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Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

12.Income Taxes

The components of (loss) income before income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)		2022			2021			2020
Domestic	​	$	(291,746)	​	$	(287,058)	​	$	133,615
Foreign	​		(8)	​		(42)	​		2,092
Total	​	$	(291,754)	​	$	(287,100)	​	$	135,707

​

Provision for income taxes:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)		2022			2021			2020
Current:		​			​			​
Federal	​	$	—	​	$	—	​	$	—
State	​		—	​		—	​		3,463
Foreign	​		—	​		—	​		—
Subtotal	​	$	—	​	$	—	​	$	3,463
​	​			​			​
Deferred:	​			​			​
Federal	​	$	—	​	$	—	​	$	—
State	​		—	​		—	​		—
Foreign	​		—	​		—	​		—
Subtotal	​	$	—	​	$	—	​	$	—
​	​			​			​
Provision for income taxes	​	$	—	​	$	—	​	$	3,463

​

There was no income tax provision in 2022 and 2021 due to the Company’s history of losses and valuation of allowances against the deferred tax assets. The income tax provision in 2020 of $3.5 million is primarily related to state taxes in jurisdictions outside of California, for which the Company has a limited operating history.

A reconciliation of the statutory United States federal rate to the Company’s effective tax rate is as follows:

​

​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2022		2021		2020
Percent of pre-tax income:							​
United States federal statutory income tax rate		21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit		1.7		2.6		2.0	​
Foreign rate differences		—		—		(0.3)	​
Permanent items	​	(0.1)		0.2		0.4	​
Research and development credit		1.8		2.6		(4.8)	​
Stock-based compensation costs	​	(2.3)	​	(1.2)	​	1.3	​
Other		—		—		(0.3)	​
Change in valuation allowance		(22.1)		(25.2)		(16.7)	​
Effective income tax rate		—	%	—	%	2.6	%

​

The components of the Company’s net deferred tax assets as of December 31, 2022 and 2021 consist of the following:

​

​	​	​	​	​	​	​
​	​	December 31,
(in thousands)		2022			2021
Net operating loss carryforwards	​	$	131,423	​	$	117,793
Research and development credits	​		63,164	​		58,039
Depreciation and amortization	​		51,877	​		40,620
Stock-based compensation	​		32,561	​		30,565
Sales related accruals	​		23,864	​		17,299
Other accruals	​		19,717	​		11,798
Capitalized research and development	​	​	17,673	​	​	—
Gross deferred tax assets	​		340,279	​		276,114
Right-of-use asset	​		(1,903)	​		(2,167)
In-process research and development	​		(603)	​		(603)
Gross deferred tax liabilities	​		(2,506)	​		(2,770)
Total net deferred tax asset	​		337,773	​		273,344
Less valuation allowance	​		(337,773)	​		(273,344)
Net deferred tax assets	​	$	—	​	$	—

​

The tax benefit of net operating losses, temporary differences and credit carry forwards is recorded as an asset to the extent that management assesses that realization is “more likely than not.” The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible. Due to the Company’s history of losses, and lack of other positive evidence, the Company has determined that it is more likely than not that its federal net deferred tax assets and certain state net deferred tax assets will not be realized, and therefore, the Company has fully offset the federal and certain state net deferred tax assets by a valuation allowance as of December 31, 2022 and 2021.

The valuation allowance increased by $64.4 million and $72.4 million during the years ended December 31, 2022 and 2021, respectively, and decreased by $22.7 million during the year ended December 31, 2020.

As of December 31, 2022, the Company had operating loss carryforwards for federal income of $591.2 million, which will start to expire in the year 2036, and various states net operating loss carryforwards of $113.2 million, which have various expiration dates beginning in 2031.

As of December 31, 2022, the Company had federal research and development credit carryforwards for federal income tax purposes of $57.7 million, which will start to expire in the year 2031, and state research and development credit carryforwards of $26.4 million, which have no expiration date.

Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to historical or future ownership percentage change rules provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of certain net operating loss and tax credit carryforwards before their utilization. Under the new enacted tax law, the carry forward period of net operating losses generated from 2018 forward is indefinite. However, the carryforward period for net operating losses generated prior to 2018 remains the same. Therefore, the annual limitation may result in the expiration of certain net operating losses and tax credit carryforwards before their utilization. The Company files income tax returns in the United States federal jurisdiction, various United States state jurisdictions, and a foreign jurisdiction with varying statutes of limitations. The tax years from 2011 forward remain open to examination due to the carryover of unused net operating losses and tax credits.

A reconciliation of the Company’s unrecognized tax benefits during 2022, 2021 and 2020 is as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)		2022			2021			2020
Balance at beginning of year	​	$	15,495	​	$	13,243	​	$	11,603
Additions based on tax positions related to current year	​		1,385	​		2,038	​		1,749
Additions (reductions) for tax positions of prior years	​		(42)	​		214	​		(109)
Balance at end of year	​	$	16,838	​	$	15,495	​	$	13,243

​

As of December 31, 2022, 2021 and 2020, the Company had $16.8 million, $15.5 million and $13.2 million, respectively, of unrecognized benefits, none of which would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance. During 2022, 2021 and 2020, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate a material adjustment of unrecognized tax benefits during the next twelve months from the balance sheet date as reductions for tax positions of prior years.

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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.

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