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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The domestic and foreign components of income before incomes taxes were as follows (in thousands):
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Domestic |  | $ | 51,442 |  |  | $ | 70,776 |  |  | $ | 33,777 |
Foreign |  | 2,600 |  |  | 1,878 |  |  | 507 |
|  | $ | 54,042 |  |  | $ | 72,654 |  |  | $ | 34,284 |
Income taxes consisted of the following (in thousands):
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |
Federal |  | $ | 3,671 |  |  | $ | — |  |  | $ | — |
State |  | 6,555 |  |  | 2,818 |  |  | 285 |
Foreign |  | 874 |  |  | 438 |  |  | 507 |
Current income tax |  | 11,100 |  |  | 3,256 |  |  | 792 |
Deferred: |  |  |  |  |  |
Federal |  | 6,336 |  |  | (157,355) |  |  | — |
State |  | (4,372) |  |  | (11,631) |  |  | — |
Foreign |  | (32) |  |  | 6 |  |  | 8 |
Deferred income tax |  | 1,932 |  |  | (168,980) |  |  | 8 |
|  | $ | 13,032 |  |  | $ | (165,724) |  |  | $ | 800 |
The differences between the statutory and effective tax rates, expressed as a percentage of net income before income taxes, were as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Impact of state taxes |  | 1.4 |  |  | (15.6) |  |  | 0.1 |
Foreign operations |  | — |  |  | (0.2) |  |  | 0.6 |
R&D tax credits |  | (7.4) |  |  | 1.4 |  |  | (4.8) |
Foreign income inclusion |  | 1.0 |  |  | — |  |  | — |
Stock-based compensation |  | — |  |  | (12.8) |  |  | (4.1) |
Other permanent items |  | (0.2) |  |  | (0.3) |  |  | 0.6 |
Tax true-up |  | — |  |  | (0.2) |  |  | (0.4) |
Valuation allowance |  | (4.0) |  |  | (208.3) |  |  | (48.1) |
Net operating loss expiration / attribute expiration |  | 5.5 |  |  | (13.1) |  |  | 37.4 |
Base erosion anti-abuse tax |  | 6.8 |  |  | — |  |  | — |
|  | 24.1 | % |  | (228.1) | % |  | 2.3 | %
The significant components of the Company’s deferred tax assets were as follows (in thousands):
|  | December 31,
|  | 2022 |  | 2021
Deferred tax assets: |  |  |  |
Net operating loss carryforwards |  | $ | 44,189 |  |  | $ | 82,672 |
Tax credit carryforwards |  | 56,717 |  |  | 52,538 |
Accruals and reserves |  | 11,679 |  |  | 10,302 |
Deferred revenue |  | 13,156 |  |  | 11,351 |
Stock-based compensation |  | 7,417 |  |  | 4,921 |
Capitalized R&D |  | 67,932 |  |  | 38,842 |
Gross deferred tax assets |  | 201,090 |  |  | 200,626 |
Valuation allowance |  | (29,914) |  |  | (29,236) |
Total deferred tax assets |  | 171,176 |  |  | 171,390 |
Deferred tax liabilities: |  |  |  |
Fixed assets |  | (2,648) |  |  | (1,511) |
Intangible assets |  | (1,497) |  |  | (917) |
Total deferred tax liabilities |  | (4,145) |  |  | (2,428) |
|  | $ | 167,031 |  |  | $ | 168,962 |
All deferred taxes, along with any related valuation allowance, are classified in the Consolidated Balance Sheet as long-term. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized. At each reporting period, the Company assesses the estimated future realizability of the gross carrying value of its deferred tax assets. The Company’s periodic assessments take into consideration both positive evidence (future profitability projections for example and recent financial performance) and negative evidence (historical financial performance for example) as it relates to evaluating the future recoverability of its deferred tax assets. During 2021, the Company released its valuation allowance for federal and state (with the exception of California) deferred tax assets that are more likely than not to be realized, primarily as a result of actual and projected increases in U.S. profitability in the current and future periods. In performing its analysis, the Company used the most updated plans and estimates that it currently uses to manage the underlying business and calculated the ability to utilize its deferred tax assets. The valuation allowance increased by $0.7 million from 2021 to 2022. The Company continues to maintain a valuation allowance of $29.9 million on certain U.S. federal and state deferred tax assets that the Company believes are not more likely than not to be realized in future periods. As of December 31, 2022, the Company had U.S. federal and state net operating losses of approximately $205.2 million and $24.0 million, respectively. The U.S. federal net operating loss carryforwards will expire at various dates through 2039 if not utilized. The state net operating loss carryforwards will expire at various dates through 2039 if not utilized. Additionally, the Company has U.S. federal, California and other U.S. states research and development credits of approximately $40.7 million, $47.0 million and $2.7 million as of December 31, 2022, respectively. The U.S. federal research and development credits have begun to expire in 2022 and will continue to expire at various dates through 2042. The California research and development credits have no expiration date. The credits related to other various U.S. states have begun to expire and will continue to expire at various dates through 2036. Uncertain Tax Positions ASC 740, “Income Taxes,” prescribes a recognition threshold and measurement attribute to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The standard requires the Company to recognize the financial statement effects of an uncertain tax position when it is more likely than not that such position will be sustained upon audit. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as interest expense and income tax expense, respectively, in its Consolidated Statements of Comprehensive Income. The following table reconciles the Company’s unrecognized tax benefits (in thousands):
|  | Years Ended December 31,
|  | 2022 |  | 2021
Balance at beginning of year |  | $ | 25,992 |  |  | $ | 23,516 |
Reduction for tax positions related to prior year |  | (905) |  |  | (1,427) |
Additions for tax positions related to prior year |  | 1,232 |  |  | 1,947 |
Additions for tax positions related to current year |  | 2,896 |  |  | 1,956 |
Balance at end of year |  | $ | 29,215 |  |  | $ | 25,992 |
As of December 31, 2022 and 2021, the Company had unrecognized tax benefits of $29.2 million and $26.0 million, respectively, $15.3 million of which would affect the Company’s effective tax rate if recognized. There were no accrued interest or penalties for uncertain income tax as of December 31, 2022. The Company files tax returns in the United States and various state jurisdictions, China, India and the United Kingdom. The tax years 2000 through 2021 remain open and subject to examination by the appropriate governmental agencies due to tax attribute carryforwards.

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