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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the years ended December 31, 2024, 2023, and 2022, income (loss) before income taxes consisted of the following:
(In thousands)202420232022
Domestic$89,556 $48,662 $(89,440)
Foreign871 215 91 
Total income (loss) before income taxes
$90,427 $48,877 $(89,349)
For the years ended December 31, 2024, 2023, and 2022, the components of the income tax provision were as follows:
(In thousands)202420232022
Current:
Federal$(1,394)$(978)$— 
State(2,593)(902)(494)
Foreign(112)(110)(42)
Total current$(4,099)$(1,990)$(536)
Deferred:
Federal$110,923 $— $— 
State18,335 — — 
Foreign— — — 
Total deferred$129,258 $— $— 
Income tax benefit (provision)
$125,159 $(1,990)$(536)
The Company had an effective tax rate of (138.41)%, 4.07%, and (0.60)% for the years ended December 31, 2024, 2023, and 2022, respectively. The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2024, 2023, and 2022 were as follows:
202420232022
Tax at federal statutory rate21.00  %21.00  %21.00  %
State tax, net of federal benefit2.03 1.42 (0.38)
Stock-based compensation1.63 10.85 (4.02)
Officer’s compensation limitation1.23 6.81 (1.51)
Foreign-derived intangible income benefit
(3.76)(5.56)— 
Other items0.16 (0.79)(0.60)
Research and development credits(5.50)(9.43)4.36 
Net operating loss expiration— 9.91 — 
Change in valuation allowance(155.20)(30.14)(19.45)
Effective tax rate(138.41) %4.07  %(0.60) %
Deferred income taxes reflect the 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. As of December 31, 2024 and 2023, the significant components of the Company’s deferred tax assets and liabilities were as follows:
(In thousands)20242023
Deferred tax assets:
Net operating loss carryforwards$10,799 $44,562 
Stock-based compensation8,056 8,766 
Operating lease liability2,561 2,708 
Accrued liabilities, reserves and other7,080 9,797 
Capitalized research and development78,606 50,396 
Tax Credits25,882 25,609 
Gross deferred tax assets132,984 141,838 
Valuation allowance— (140,339)
Total deferred tax assets132,984 1,499 
Deferred tax liabilities:
Prepaid expenses(250)(502)
Operating lease asset(1,316)(997)
Acquired intangibles
(2,639)— 
Total deferred tax liabilities(4,205)(1,499)
Net deferred tax assets$128,779 $— 
The change in valuation allowance for deferred tax assets was as follows for the periods presented:
(In thousands)
Year Ended December 31,
Balance at
Beginning of Year
Additions Charged to
Costs & Expenses
Additions Charged to Other AccountsDeductionsBalance at End of Year
2024$140,339 $(140,339)$— $— $— 
2023157,353 (16,262)(752)— 140,339 
2022132,162 24,489 702 — 157,353 
The Company has released the valuation allowance of $140.3 million as of December 31, 2024. This release reflects the Company’s determination that it is more likely than not that its U.S. federal and state deferred tax assets will be realized. As a result, the income tax benefit for the year was primarily attributable to the release of this valuation allowance. Previously, the Company recorded a full valuation allowance of $140.3 million as of December 31, 2023.
The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that some or all of its deferred tax assets will not be realized. This assessment considers all available positive and negative evidence, including cumulative pre-tax income, anticipated future earnings, and the impact of permanent differences and other comprehensive losses. As of December 31, 2024, the Company achieved cumulative U.S. pre-tax income during the prior three years, adjusted for permanent differences and other comprehensive losses, which provided objective and verifiable evidence supporting the release of the valuation allowance. This sustained profitability, combined with anticipated future taxable income, led the Company to conclude, based on the weight of all available evidence, that it is more likely than not that its U.S. federal and state deferred tax assets will be realized.
The Company has federal net operating loss, which is referred to as NOL, carryforwards of approximately $18.9 million and $181.2 million as of December 31, 2024 and 2023, respectively. The federal NOL carryforwards of $18.9 million generated after December 31, 2017 can be carried forward indefinitely with utilization in any year limited to 80% of the Company’s taxable income. The Company has California NOL carryforwards of approximately $91.0 million and $81.3 million as of December 31, 2024 and 2023, respectively. California NOLs will begin to expire in 2032 if not utilized.
The Company has federal research and development credits of approximately $31.1 million and $29.1 million as of December 31, 2024 and 2023, respectively. The federal research and development credits will begin to expire in 2038 if not utilized. The Company has California research and development credits of approximately $16.7 million and $16.6 million as of December 31, 2024 and 2023, respectively. California research and development credits have an infinite carryforward period.
The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event that there is a change in ownership as provided by Section 382 of the Internal Revenue code and similar state provisions. Such a limitation could result in the expiration of the NOL carryforwards and tax credits before utilization, which could result in increased future tax liabilities.
Uncertain Tax Positions
As of December 31, 2024, the Company’s total amount of unrecognized tax benefits was $20.0 million, which would impact the Company’s effective tax rate, if recognized.
For the years ended December 31, 2024, 2023, and 2022, the activity related to the unrecognized tax benefits were as follows:
(In thousands)202420232022
Gross unrecognized tax benefits—beginning balance$18,157 $16,573 $15,391 
Increase related to tax positions taken during prior year112 342 1,234 
Decrease related to tax positions taken during prior year(19)(21)(1,253)
Increase related to tax positions taken during current year1,716 1,263 1,354 
Decrease related to expiration of unrecognized tax benefit— — (153)
Gross unrecognized tax benefits—ending balance$19,966 $18,157 $16,573 
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the provision for income taxes in the period that such determination is made. As of December 31, 2024, the Company did not currently recognize any penalties or interest charges relating to uncertain tax positions. The Company does not anticipate the recorded reserves to change significantly in the next 12 months.
The Company is subject to taxation in the United States and various other state and foreign jurisdictions. Due to certain tax attribute carryforwards, the tax years 2001 to 2023 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax. As of December 31, 2024, the Company was not under examination by the Internal Revenue Service. The Company is subject to ongoing audits by state and foreign tax authorities.