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Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

14. Income Taxes

The components of loss before income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended
​	​	December 31,
​		2023			2022			2021
United States	​	$	(178,669)	​	$	(181,119)	​	$	(69,612)
Foreign	​		(5,445)	​		—	​		—
Loss before income taxes	​	$	(184,114)	​	$	(181,119)	​	$	(69,612)

​

Components of provision for income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended
​	​	December 31,
Current:		2023			2022			2021
U.S. Federal	​	$	—	​	$	—	​	$	—
U.S. State and Local	​		1	​		—	​		—
Foreign	​		563	​		—	​		—
Total Current Expense	​	$	564	​	$	—	​	$	—
​	​	​	​	​	​	​	​	​	​
Deferred:	​	​	​	​	​	​	​	​	​
U.S. Federal	​	$	—	​	$	—	​	$	—
U.S. State and Local	​		—	​		—	​		—
Foreign	​		—	​		—	​		—
Total Deferred Expense	​	$	—	​	$	—	​	$	—

​

A reconciliation of the income tax benefit at the federal statutory tax rate to the Company's effective income tax rate is as follows:

​

​	​	​	​	​	​	​	​
​	​	As of
​	​	December 31,
​		2023		2022		2021
Statutory tax rate		21.00	%	21.00	%	21.00	%
State tax, net of federal benefit		10.24	​	9.83	​	7.45	​
Research and development credit		0.65	​	0.78	​	2.94	​
Orphan drug credit		3.37	​	2.15	​	7.58	​
Stock compensation		(1.37)	​	(0.29)	​	(1.05)	​
Other		(0.48)	​	(0.04)	​	(0.47)	​
Rate changes	​	(6.52)	​	—	​	​	​
Change in valuation allowance		(27.10)	​	(33.44)	​	(37.45)	​
Effective tax rate		(0.21)	%	—	%	—	%

​

The principal components of the Company's deferred tax assets and liabilities are as follows:

​

​	​	​	​	​	​	​
​	​	As of
​	​	December 31,
​		2023			2022
Deferred tax assets:		​			​
Net operating loss carryforwards	​	$	153,685	​	$	135,470
Research and development credits	​		16,139	​		14,380
Orphan drug credit	​		25,484	​		19,281
Capitalized license fee	​		2,311	​		2,776
Stock-based compensation	​	​	13,159	​	​	11,074
Section 174 Costs	​	​	50,688	​	​	29,663
Deferred revenue	​	​	350	​	​	438
Accrued Expenses & Other	​		5,680	​		4,536
Total deferred tax assets	​		267,496	​		217,618
Valuation allowance	​	​	(267,158)	​	​	(217,257)
Net deferred tax assets	​	​	338	​	​	361
Deferred tax liabilities:	​	​	​	​	​	​
Operating lease right-of-use asset and other	​	​	(338)	​	​	(361)
Total deferred tax liabilities	​	$	(338)	​	$	(361)

​

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, the Company has recorded a full valuation allowance against its deferred tax assets at December 31, 2023 and 2022, because the Company's management has determined that is it more likely than not that these assets will not be realized. The increase in the valuation allowance of $49,901 in 2023 and $59,046 in 2022 primarily relates to the net loss incurred by the Company during each period.

As of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $555,563 and $597,952, respectively, which are available to reduce future taxable income. The net operating loss carryforwards expire at various times beginning in 2033 for federal and state purposes.  Of the federal net operating loss carryforwards at December 31, 2023, $482,396 can be carried forward indefinitely.  As of December 31, 2023, the Company had gross foreign net operating loss carryforwards of approximately $1,342 which have an indefinite carryforward period.

As of December 31, 2023, the Company had federal and state research tax credits of approximately $13,142 and $3,794, respectively, which may be used to offset future tax liabilities. Additionally, as of 2023, the Company had a federal orphan drug credit related to qualifying research of $25,484. These tax credit carryforwards will begin to expire at various times beginning in 2033 for federal purposes and 2028 for state purposes.

The net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions and other provisions within the Internal Revenue Code. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.    

The Company has not provided U.S. deferred income taxes or foreign withholding taxes on unremitted earnings of foreign subsidiaries of approximately $730 as such amounts are considered to be indefinitely reinvested in these jurisdictions. The accumulated earnings in the foreign subsidiaries are primarily utilized to fund working capital requirements as its subsidiaries continue to expand their operations and to fund future foreign acquisitions. The amount of any unrecognized deferred tax liability related to undistributed foreign earnings is immaterial.

The Company has not recorded any reserves for uncertain tax positions as of December 31, 2023 and 2022. The Company has not, as yet, conducted a study of research and development credit carryforwards. This study may result in an adjustment to the Company's research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company's research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations and comprehensive loss if an adjustment were required.  

Interest and penalty charges, if any, related to unrecognized tax benefits will be classified as provision for income taxes in the accompanying statements of operations and comprehensive loss. As of December 31, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company is subject to examination by the U.S. federal, state and local income tax authorities for tax years 2013 forward. The Company is not currently under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

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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

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