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Income Tax | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 14. INCOME TAXES The provision for income tax expense included on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021 consists of the following:
|  | December 31, |
|  | 2022 |  |  | 2021 |
|  | (In thousands) |
Current tax expense - federal and state |  | $ | 2 |  |  | $ | 1 |
Deferred tax benefit |  |  | — |  |  |  | — |
Change in valuation allowance |  |  | (2 | ) |  |  | (1 | )
Income tax provision |  | $ | — |  |  | $ | — |
The components of the net deferred tax asset as of December 31, 2022 and 2021 are as follows:
|  | December 31, |
|  | 2022 |  |  | 2021 |
|  | (In thousands) |
Deferred tax assets: |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 22,183 |  |  | $ | 13,442 |
Research and development tax credits |  |  | 11,074 |  |  |  | 3,721 |
Capitalized research and development costs |  |  | 46,260 |  |  |  | 33,435 |
Stock-based compensation |  |  | 4,396 |  |  |  | 1,857 |
Accrued bonus |  |  | 1,090 |  |  |  | 1,924 |
Lease liability |  |  | 1,165 |  |  |  | 953 |
Other |  |  | — |  |  |  | 26 |
Total deferred tax assets |  |  | 86,168 |  |  |  | 55,358 |
Deferred tax liabilities: |  |  |  |  |  |
Unrealized gain on marketable securities |  |  | — |  |  |  | — |
Right of use asset |  |  | (1,036 | ) |  |  | (896 | )
Other |  |  | (9 | ) |  |  | — |
Total deferred tax liabilities |  |  | (1,045 | ) |  |  | (896 | )
Valuation allowance |  |  | (85,123 | ) |  |  | (54,462 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
A reconciliation between the Company’s effective tax rate and the federal statutory rate for the years ended December 31, 2022 and 2021 are as follows:
|  | December 31,
|  | 2022 |  | 2021
Federal statutory rate |  | 21.00% |  | 21.00%
State income taxes, net of federal tax benefit |  | 6.33% |  | 10.21%
Permanent differences |  | 1.65% |  | 0.39%
Tax credits |  | 5.65% |  | 1.59%
True-up |  | (0.54)% |  | 3.87%
Change in rate |  | (4.67)% |  | 0.59%
Other items |  | 0.00% |  | 0.01%
Valuation allowance |  | (29.42)% |  | (37.66)%
Effective tax rate |  | 0.00% |  | 0.00%
As of December 31, 2022, the Company had federal net operating loss carryforwards of approximately $67.8 million and state net operating loss carryforwards of approximately $124.9 million. The federal net operating losses have an unlimited carryover period and state net operating losses begin to expire in 2038. As of December 31, 2022, the Company had federal research and development tax credit carryforwards of approximately $6.3 million and state research and development tax credit carryforwards of approximately $1.9 million. The federal research and development tax credits begin to expire in 2039 and state research and development tax credits have an unlimited carryover period. As of December 31, 2022, the Company had federal orphan drug tax credit carryforwards of approximately $8.0 million. The federal orphan drug tax credits begin to expire in 2042. All of the federal and state net operating losses may be subject to change of ownership limitations provided by the Internal Revenue Code and similar state provisions. An annual loss limitation may result in the expiration or reduced utilization of the net operating losses. As of December 31, 2022, the Company maintained a full valuation allowance on its net deferred tax assets. The valuation allowance was determined in accordance with the provisions of ASC 740, Accounting for Income Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses required that a full valuation allowance be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. As of December 31, 2022, the Company’s total amount of unrecognized tax benefits was $5.1 million, none of which would impact the Company’s effective tax rate, if recognized. The Company does not anticipate that the amount of unrecognized tax benefit will significantly increase within the next 12 months. For the years ended December 31, 2022 and 2021, the activity related to the unrecognized tax benefits were as follows (in thousands):
|  | Years Ended December 31, |
|  | 2022 |  |  | 2021 |
Unrecognized tax benefits at beginning of year |  | $ | 1,595 |  |  | $ | — |
Gross increases - current year tax positions |  |  | 2,524 |  |  |  | 893 |
Gross increases - prior year tax positions |  |  | 949 |  |  |  | 702 |
Unrecognized tax benefits at end of year |  | $ | 5,068 |  |  | $ | 1,595 |
The Company is subject to taxation in the United States and various state jurisdictions. All tax years remain subject to examination for U.S. federal and state purposes. All net operating losses generated to date are subject to adjustment for U.S. federal and state purposes. The Company is not currently under examination in federal or state jurisdictions.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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