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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 8. INCOME TAXES
We are subject to income taxes both in the United States and certain foreign jurisdictions in which we operate, and we use estimates in determining our provisions for income taxes. Significant management judgement is required in determining our provision for income taxes, deferred tax assets and liabilities, and valuation allowances recorded against net deferred tax assets in accordance with U.S. GAAP. These estimates and judgements occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in the current or subsequent period.
We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and the amount of the recognized tax benefit is still appropriate.
We account for Global Intangible Low-taxed Income as a period cost.
During the years ended December 31, 2024, 2023, and 2022 income/(loss) before taxes from U.S. operations were ($311.0) million, ($318.9) million, and ($315.7) million, respectively, and income/(loss) before taxes from foreign operations was $1.5 million, $0.7 million, and $1.8 million, respectively.
Income Tax Provision (Benefit)
Income tax provision (benefit) consists of the following:
Years ended December 31,
(in thousands)202420232022
Total current$521 $— $— 
Deferred:
Federal(8)(9,956)— 
State(197)(1,468)— 
Foreign— — — 
Total deferred(205)(11,424)— 
Income tax provision (benefit)$316 $(11,424)$— 
Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows:
Years ended December 31,
202420232022
Statutory tax rate 21.0 %21.0 %21.0 %
State tax rate, net of federal benefit1.9 3.0 4.4 
Change in valuation allowance (10.8)(20.0)(25.1)
Tax credits1.5 2.0 2.2 
Share-based compensation(3.7)(2.1)(2.2)
Merger Expenses— (0.1)— 
Goodwill impairment
(9.8)— — 
Other(0.2)(0.2)(0.4)
Total(0.1)%3.6 %(0.1)%
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets for federal and state income taxes are as follows:
December 31,
(in thousands)20242023
Deferred tax assets:
Net operating loss carryforwards$434,122 $435,488 
Research and development credits 91,416 83,922 
Capitalized research and experimental expenses73,281 63,196 
Accruals and reserves10,506 16,872 
Cancellation of indebtedness income and interest expense20,424 14,907 
Share-based compensation18,195 18,584 
Operating lease liability5,618 9,510 
Total deferred tax assets 653,562 642,479 
Less: Valuation allowance(558,794)(525,703)
Total deferred tax assets:94,768 116,776 
Intangibles(91,504)(109,488)
Fixed assets(261)(548)
Operating lease right-of-use assets(3,549)(7,491)
Total deferred tax liabilities(95,314)(117,527)
Deferred tax liabilities, net$(546)$(751)
At December 31, 2024, we maintained a valuation allowance against our net deferred tax assets which totaled $558.8 million, including net operating loss carryforwards and research and development credits of $434.1 million and $91.4 million, respectively.
A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. We regularly assess the need for a valuation allowance against our deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that our deferred income tax assets will be realized. In evaluating our ability to recover our deferred income tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. We maintain a valuation allowance on the net deferred tax assets of our U.S. entities as we have concluded that it is more likely than not that we will not realize our deferred tax assets.
For the year ended December 31, 2024, the Company's valuation allowance increased to $558.8 million, primarily because of an increase in our credits and capitalized research & experimental expenses that were fully offset by a valuation allowance. For the year ended December 31, 2023, the Company's valuation allowance increased to $525.7 million, primarily because of an increase in our net operating losses, credits, and capitalized research and experimental expenses that were fully offset by a valuation allowance.
As of December 31, 2024, we had a net operating loss carryforward for federal income tax purposes of approximately $1,704.2 million, of which $783.2 million is subject to expiration beginning in 2025. We had a total state net operating loss carryforward of approximately $1,170.6 million, which is subject to annual expirations. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization.
We have federal credits of approximately $64.4 million, a portion of which will begin to expire in 2025 if not utilized and state research credits of approximately $54.6 million, which have no expiration date. These tax credits are subject to the same limitations discussed above.
As of December 31, 2024, our total unrecognized tax benefit was $17.7 million. A reconciliation of the beginning and ending unrecognized tax benefit balance is as follows:
(in thousands)
Balance as of December 31, 2021$8,335 
Decrease in balance related to tax positions taken in prior year (10)
Increase in balance related to tax positions taken during current year 2,085 
Balance as of December 31, 202210,410 
Increase in balance related to tax positions taken in prior year 2,044 
Increase in balance related to tax positions taken during current year 2,100 
Balance as of December 31, 202314,554 
Decrease in balance related to tax positions taken in prior year (6)
Increase in balance related to tax positions taken during current year 3,128 
Balance as of December 31, 2024$17,676 
Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2024 and 2023, we had no accrued interest or penalties due to our net operating losses available to offset any tax adjustment. If total unrecognized tax benefits were realized in the future, it would not result in any tax benefit as we currently have a full valuation allowance. We file U.S. federal and various state income tax returns. For U.S. federal and state income tax purposes, the statute of limitations currently remains open for the years ending December 31, 2021 to present and December 31, 2020 to present, respectively. In addition, all of the net operating losses and research and development credit carryforwards that may be utilized in future years may be subject to examination. We are not currently under examination by income tax authorities in any jurisdiction.