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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For the year ended December 31, 2022, income tax expense totaled $20.9 million, and consisted of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020 |  |  |  |
Current: |  |  |  |  |  |  |  |  |
U.S.: |  |  |  |  |  |  |  |  |
Federal | $ | 8.2 |  |  | $ | — |  |  | $ | — |  |  |  |  |
State and local | 12.7 |  |  | — |  |  | — |  |  |  |  |
Total current | 20.9 |  |  | — |  |  | — |  |  |  |  |
Deferred: |  |  |  |  |  |  |  |  |
U.S.: |  |  |  |  |  |  |  |  |
Federal | — |  |  | — |  |  | — |  |  |  |  |
State and local | — |  |  | — |  |  | — |  |  |  |  |
Total deferred | — |  |  | — |  |  | — |  |  |  |  |
Income tax expense | $ | 20.9 |  |  | $ | — |  |  | $ | — |  |  |  |  |
The Company generated taxable income for the year ended December 31, 2022 primarily due to revenue recognition for tax purposes from the ARV-471 Collaboration Agreement and the mandatory capitalization of qualified research and development expenses incurred on or after January 1, 2022, which, upon recognition for tax purposes, would create additional deferred tax assets. Under the Tax Cuts and Jobs Act of 2017, qualified research expenses incurred after 2021 are no longer immediately deductible for tax purposes and instead must be capitalized and amortized for tax purposes. For the years ended December 31, 2021 and 2020, the Company had no income tax expense due to incurred operating losses. The Company had also not recorded any income tax benefits for the net operating losses incurred in each of those periods due to its uncertainty of realizing a benefit from those items. All of the Company’s losses before income taxes were generated in the United States. A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2022, 2021 and 2020 were as follows:
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Return to provision | 3.6 | % |  | 1.1 | % |  | — | %
Federal research tax credit | 3.4 | % |  | 2.7 | % |  | 4.1 | %
Other | (0.1 | %) |  | — | % |  | — | %
Uncertain tax positions | (1.2 | %) |  | — | % |  | — | %
Stock compensation | (1.4) | % |  | (2.7) | % |  | (1.7) | %
State taxes | (1.6) | % |  | 16.3 | % |  | (0.1) | %
Change in valuation allowance | (31.7) | % |  | (38.4) | % |  | (23.3) | %
| (8.0 | %) |  | 0.0 | % |  | 0.0 | %
Deferred income taxes represent the tax effect of transactions that are reported in different periods for financial and tax reporting purposes. Temporary differences and carryforwards that give rise to a significant portion of the deferred income tax benefits and liabilities were as follows as of December 31, 2022 and 2021:
| December 31,
(dollars in millions) | 2022 |  | 2021
Deferred income tax assets: |  |  |
Deferred revenue | $ | 143.0 |  |  | $ | 10.0 |
Capitalized research and development | 56.3 |  |  | — |
Stock compensation | 25.9 |  |  | 15.4 |
Tax credits | 10.4 |  |  | 18.8 |
Loss carryforwards | 3.8 |  |  | 97.0 |
Other | 7.7 |  |  | 3.3 |
Total deferred income tax assets | 247.1 |  |  | 144.5 |
Deferred income tax liabilities: |  |  |
Property, equipment and leasehold improvements | (2.6) |  |  | (3.6) |
Other | (1.0) |  |  | (1.4) |
Total deferred income tax liabilities | (3.6) |  |  | (5.0) |
Less valuation allowance | (243.5) |  |  | (139.5) |
Net deferred income tax liability | $ | — |  |  | $ | — |
A valuation allowance is established when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company has provided a valuation allowance against the full amount of the deferred tax assets since it is more likely than not that the benefits will not be realized. This assessment is based on the Company's historical cumulative losses, which provide strong objective evidence that cannot be overcome with projections of income, as well as the fact the Company expects continuing losses in the future. All, or a portion of, the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to utilize these potential tax benefits. The valuation allowance increased by $104.0 million and $74.6 million in 2022 and 2021, respectively, due to revenue recognition for tax purposes from the ARV-471 Collaboration Agreement and the mandatory capitalization of qualified research and development costs in 2022, and increases in net operating loss carryforwards, tax credit carryforwards, stock compensation expense, and research and development tax credits in 2021. The Company had zero and $373.6 million of federal net operating loss carryforwards as of December 31, 2022 and 2021, respectively. Federal net operating loss carryforwards as of December 31, 2017 expire at various dates through 2037 and federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such carryforwards is limited to 80% of the Company’s taxable income in the year in which carryforwards are used. The Company had $63.4 million and $346.9 million of state and local net operating loss carryforwards as of December 31, 2022 and 2021, respectively, that expire at various dates through 2041. The Company had zero and $15.2 million of federal tax credit carryforwards as of December 31, 2022 and 2021, respectively. The Company had $13.1 million and $4.5 million of state tax credit carryforwards as of December 31, 2022 and 2021, respectively, which expire at various dates through 2037. During 2021, the Company performed a Section 382 analysis to determine whether an ownership change occurred for tax purposes. Based on this analysis, the Company determined that ownership changes occurred on July 31, 2018 and December 31, 2020 due to various equity offerings, vesting of restricted stock awards and stock option exercises. These ownership changes resulted in Section 382 limitations on the Company’s net operating loss and tax credit carryforwards generated before these dates. However, because the amount of the Section 382 limitations (including carryover of the unused Section 382 limitations and realized built-in gains) exceeds the amount of the Company’s carryforwards generated before these dates, the limitations will not affect the Company's ability to fully utilize these carryforwards. The Company complies with the provisions of ASC 740 in accounting for its uncertain tax positions. ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. As of December 31, 2022, the Company recorded net uncertain tax positions of $3.2 million relating primarily to state income tax filing positions in various jurisdictions. As of December 31, 2021, the Company had no unrecognized tax benefits. Changes in the Company's gross unrecognized tax benefits were as follows:
| Year ended December 31,
(dollars in millions) | 2022 |  | 2021 |  | 2020
Beginning of period balance - gross | $ | — |  |  | $ | — |  |  | $ | — |
Increases for tax positions taken during the current period | 4.1 |  |  | — |  |  | — |
Decreases for tax positions taken during a prior period | — |  |  | — |  |  | — |
End of period balance - gross | $ | 4.1 |  |  | $ | — |  |  | $ | — |
The Company recognizes interest accrued related to unrecognized tax benefits and penalties in tax expense. The Company's accrual for interest and penalties as of December 31, 2022 was immaterial. The Company is required to file income tax returns in the U.S. Federal and various state jurisdictions. As a result of the Company’s net operating loss carryforwards, the Company’s federal and state statutes of limitations generally remain open for all tax years until its net operating loss and tax credit carryforwards are utilized or expire prior to utilization. The Company does not currently have any federal or state income tax examinations in progress. For the years ended December 31, 2022, 2021, and 2020, the Company recorded a benefit from expected cash refunds to be provided by the State of Connecticut, equal to 65% of research and development credits, of zero, $1.6 million, and $1.8 million, respectively, which is included in Other income, net in the accompanying consolidated statements of operations and comprehensive loss, due to the Company being a state income and franchise taxpayer in 2022, and a state franchise taxpayer in 2021 and 2020. The benefit results from the exchange of the state research and development tax credit carryforwards for cash refunds. As of December 31, 2022 and 2021, the Company had receivables of $1.9 million and $3.4 million, respectively, relating to research and development credits due to the Company.

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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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