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Income Tax
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
The components of loss before income taxes by tax jurisdiction were as follows:
Year Ended December 31,
202220212020
United States$(185,612)$(165,160)$(47,911)
Foreign730 591 303 
Loss before income taxes$(184,882)$(164,569)$(47,608)
The components of income tax expense (benefit) were as follows:
Year Ended December 31,
202220212020
Current:
Federal$— $— $— 
State353 38 18 
Foreign18 — 147 
371 38 165 
Deferred:
Federal — — — 
State— — — 
Foreign(473)(678)(78)
(473)(678)(78)
Total:
Federal — — — 
State353 38 18 
Foreign(455)(678)69 
Income tax expense (benefit)$(102)$(640)$87 
The reconciliation of the Company's effective tax rate to the statutory federal rate is as follows:
Year Ended December 31,
202220212020
Taxes at federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal effect4.6 %4.0 %4.4 %
Share-based compensation3.9 %4.5 %(8.5)%
Section 162(m) limitation(13.8)%(8.3)%— %
Other1.4 %(0.3)%(0.1)%
Change in valuation allowance(17.0)%(20.5)%(17.0)%
Effective tax rate0.1 %0.4 %(0.2)%
Deferred tax assets and liabilities consist of the following:
December 31
20222021
Deferred tax assets:
Federal and state net operating losses$33,497 $41,418 
Research and development credits77 77 
Property and equipment205 (47)
Accruals and other20,884 16,173 
Share-based compensation14,490 7,124 
R&D capitalization expenditures23,404 — 
Reserve for contract contingencies and processing errors
614 818 
Deferred revenue6,011 3,132 
Lease liability3,061 3,730 
Total deferred tax assets102,243 72,425 
Less valuation allowance(98,816)(68,847)
Total deferred tax assets, net of valuation allowance3,427 3,578 
Deferred tax liabilities:
Right-of-use asset(2,220)(2,728)
Total deferred tax liabilities(2,220)(2,728)
Net deferred tax assets$1,207 $850 
In accordance with ASC 740 and based on all available evidence on a jurisdictional basis, the Company believes that it is more likely than not that its U.S. deferred tax assets will not be utilized and has recorded a full valuation allowance against its net deferred tax assets in the U.S. jurisdiction. The Company assesses on a periodic basis the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income or losses and expectations and risks associated with estimates of future taxable income in assessing the need for the valuation allowance. If it is not more likely than not that the Company expects to recover its deferred tax assets, the Company will increase its provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. The available negative evidence at December 31, 2022 and 2021 included historical and projected future operating losses. As a result, the Company concluded that an additional valuation allowance of $30.0 million and $32.4 million was required to reflect the change in its deferred tax assets prior to valuation allowance during 2022 and 2021, respectively. As of December 31, 2022 and 2021, the Company considered it more likely than not that substantially all of its deferred tax assets would not be realized.
The Tax Cuts and Jobs Act of 2017 (TCJA) requires taxpayers to capitalize and amortize research and development (R&D) expenditures under Section 174 for tax years beginning after December 31, 2021.  This became effective for the Company during the year ending December 31, 2022, and resulted in the capitalization of R&D costs of $23.4 million. The Company will amortize these costs for tax purposes over 5 years for R&D performed in the US and over 15 years for R&D performed outside of the US.
As of December 31, 2022, the Company had net operating loss carryforwards of approximately $130.0 million and $85.3 million for federal and state tax purposes, respectively. Of the Company's federal net operating loss carryforwards as of December 31, 2022, $121.5 million can be carried forward indefinitely but is limited to 80% of taxable income. If not utilized, the federal and state net operating carryforwards will begin to expire in 2036 and 2025, respectively. In addition, the Company has research and development tax credit carryforwards of approximately $0.2 million for federal income tax purposes. If not utilized, the federal research and development tax credit carryforwards will begin to expire in 2031. The California state research credit can be carried forward indefinitely.
Under Section 382 of the Internal Revenue Code of 1986, as amended , the Company's ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if the Company has experienced an ownership change. As of December 31, 2022, the Company has concluded that it has experienced ownership changes since inception and that its utilization of net operating loss carryforwards will be subject to annual limitations. However, it is not expected that the annual limitations will result in the expiration of tax attribute carryforwards prior to utilization.
The Company files federal and various state tax returns in the U.S., as well as tax returns in the U.K and Australia. Due to tax attribute carryforward still being utilized, the Company's federal and state returns remain open for examination since inception.
The Company made an accounting policy election to provide for the Global Intangible Low-Taxed Income (GILTI) tax expense in the year the tax is incurred as a period cost. The Company elected and applied the tax law ordering approach when considering GILTI as part of its valuation allowance.
The Company did not have any material unrecognized tax benefits in 2022, 2021, and 2020.
The Company did not incur any interest expenses or penalties or have outstanding liabilities on the balance sheets associated with unrecognized tax benefits for the year ended December 31, 2022. The Company does not expect any significant increases or decreases to its unrecognized benefits within the next twelve months.