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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes Tax Rates Applicable to the Income of the Company and its Subsidiaries As a result of the Reorganization described in Note 1, the Company is taxed according to U.S. federal and state tax laws and Israeli tax laws. The statutory tax rates applicable to the income of the Company and its subsidiaries are as follows:
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
89bio, Inc. |  |  | 21 | % |  |  | 21 | %
89Bio Ltd |  |  | 23 | % |  |  | 23 | %
89bio Management, Inc. |  |  | 21 | % |  |  | 21 | %
UAB 89bio Lithuania |  |  | 15 | % |  |  | 15 | %
The income tax benefit (expense) is comprised of (in thousands):
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (11 | ) |  | $ | (167 | )
State |  |  | 1 |  |  |  | (1 | )
Foreign |  |  | — |  |  |  | (30 | )
Total |  |  | (10 | ) |  |  | (198 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 69 |  |  |  | (20 | )
Total |  |  | 69 |  |  |  | (20 | )
Income tax benefit (expense) |  | $ | 59 |  |  | $ | (218 | )
Deferred Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows (in thousands):
|  | As of December 31, |
|  | 2020 |  |  | 2019 |
U.S. net operating loss carryforwards |  | $ | 11,342 |  |  | $ | 1,916 |
Israel net operating loss carryforwards |  |  | 3,978 |  |  |  | 4,328 |
Research and development expenses |  |  | 5,392 |  |  |  | 3,419 |
Accrued expenses |  |  | 635 |  |  |  | 349 |
Other |  |  | 658 |  |  |  | 10 |
Total deferred tax assets |  |  | 22,005 |  |  |  | 10,022 |
Less: valuation allowance |  |  | (21,936 | ) |  |  | (10,022 | )
Net deferred tax assets |  | $ | 69 |  |  | $ | — |
U.S. research and development expenses and accrued expenses disclosed for the year ended December 31, 2019 were previously reported in the 2019 notes to the consolidated financial statements as a component of other. The reclassification had no impact on the consolidated financial statements for the year ended December 31, 2019. As of December 31, 2020 and 2019, the Company recorded a valuation allowance of $21.9 million and $10.0 million, respectively, in respect of deferred tax assets resulting from tax loss carryforwards and other temporary differences. Realization of deferred tax assets is dependent upon future earnings, if any, the time and amount of which are uncertain. The Company regularly assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes based upon the weight of available evidence that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through an adjustment to income tax expense. The valuation allowance increased by $11.9 million in 2020, which primarily relates to significant taxable losses. The change in valuation allowance during 2020 also includes a partial release of the valuation allowance against deferred tax assets in Israel due to achievement of recent profitability and the expectation of future profitability in the jurisdiction, which decreased the valuation allowance by $69,000 in 2020. The valuation allowance increased by $6.5 million in 2019, which primarily relates to significant taxable losses. It also includes a recapture of the valuation allowance against the Company’s deferred tax assets in the United States due to the Reorganization that occurred in 2019, which increased the valuation allowance by $20,000. Available Carryforward Tax Losses and Credits As of December 31, 2020, the Company has an accumulated tax loss carryforward of approximately $54.1 million and $17.3 million for U.S. and Israeli tax purposes, respectively. As of December 31, 2019, the Company has an accumulated tax loss carryforward of approximately $9.1 million and $23.8 million for U.S. and Israeli tax purposes. Federal net operating losses generated after 2017 can be carried forward indefinitely but utilization will be limited to 80% of taxable income in the period that net operating losses are being utilized. Carryforward tax losses in Israel have no expiration date. As of December 31, 2020, the Company has federal research and development credit carryforwards of approximately $0.6 million, which expire beginning in 2040. As of December 31, 2020 and 2019, the Company has state research and development credit carryforwards of approximately $0.7 million and $0.2 million, respectively, which will carry forward indefinitely. Loss from Continuing Operations, Before Income Tax The Company recorded a loss from continuing operations, before income tax for the periods indicated as follows (in thousands):
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
United States |  | $ | (58,760 | ) |  | $ | (19,502 | )
Lithuania |  |  | (73 | ) |  |  | 200 |
Israel |  |  | 9,275 |  |  |  | (37,900 | )
Net loss before income tax |  | $ | (49,558 | ) |  | $ | (57,202 | )
Reconciliation of Income Tax Benefit (Expense) The reconciliation of income tax benefit (expense) based on the statutory tax rate to the effective tax rate is as follows (in thousands):
|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Income tax benefit computed at statutory rates |  | $ | 8,285 |  |  | $ | 13,095 |
Research and development credits, net of uncertain tax position |  |  | 815 |  |  |  | 93 |
Change in valuation allowance |  |  | (11,914 | ) |  |  | (6,520 | )
Change in Israel effective tax rate due to the 2019 reorganization |  |  | 647 |  |  |  | (734 | )
Foreign rate differential |  |  | 1,671 |  |  |  | — |
Revaluation of convertible preferred stock liability |  |  | — |  |  |  | (6,039 | )
Other |  |  | 555 |  |  |  | (113 | )
Income tax benefit (expense) |  | $ | 59 |  |  | $ | (218 | )
Research and development credits, net of uncertain tax position disclosed for the year ended December 31, 2019 were previously reported in the 2019 notes to the consolidated financial statements as a component of other. The reclassification has no impact on the consolidated financial statements for the year ended December 31, 2019. Utilization of the U.S. federal and state net operating losses and credit carryforwards may be subject to an annual limitation provided for in Section 382 of the Internal Revenue Code and similar state codes. Any annual limitation could result in a deferral of the utilization of the net operating loss and credit carryforwards. Unrecognized Tax Benefits During the years ended December 31, 2020 and 2019, the amount of gross unrecognized tax benefits increased by $0.3 million and $39,000, respectively. If the total amount of unrecognized tax benefits was recognized, it would not have an impact to the effective tax rate as it would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. The Company recognizes interest and penalties related to uncertain tax positions as part of the income tax provision. As of December 31, 2020 and 2019, such interest and penalties are not material. The Company is subject to taxation in the United States, California, and several foreign jurisdictions. To date, the Company has not been subject to any federal or state income tax audits. The Company is currently under examination by the Israeli taxing authorities for 2019 and 2018. As of December 31, 2020, all tax years remain open to examination. In March 2020 and December 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the Consolidated Appropriation Act (“CAA”), respectively, as a result of the COVID-19 pandemic, which contain among other things, numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The Company has evaluated the current legislation and at this time, does not anticipate the CARES Act or the CAA to have a material impact on its consolidated financial statements.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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