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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
17.
Income Taxes

Consolidated (loss) income before provision for income taxes consisted of the following (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

U.S.

 

$

(6,275

)

 

$

292,460

 

 

$

75,954

 

Non U.S.

 

 

1,908

 

 

1,839

 

 

1,567

 

Total

 

$

(4,367

)

 

$

294,299

 

 

$

77,521

 

 

The components of the consolidated income tax provision for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

 

 

 

Year Ended December 31, 2023

 

 

Year Ended December 31, 2022

 

 

Year Ended December 31, 2021

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

(178

)

 

$

(165

)

 

$

345

 

State

 

 

1,533

 

 

 

897

 

 

 

260

 

Non-US

 

 

667

 

 

 

411

 

 

 

203

 

Total current tax expense

 

 

2,022

 

 

 

1,143

 

 

 

808

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

-

 

 

 

-

 

 

 

-

 

State

 

 

-

 

 

 

-

 

 

 

-

 

Non-US

 

 

-

 

 

 

-

 

 

 

-

 

Total deferred tax expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Total income tax expense

 

$

2,022

 

 

$

1,143

 

 

$

808

 

 

 

The difference between the consolidated income tax provision and the amount computed by applying the federal statutory income tax rate to the consolidated income before income taxes in the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Income tax provision (benefit) at federal statutory rate

 

$

(917

)

 

$

61,775

 

 

$

16,397

 

State tax

 

 

574

 

 

 

(2,942

)

 

 

3,576

 

Business credits

 

 

(2,050

)

 

 

(3,246

)

 

 

(982

)

Uncertain tax positions

 

 

334

 

 

 

586

 

 

 

424

 

Deferred compensation charges

 

 

830

 

 

 

(473

)

 

 

131

 

Change in valuation allowance

 

 

1,466

 

 

 

(324

)

 

 

(86,847

)

Section 162(m) limitation

 

 

1,963

 

 

 

1,779

 

 

 

1,241

 

Mark-to-market of warrants

 

 

-

 

 

 

(378

)

 

 

10,364

 

Net operating loss and tax credit limitation

 

 

-

 

 

 

(56,908

)

 

 

56,459

 

Other (1)

 

 

(518

)

 

 

879

 

 

 

(290

)

Foreign taxes

 

 

340

 

 

 

395

 

 

 

335

 

Total income tax expense

 

$

2,022

 

 

$

1,143

 

 

$

808

 

(1) Certain prior year amounts have been reclassified to conform to the current year presentation. In 2022 and 2021, Foreign taxes were included in Other.

 

Deferred tax assets and liabilities consisted of the following (in thousands):

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

96,336

 

 

$

113,228

 

Research credit carryforwards

 

 

34,940

 

 

 

33,444

 

Section 174 capitalization

 

 

22,556

 

 

 

15,308

 

Lease liability

 

 

8,868

 

 

 

9,530

 

Stock compensation

 

 

10,572

 

 

 

7,780

 

Accruals and reserves

 

 

15,808

 

 

 

9,089

 

Other

 

 

348

 

 

 

337

 

Total deferred tax assets

 

 

189,428

 

 

 

188,716

 

Less valuation allowance

 

 

(180,387

)

 

 

(178,920

)

Net deferred tax assets

 

 

9,041

 

 

 

9,796

 

Deferred tax liabilities:

 

 

 

 

 

 

Fixed assets

 

 

(2,667

)

 

 

(2,916

)

Operating lease right-of-use assets

 

 

(6,345

)

 

 

(6,785

)

Other

 

 

(29

)

 

 

(95

)

Total deferred tax liabilities

 

 

(9,041

)

 

 

(9,796

)

Net deferred tax assets

 

$

-

 

 

$

-

 

 

The tax benefit of net operating losses, temporary differences and credit carryforwards is required to be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on all available evidence as of December 31, 2023, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized, and, accordingly, has provided a valuation allowance.

 

The valuation allowance increased by $1.5 million during the year ended December 31, 2023 and decreased by $0.3 million during the year ended December 31, 2022. The increase in valuation allowance during the year ended December 31, 2023 was due to an increase in our deferred tax assets, predominantly related to Section 174 capitalization and increased reserves largely offset by utilization of net operating losses. The decrease in valuation allowance during the year ended December 31, 2022 was due to a decrease in our deferred tax assets, predominantly related to utilization of net operating losses, offset by updates to the Section 382 analysis.

As of December 31, 2023, we had federal net operating loss carryforwards of approximately $23.1 million, which began to expire in the year 2024, federal net operating loss carryforwards of approximately $353.5 million, which do not expire and federal research and development tax credits of approximately $28.3 million, which expire in the years 2024 through 2043.

As of December 31, 2023, we had net operating loss carryforwards for California and other states for income tax purposes of approximately $283.9 million, which expire in the years 2024 through 2040, and California state research and development tax credits of approximately $22.3 million, which do not expire.

As of December 31, 2023, we had no remaining net operating loss carryforwards for foreign income tax purposes.

Uncertain Income Tax positions

The total amount of unrecognized tax benefits was $12.1 million and $11.3 million as of December 31, 2023 and 2022, respectively. If recognized, none of the unrecognized tax benefits would affect the effective tax rate.

The following table summarizes the activity related to our unrecognized tax benefits:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

Balance at beginning of year

 

$

(11,339

)

 

$

(5,615

)

Tax positions related to the current year

 

 

 

 

 

 

Additions

 

 

(762

)

 

 

(670

)

Reductions

 

 

-

 

 

 

-

 

Tax positions related to the prior year

 

 

 

 

 

 

Additions

 

 

-

 

 

 

(5,054

)

Reductions

 

 

-

 

 

 

-

 

Settlements

 

 

-

 

 

 

-

 

Lapses in statute

 

 

 

 

 

-

 

Balance at end of year

 

$

(12,101

)

 

$

(11,339

)

 

Our policy is to account for interest and penalties as income tax expense. As of December 31, 2023, there was no interest and no penalties recognized in the provision for income taxes. As of December 31, 2022, there were no interest and no penalties recognized in the provision for income taxes. We do not anticipate any significant change within 12 months of this reporting date of its uncertain tax positions.

The Tax Reform Act of 1986 limits the annual use of net operating loss and tax credit carryforwards in certain situations where changes occur in stock ownership of a company. In the event there is a change in ownership, as defined, the annual utilization of such carryforwards could be limited. For the year ended December 31, 2021, we completed a preliminary analysis under Section 382 of the Internal Revenue Code indicating we experienced ownership changes in 2008, 2010, 2012, and 2019 that limited the future use of our pre-change federal and state net operating loss carryforwards and federal research and development tax credits. We finalized the study during the year ended December 31, 2022 and concluded that we only experienced ownership changes in 2008, 2010, and 2012, resulting in a significant reduction in the federal and state net operating loss carryforwards and federal research and development tax credits that are expected to expire unused. We have revised the net operating loss carryforwards and research and development tax credits that are expected to expire unused as a result of the annual limitations in the deferred tax assets and corresponding uncertain tax positions as of December 31, 2022. There were no changes to our Section 382 analysis as of December 31, 2023.

We are subject to income tax examinations for U.S. federal and state income taxes from 2002 forward. We are subject to tax examination in Germany from 2018 forward, in India from 2019 forward and in Italy from 2021 forward.