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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consisted of losses from domestic operations of $1.4 billion, $661 million, and $253 million for the years ended December 31, 2022, 2021, and 2020, respectively. The following table summarizes the components of the Company’s provision for income taxes for the periods presented (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current income tax expense: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | 2 |  |  | 1 |  |  | — |
Total current income tax expense | 2 |  |  | 1 |  |  | — |
Income Tax Provision | $ | 2 |  |  | $ | 1 |  |  | $ | — |
For the years ended December 31, 2022, 2021, and 2020, the Company did not record any deferred federal and state income tax expense or benefit due to the full valuation allowance. Additionally, the Company’s foreign current and deferred expense or benefit was immaterial. Effective Tax Rate The following table presents a reconciliation of the U.S. federal statutory income tax rates to the Company’s effective income tax rate for the periods presented:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
U. S. Federal tax benefit at statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit | 2.7 |  |  | 3.4 |  |  | 3.5 |
Non-deductible expenses and other | (1.2) |  |  | (0.4) |  |  | 0.4 |
Non-deductible warrant expenses | — |  |  | 0.4 |  |  | 3.0 |
Loss on convertible note exchange | — |  |  | — |  |  | (2.4) |
Share-based compensation | (1.7) |  |  | 7.0 |  |  | 0.4 |
Deduction limitation on executive compensation | (0.3) |  |  | (14.1) |  |  | (2.1) |
Change in valuation allowance, net | (21.4) |  |  | (19.5) |  |  | (23.9) |
Research and development credits | 0.5 |  |  | 2.0 |  |  | 0.1 |
Effective tax rate | (0.4) | % |  | (0.2) | % |  | — | %
For the years ended December 31, 2022, 2021 and 2020, the Company’s effective tax rate differs from the amount computed by applying the U.S. federal statutory and state income tax rates to net loss before income tax, primarily as the result of state income taxes, deduction limitation on executive compensation, and changes in the Company’s valuation allowance. Deferred Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income taxes purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021, are as follows (in millions):
| December 31, 2022 |  | December 31, 2021
Deferred tax assets: |  |  |
Accrued and reserves | $ | 128 |  |  | $ | 21 |
Inventory | 34 |  |  | 34 |
Tax credits | 41 |  |  | 33 |
Lease Liabilities | 11 |  |  | 11 |
Section 174 capitalization | 50 |  |  | — |
Goodwill | 8 |  |  | — |
Net operating loss | 404 |  |  | 293 |
Total deferred tax assets | 676 |  |  | 392 |
Less: Valuation allowance | (664) |  |  | (376) |
Deferred tax assets, net of valuation allowance | 12 |  |  | 16 |
Deferred tax liabilities: |  |  |
Depreciation and amortization | (2) |  |  | (5) |
Goodwill | — |  |  | (1) |
Right-of-use assets | (10) |  |  | (10) |
Deferred tax liabilities | (12) |  |  | (16) |
Net deferred tax assets and liabilities | $ | — |  |  | $ | — |
A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized in a particular tax jurisdiction. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. Due to the losses the Company generated in the current and prior years, the Company believes it is not more likely than not that all of the deferred tax assets can be realized. Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $664 million as of December 31, 2022 and a full valuation allowance on its net deferred tax assets of $376 million as of December 31, 2021. The valuation allowance increased by $288 million and $141 million for 2022 and 2021, respectively primarily as a result of current year losses. As of December 31, 2022, the Company had U.S. federal and state net operating loss (“NOL”) carryforwards of $1.7 billion and $1.2 billion, respectively, which will each begin to expire in 2034 if not utilized. For NOLs arising after December 31, 2017, the Tax Cuts and Jobs Act of 2017 limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income and can be carried forward indefinitely (carryback is generally prohibited). In the Company’s case, as of December 31, 2022, $1.6 billion of US. federal NOLs and $342 million of state NOLs have an unlimited carryover period. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation and will continue to have a two-year carryback and twenty-year carryforward period. Additionally, as of December 31, 2022, the Company had U.S. federal research tax credit carryforwards of $39 million that begin to expire in 2034. The Company also had state research tax credit carryforwards of $26 million that begin to expire in 2029. Section 382 of the Internal Revenue Code (the “Code”) limits the use of net operating losses and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. Utilization of the net operating loss carryforwards are subject to various limitations due to the ownership change limitations provided by Internal Revenue Code (IRC) Section 382 and similar state provisions. The Company performed an ownership analysis and identified three previous ownership changes in 2014, 2016 and 2020, as defined under Section 382 and 383 of the IRC, however none of the previous ownership changes resulted in a material limitation that will reduce the total amount of net operating loss carryforwards and credits that can be utilized. Unrecognized Tax Benefits The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Unrecognized tax benefits as of the beginning of the year | $ | 15 |  |  | $ | 6 |  |  | $ | 5 |
Decrease related to prior year tax provisions | — |  |  | — |  |  | (1) |
Increase related to current year tax provisions | 5 |  |  | 9 |  |  | 2 |
Unrecognized tax benefits as of the end of the year | $ | 20 |  |  | $ | 15 |  |  | $ | 6 |
Due to the full valuation allowance at December 31, 2022, current adjustments to the unrecognized tax benefit will have no impact on the Company’s effective income tax rate. There would be an impact of $18 million to the effective tax rate if adjustments are made after the valuation allowance is released. The Company does not anticipate any significant change in its uncertain tax positions within 12 months of this reporting date. The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s consolidated balance sheets. To date, the Company has not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties. The Company is subject to income tax in the U.S. and in various states. Due to the history of net operating losses, the Company is subject to U.S. federal, state and local examinations by tax authorities for all years since incorporation but as of December 31, 2022 are not currently under any audits. The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2022, because it intends to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place under the Tax Act.

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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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