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Note 13 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 13—Income Taxes 

 

The components of income tax benefit from continuing and discontinued operations were as follows:

 

  

December 31,

 
  

2023

  

2022

  

2021

 
  

(In thousands)

 

Continuing operations:

            

Current income tax expense:

            

Federal

 $—  $—  $— 

State

  —   —   — 

Total current income tax expense

  —   —   — 
             

Deferred income tax benefit:

            

Federal

  —   —   — 

State

  —   —   — 

Total deferred income tax benefit

  —   —   — 

Income tax benefit in continuing operations

 $—  $—  $— 
             

Income tax expense as a component of discontinued operations

 $462  $3,952  $1,006 

 

For the years ended December 31, 2023, 2022 and 2021, for federal and state income tax purposes, we had net losses from continuing operations and net income from discontinued operations, which resulted in an overall tax loss. At December 31, 2023, 2022 and 2021, we had federal net operating loss ("NOL") carryforwards of approximately $398.6 million, $361.4 million and $630.6 million, respectively, for all periods. At December 31, 2023, 2022 and 2021, we had state NOL carryforwards of approximately $245.8 million, $226.3 million and $245.1 million, respectively. In 2023, we had a net loss for federal income tax purposes and in 2022 and 2021, we utilized existing net operating loss carryforwards of $268.6 million and $245.1 million, respectively to fully offset our federal tax liability for both periods. We recorded state income tax expense of $0.5 million, $4.0 million and $1.0 million in discontinued operations in 2023, 2022 and 2021, respectively as we did not have adequate net operating losses and tax credits to fully offset our state tax liability.

 

Deferred income tax assets and liabilities reflect the tax effect of net operating loss and tax credit carryforwards and the net temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

 

Significant components of deferred income taxes were as follows:

 

 

  

December 31,

 
  

2023

  

2022

 
  

(In thousands)

 

Deferred tax assets:

        

Net operating loss carryforwards

 $95,183  $85,887 

Research and development tax credits

  92,837   78,992 

Capitalized research and development

  39,318   21,864 

OMIDRIA royalty obligation

  28,903   28,938 

Stock-based compensation

  10,132   12,517 

Lease liability

  5,085   5,926 

Other

  10,283   9,234 

Total deferred tax assets

  281,741   243,358 

Deferred tax liabilities:

        

OMIDRIA contract royalty asset

  (38,832)  (34,883)

Right of use assets

  (4,304)  (4,987)

Property and equipment

  (122)  (288)

Total deferred tax liabilities

  (43,258)  (40,158)

Net deferred tax assets before valuation allowance

  238,483   203,200 

Less valuation allowance

  (238,483)  (203,200)

Net deferred tax liabilities

 $—  $— 

 

As of December 31, 2023, we had federal net operating loss carryforwards of approximately $398.6 million and state net operating loss carryforwards of approximately $245.8 million. Pre-2018 federal net operating losses of $109.8 million expire between 2035 and 2037. Post-2018 federal net operating losses of $288.8 million do not expire. Research and development tax credit carryforwards of $93.0 million expire between 2024 and 2043.

 

The Tax Cuts and Jobs Act was enacted on December 22, 2017 and includes the requirement to capitalize and amortize research and experimental expenditures beginning in 2022. Prior to 2022, we expensed these costs as incurred for tax purposes. 

 

Reconciliation of income tax computed at federal statutory rates to the reported provisions for income taxes from continuing operations are as follows:

 

  

Year ended December 31,

 
  

2023

  

2022

  

2021

 

U.S. Federal statutory rate on net loss

  (21.0)%  (21.0)%  (21.0)%

State tax, net of federal tax benefit

  (2.1)%  (1.7)%  (0.6)%

Change in valuation allowance

  27.7%  28.3%  26.9%

Tax credits

  (8.0)%  (6.8)%  (5.5)%

Stock compensation

  1.5%  1.4%  0.3%

Other

  1.9%  (0.2)%  (0.1)%

Effective tax rate

  0.0%  0.0%  0.0%

 

We file federal and certain state income tax returns, which provides varying statutes of limitations on assessments. However, because of net operating loss carryforwards, substantially all our tax years remain open to federal and state tax examination.

 

As of December 31, 2023 and 2022, the total amount of gross unrecognized tax benefits was $2.0 million and $0.2 million, respectively. We recognized $0.3 million of interest and penalties at December 31, 2023 as an unrecognized tax benefit. As of December 31, 2023, $1.8 million of the total unrecognized tax benefits, if recognized, would have an impact on our effective tax rate. We estimate that there will be no material changes in this uncertain tax position for the next 12 months. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

 

The following table summarizes the activities related to our gross unrecognized tax benefits (in thousands):  

 

Balance at December 31, 2022

 $212 

Increase in balance related to tax positions taken during prior years

  

1,796

 

Decrease in balance related to tax positions during prior years

  (30)

Decrease in balance as a result of a lapse of the applicable statute of limitations

  (12)

Balance at December 31, 2023

 $1,966