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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 8. Income Taxes Domestic and foreign pre-tax loss is as follows (in thousands):
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | (123,411 | ) |  | $ | (78,112 | ) |  | $ | (45,249 | )
Foreign |  |  | (110,972 | ) |  |  | (165,824 | ) |  |  | (243,035 | )
|  | $ | (234,383 | ) |  | $ | (243,936 | ) |  | $ | (288,284 | )
At December 31, 2019, the Company had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $426.1 million, $363.2 million, and $1,004.2 million, respectively. The Company recognized state income tax provisions of $0.9 million, $1.3 million and $1.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. These tax liabilities were associated with minimum taxes in the current year and the apportionment of income to certain state jurisdictions which the Company did not have corresponding NOLs in 2017 and 2018. Utilization of the domestic NOL and research and development (“R&D”) credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred or that could occur in the future, as required by Section 382 of the Code, as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. The Company previously completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from the Company’s formation through December 31, 2013. Based upon this study, the Company determined that several ownership changes had occurred. Accordingly, the Company reduced its deferred tax assets related to the federal NOL carryforwards and the federal R&D credit carryforwards that are anticipated to expire unused as a result of these ownership changes. These tax attributes were excluded from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on income tax expense or the effective tax rate. The Company completed a study through December 31, 2019 and concluded no additional ownership changes occurred. Future ownership changes may further limit the Company’s ability to utilize its remaining tax attributes. Federal and state NOL carryforwards of $6.9 million and less than $0.1 million will expire in 2025 unless utilized. The remaining federal and state NOL carryforwards will begin to expire in 2026. At December 31, 2019, the Company had federal and state charitable contribution carryforwards of $75.8 million, which will begin to expire in 2021. At December 31, 2019, the Company had $40.4 million of federal R&D credit carryforwards of which $0.2 million will expire in 2020 unless utilized, and the remaining federal R&D credit carryforwards will begin to expire in 2021. At December 31, 2019, the Company had state R&D credit carryforwards of approximately $1.5 million that will begin to expire in 2024 and $13.5 million that have no expiration date. At December 31, 2019, the Company had foreign NOL carryforwards of approximately $1,000.9 million that will begin to expire in 2022 and $3.4 million that have no expiration date. The Company continues to record the deferred tax assets related to these attributes, subject to valuation allowance, until expiration occurs. The components of the deferred tax assets are as follows (in thousands):
|  | December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets |  |  |  |  |  |  |  |
NOL carryforwards |  |  | 182,948 |  |  |  | 170,476 |
R&D credit carryforwards |  |  | 48,069 |  |  |  | 32,984 |
Capitalized R&D |  |  | 7,607 |  |  |  | 7,421 |
Stock-based compensation |  |  | 45,440 |  |  |  | 45,492 |
Intangibles |  |  | 59,783 |  |  |  | — |
Charitable contributions |  |  | 18,303 |  |  |  | 8,530 |
Lease liabilities |  |  | 2,366 |  |  |  | — |
Other |  |  | 8,568 |  |  |  | 6,220 |
Total deferred tax assets |  |  | 373,084 |  |  |  | 271,123 |
Valuation allowance |  |  | (370,783 | ) |  |  | (271,123 | )
Deferred tax liabilities |  |  |  |  |  |  |  |
Right-of-use assets |  |  | (2,301 | ) |  |  | — |
Total deferred tax liabilities |  |  | (2,301 | ) |  |  | — |
Total net deferred tax assets |  | $ | — |  |  | $ | — |
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $99.7 million in 2019 primarily due to an increase in deferred tax assets generated from net operating losses, R&D credits and stock-based compensation expense, and the impact of the Switzerland tax reform, partially offset by the expiration of R&D credits in 2019 and the remeasurement of the Company’s deferred tax balance for changes in future tax rates. In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act included a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. The 2017 Tax Act also provided for a one-time transition tax on certain foreign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, global intangible low taxed income, foreign derived intangible income deduction, additional limitations on executive compensation and limitations on the deductibility of interest. During 2019, Switzerland implemented tax reform that is effective for tax years 2020 and forward. As a result, the Company has remeasured the deferred tax assets, primarily comprised of net operating loss carryforwards, at the amount and rate in which it is anticipated they will reverse. Due to the enactment of the cantonal law, the Company recognized a deferred tax asset of $57.0 million in the fourth quarter of 2019, which was fully offset with a valuation allowance. The amount primarily related to deferred tax benefits associated with an allowed step-up of intangible assets for tax purposes. The Company must elect certain components of the Swiss tax reform when it files the 2019 tax return. The Company will continue to monitor Swiss tax reform for any additional interpretative guidance that could result in changes to the amounts that have been recorded. A reconciliation of income taxes to the amount computed by applying the statutory federal income tax rate to the pretax loss is summarized as follows (in thousands):
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Amounts computed at statutory federal rate |  | $ | (49,365 | ) |  | $ | (51,226 | ) |  | $ | (98,016 | )
Stock-based compensation and other permanent differences |  |  | 6,070 |  |  |  | 3,432 |  |  |  | 1,341 |
R&D credits |  |  | (16,687 | ) |  |  | (7,941 | ) |  |  | (5,573 | )
Change in valuation allowance |  |  | 99,846 |  |  |  | 34,333 |  |  |  | (28,230 | )
State taxes |  |  | (2,138 | ) |  |  | (1,017 | ) |  |  | (26 | )
Contingencies |  |  | 1,861 |  |  |  | 2,938 |  |  |  | 360 |
Foreign rate differential |  |  | 20,413 |  |  |  | 20,896 |  |  |  | 61,480 |
Tax Cuts and Jobs Act |  |  | — |  |  |  | — |  |  |  | 68,889 |
Switzerland Tax Reform |  |  | (59,181 | ) |  |  | — |  |  |  | — |
Other |  |  | 57 |  |  |  | (159 | ) |  |  | 894 |
Income tax expense |  | $ | 876 |  |  | $ | 1,256 |  |  | $ | 1,119 |
The tax years 2000-2018 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination. The Company recorded an uncertain tax position reserve of $1.9 million, $3.1 million and $0.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, due to the 2017 Tax Act, an adjustment of $1.1 million was made to remeasure the uncertain tax position reserve at December 31, 2017. Due to the valuation allowance recorded against the Company’s deferred tax assets, an immaterial amount of the total unrecognized tax benefits as of December 31, 2019 would reduce the annual effective tax rate if recognized. The Company does not anticipate that the amount of unrecognized tax benefits as of December 31, 2019 will significantly change within the next twelve months. The Company’s practice is to recognize interest and/or penalties related to uncertain income tax positions in income tax expense. The Company had no interest and/or penalties accrued on the Company’s consolidated balance sheets at December 31, 2019 or 2018, respectively. Further, the Company did not recognize any interest and/or penalties in the statement of operations for the years ended December 31, 2019, 2018 and 2017, respectively, related to uncertain tax positions. The following table provides a reconciliation of changes in unrecognized tax benefits (in thousands):
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of period |  | $ | 5,037 |  |  | $ | 1,933 |  |  | $ | 2,664 |
Additions related to current period tax positions |  |  | 1,908 |  |  |  | 3,104 |  |  |  | 361 |
Impact of Tax Cuts and Jobs Act |  |  | — |  |  |  | — |  |  |  | (1,092 | )
Balance at end of period |  | $ | 6,945 |  |  | $ | 5,037 |  |  | $ | 1,933 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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