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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company did not record an income tax provision for the periods presented.
Reconciliation between the tax provision computed at the federal statutory income tax rate and the Company's actual effective income tax rate are as follows:
Year Ended December 31,
202320222021
Federal statutory tax rate21 %21 %21 %
R&D tax credit1 2 2 
Stock-based compensation and other permanent differences(1)2 — 
Change in valuation allowance(21)(25)(23)
Total— %— %— %
The Company’s income taxes are accounted for in accordance with authoritative guidance, which requires the use of the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based upon the difference between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.
Significant components of net deferred tax assets are as follows (in thousands):
December 31,
20232022
Deferred tax assets:
Net operating losses$80,273 $65,197 
Property and equipment203 847 
R&D tax credit9,224 7,346 
Stock-based compensation3,829 2,082 
Capitalized R&D expenses20,644 12,971 
Inventory2,708 2,279 
Lease liability6,824 6,404 
Accruals and reserves2,713 2,758 
Total deferred tax assets126,418 99,884 
Valuation allowance(121,461)(94,056)
Net deferred tax assets4,957 5,828 
Deferred tax liabilities:
Right-of-use assets(4,957)(5,828)
Total deferred tax liabilities(4,957)(5,828)
Net deferred tax assets
$— $— 
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company's history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. The valuation allowance increased by $27.4 million during the year ended December 31, 2023.
As of December 31, 2023 and 2022, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $326.3 million and $264.6 million, respectively, expiring beginning 2028. As of December 31, 2023 and 2022, the Company has U.S. state and local NOL carryforwards of approximately $194.0 million and $155.7 million, respectively, expiring beginning 2028.
As of December 31, 2023 and 2022, the Company has federal research and development credit carryforwards of approximately $7.5 million and $6.0 million, respectively, available to reduce future taxable income, if any. As of December 31, 2023 and 2022, the Company has California research and development credit carryforwards of approximately $6.0 million and $4.8 million, respectively, available to reduce future taxable income, if any.
The federal research and development credit carryforwards expire beginning 2028 and California research and development credit carryforwards are indefinite.
Internal Revenue Code section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carryovers in excess of the Section 382 limitation. The Company has not performed an analysis to determine if a limitation applies and whether the limitation would cause the net operating losses to expire un-utilized.
The Company files federal, state, and foreign income tax returns. The tax periods 2008 through 2023 remain open in most jurisdictions. In addition, any tax losses that were generated in prior years and carried forward may also be subject to examination by respective authorities. The Company is not currently under examination by federal, state or foreign income tax authorities.
One of the provisions under the Tax Cuts and Jobs Act that became effective in tax years beginning after December 31, 2021 required the capitalization and amortization of research and experimental expenditures. The change in this US tax law did not have an impact on the Company's consolidated financial statements. The Company will continue to evaluate the impact of this tax law change on future periods.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 ( the Inflation Act) into law. The Inflation Act contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on corporate stock buy-backs. The various provisions of the Inflation Act did not have an impact on the Company’s consolidated financial statements and related notes.
A reconciliation of the change in the unrecognized tax benefit during the year is as follows (in thousands):
December 31,
202320222021
Beginning of year$2,700 $1,917 $1,407 
Additions for tax positions related to:
Current year842 783 510 
Prior years(150)— — 
End of year$3,392 $2,700 $1,917 
As of December 31, 2023, the Company had a total of $3.4 million of gross unrecognized tax benefits, none of which would affect the effective tax rate upon realization. The Company currently has a full valuation allowance against its U.S. net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future.
The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2023, the Company has not accrued interest or penalties related to uncertain tax positions.