and tax credit carryforwards. The valuation allowance on the Company’s net deferred tax assets increased by $242.3 million during the year ended December 31, 2021 primarily due to increased U.S. federal and state net operating loss carryforwards and tax credit carryforwards and the establishment of a valuation allowance in the United Kingdom. The valuation allowance increased by $32.6 million and $22.1 million during the years ended December 31, 2020 and 2019, respectively, primarily due to increased U.S. federal and state net operating loss carryforwards and tax credit carryforwards.

 

Deferred taxes have not been provided for the cumulative undistributed earnings of the Company’s foreign subsidiaries as of December 31, 2021 due to the Company’s intent and ability to permanently reinvest such earnings. The Company has determined that the amount of the unrecognized deferred tax liability related to these earnings is not material.

 

As of December 31, 2021, the Company had $1,096.7 million of federal net operating loss carryforwards and $559.6 million of state net operating loss carryforwards. Of the federal net operating loss carryforwards, $1,052.6 million can be carried forward indefinitely, but is limited to 80% of annual taxable income. The remaining federal and state net operating loss carryforwards will begin to expire in 2034 and 2025, respectively.

 

As of December 31, 2021, the Company had U.S. federal and state research tax credit carryforwards of $28.2 million and $13.6 million, respectively. The U.S. federal research tax credit carryforwards will begin to expire in 2034. The U.S. state research tax credit carryforwards will begin to expire in 2026.

 

As of December 31, 2021, the Company had $59.1 million of foreign net operating loss carryforwards. These foreign net operating loss carryforwards have an indefinite life and do not expire.

 

Under Section 382 of the Internal Revenue Code of 1986, as amended, and similar provisions of state law, utilization of net operating loss and tax credit carryforwards may be subject to an annual limitation due to an ownership change. As of December 31, 2021, the Company assessed that its net operating loss and tax credit carryforwards will not expire solely due to Section 382 limitations.

 

A reconciliation of the beginning and ending balances of total unrecognized tax benefits is as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Beginning balance

 

$

3,399

 

 

$

1,623

 

 

$

796

 

Gross increase (decrease) for prior year tax positions

 

 

192

 

 

 

200

 

 

 

(2

)

Gross increase for current year tax positions

 

 

8,939

 

 

 

1,576

 

 

 

829

 

Ending balance

 

$

12,530

 

 

$

3,399

 

 

$

1,623

 

 

As of December 31, 2021, the total amount of unrecognized tax benefits, if recognized, would not affect the Company’s effective tax rate due to the existence of carryforwards and the valuation allowance in the United States and applicable U.S. state jurisdictions.

 

The Company does not expect its gross unrecognized tax benefits to change significantly within the next 12 months. It is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months due to tax examination changes, settlement activities, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities.

 

The Company recognizes interest and penalties related to uncertain tax positions in benefit from income taxes in the consolidated statements of operations. There were no interest and penalties associated with unrecognized income tax benefits for the years ended December 31, 2021, 2020, and 2019.

 

The Company’s tax years from inception in 2014 through December 31, 2021 remain subject to examination by various jurisdictions.