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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The domestic and foreign components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
202320222021
Domestic$(173,375)$(216,573)$(185,216)
Foreign(89,528)24,724 7,225 
Loss before income taxes$(262,903)$(191,849)$(177,991)
Income tax benefit for the year 2023 and the income tax expense for the years 2022 and 2021 consisted of the following (in thousands):
Year Ended December 31,
202320222021
Income tax expense:
Current:
Federal$— $— $— 
State— — — 
Foreign186 500 886 
Subtotal186 500 886 
Deferred:
Federal— — — 
State— — — 
Foreign(5,258)(71)(580)
Subtotal(5,258)(71)(580)
Income tax expense$(5,072)$429 $306 
The difference between the income tax benefit for the year 2023 and the income tax expense for the years 2022 and 2021 and the amount computed by applying the federal statutory income tax rate to loss before income taxes is explained as follows (in thousands):
Year Ended December 31,
202320222021
Tax at federal statutory rate$(55,210)$(40,288)$(37,372)
State taxes, net(1,372)(6,895)(6,734)
Foreign rate differential(4,273)309 362 
Global Intangible Low-taxed Income791 1,002 637 
Non-deductible stock-based compensation4,770 3,545 2,770 
Research credits(7,020)(6,694)(5,230)
Change in valuation allowance49,016 44,005 45,373 
Transfer pricing settlement— 4,343 — 
Goodwill impairment9,764 — — 
Other(1,538)1,102 500 
Income tax expense$(5,072)$429 $306 
Deferred income taxes reflect the net tax effects of 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 the Company’s deferred tax assets and liabilities are as follows (in thousands):
December 31,
20232022
Assets:
Deferred tax assets:
Net operating loss carryforwards$196,719 $174,129 
Research and development tax credit carryforwards54,336 44,264 
Stock-based compensation5,983 7,695 
Deferred revenue— 38,700 
Capitalized research71,675 37,985 
Fixed assets17,152 10,087 
Intangible assets101 — 
Lease liability8,559 10,074 
Accruals and reserves2,409 1,603 
Other259 283 
Total deferred tax asset357,193 324,820 
Valuation allowance351,430 301,840 
Deferred tax assets5,763 22,980 
Liabilities:
Intangible assets— (13,512)
Operating lease right-of-use assets(5,763)(14,620)
Deferred tax liabilities(5,763)(28,132)
Total net deferred tax liabilities$— $(5,152)
The deferred tax assets and liabilities based on tax jurisdictions are presented on the Consolidated Balance Sheets as follows (in thousands):
December 31,
20232022
Deferred tax assets (included in Other non-current assets on the Consolidated Balance Sheets)$— $1,118 
Deferred tax liabilities— (6,270)
Net deferred tax liabilities$— $(5,152)
The income tax benefit for the period-ended December 31, 2023 was primarily driven by the reduction of the foreign deferred tax liability due to the impairment of the indefinite-lived intangible asset and was offset by the setup of the Sangamo United Kingdom’s (“U.K.”) valuation allowance. The income tax expense for the years ended December 31, 2022 and December 31, 2021 was due to foreign income taxes and partially offset by a foreign deferred tax benefit.
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. The Company regularly assesses the need for a valuation allowance against its deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that the Company’s deferred income tax assets will be realized. In evaluating the Company’s ability to recover its deferred income tax assets within the jurisdiction from which they arise, the Company considers 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. The Company continues to maintain a full valuation allowance on its U.S. federal and state net deferred tax assets and on the Sangamo France net deferred tax assets, as the Company believes it is not more likely than not that these benefits will be realized. The Company recorded a full valuation allowance on the U.K. net deferred tax assets in 2023 due to the uncertainty regarding future income projections for Sangamo U.K., which outweighed positive evidence related to realization of the deferred tax assets for Sangamo U.K. The valuation allowance increased by $49.6 million, $42.0 million and $45.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2023, Sangamo had net operating loss carryforwards for federal and state income tax purposes of approximately $764.6 million and $338.9 million, respectively. The federal net operating loss generated before 2018 will begin
to expire in 2024 and will keep expiring through 2037, if not utilized. Federal net operating loss generated from 2018 will carry forward indefinitely. If not utilized, the state net operating loss carryforwards will begin to expire in 2029, respectively. The Company’s French net operating loss carryforward balance is $118.7 million, which carries over indefinitely. The Company also has federal and state research tax credit carryforwards of $45.3 million and $31.3 million, respectively. The federal research credits will begin to expire in 2024 and will keep expiring through 2043, while the state research credits have no expiration date. Utilization of the Company’s net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before utilization.
The Company’s policy is to reinvest the earnings of its non-U.S. subsidiaries in those operations. The Company does not provide for U.S. taxes on the earnings of foreign subsidiaries because the Company intends to reinvest such earnings offshore indefinitely. However, if these funds were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes. Due to the cumulative losses generated in foreign countries there are no earnings to repatriate.
Government incentives in the form of refundable research tax credits are recognized when there is reasonable assurance that the incentive will be received and the Company will comply with the conditions specified in the agreement or statutory requirements. The Company is eligible to receive these incentives because it engages in qualifying research and development activities in a foreign jurisdiction as defined by the government entity. The Company recorded refundable research tax credits of $5.9 million, $5.1 million and $4.7 million, as income in interest and other income, net on the Consolidated Statements of Operations for the years ended 2023, 2022, and 2021, respectively. As of December 31, 2023 and 2022, the Company had refundable research tax credits of $3.1 million and $2.0 million, respectively, in prepaid expenses and other current assets and $15.3 million and $12.1 million, respectively, in other non-current assets on the Consolidated Balance Sheets.
The Company files federal and state income tax returns with varying statutes of limitations. The tax years from 2003 forward remain open to examination due to the carryover of net operating losses or tax credits. The Company also files the U.K. and French income tax returns, and the tax years from 2008 and thereafter remain open in the U.K., and the tax years 2019 and thereafter in France are still subject to examination.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had $0.3 million and $0.2 million accrued interest and/or penalties as of December 31, 2023 and 2022, respectively. Unrecognized tax benefits are not expected to change materially over the next 12 months. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $1.2 million, $1.2 million and $1.2 million as of December 31, 2023, 2022 and 2021, respectively.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
December 31,
202320222021
Beginning balance$18,179 $15,062 $12,892 
Additions based on tax positions related to the current year2,805 3,177 2,454 
Additions for tax positions of prior years29 278 130 
Reductions for tax positions of prior years(2,693)(338)(414)
Ending balance$18,320 $18,179 $15,062