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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For the years ended December 31, 2022, 2021 and 2020 there was no provision for income taxes due to taxable losses generated, fully offset by a valuation allowance. The significant components of the Company's deferred income tax assets (liabilities) were as follows (in thousands):
| December 31,
| 2022 |  | 2021
Deferred income tax assets: |  |  |
Federal U.S. net operating loss carryforward | $ | 163,071 |  |  | $ | 175,802 |
State net operating loss carryforward | 44,784 |  |  | 49,965 |
Research and development credit, net | 65,084 |  |  | 60,514 |
Orphan drug credit, net | 35,703 |  |  | 24,858 |
Operating lease liabilities | 9,585 |  |  | 7,008 |
Deferred revenue | — |  |  | 1,245 |
Section 174 deferred tax asset | 43,192 |  |  | — |
Depreciation | 158 |  |  | — |
Other | 19,733 |  |  | 16,727 |
Gross deferred income tax assets | 381,310 |  |  | 336,119 |
Valuation allowance | (372,267) |  |  | (327,595) |
Net deferred income tax assets | 9,043 |  |  | 8,524 |
Deferred income tax liabilities: |  |  |
Depreciation | — |  |  | (1,688) |
Operating lease ROU assets | (7,522) |  |  | (4,576) |
Prepaid expenditures | (1,521) |  |  | (2,260) |
Gross deferred income tax liabilities | (9,043) |  |  | (8,524) |
Net deferred income tax asset/(liability) | $ | — |  |  | $ | — |
The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, management considers (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary difference and carryforwards; (iii) taxable income in prior carryback years if carryback is permitted under applicable tax law; and (iv) tax planning strategies. The Company's net deferred income tax asset is not more likely than not to be utilized due to the lack of sufficient sources of future taxable income and cumulative book losses which have resulted over the years. As of December 31, 2022, the Company has U.S. federal and state net operating loss (NOL) carryforwards of approximately $777.0 million. Of these NOLs, $172.0 million will expire in various years beginning in 2025 through 2037. $605.0 million of NOLs were generated post December 31, 2017 and carryforward indefinitely. In addition, the Company has U.S. federal tax credits of $94.0 million which will expire in various years beginning in 2023 through 2041. The use of the Company's U.S. federal NOL and tax credit carryforwards in future years are restricted due to changes in the Company's ownership and tax attributes acquired through the Company's acquisitions. As of December 31, 2022, $13.5 million of the Company's U.S. Federal NOLs are limited for use over the years 2023 – 2028 in which a range of such amounts could be utilized on an annual basis of $0.2 million to $1.4 million. The remaining $763.0 million of NOLs is not limited and can be offset against future taxable income, subject to certain limitations for newly enacted tax legislation. The reconciliation of the reported estimated income tax benefit to the amount that would result by applying the U.S. federal statutory tax rate to the net income is as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
United States federal tax at statutory rate | $ | (25,149) |  |  | $ | (42,445) |  |  | $ | (27,245) |
State taxes (net of federal benefit) | (7,385) |  |  | (12,806) |  |  | (8,100) |
Deferred income tax adjustments | 308 |  |  | 473 |  |  | 344 |
Research credit, net | (4,569) |  |  | (10,243) |  |  | (14,691) |
Orphan drug credit, net | (10,846) |  |  | (1,449) |  |  | (528) |
Other permanent items | 1,362 |  |  | 1,199 |  |  | 1,156 |
Equity-based compensation | 1,604 |  |  | 1,079 |  |  | 554 |
Change in valuation allowance | 44,675 |  |  | 64,192 |  |  | 48,510 |
Income tax expense/(benefit) | $ | — |  |  | $ | — |  |  | $ | — |
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Beginning balance | $ | 7,197 |  |  | $ | 6,126 |  |  | $ | 4,950 |
Increases for current year tax positions | 548 |  |  | 965 |  |  | 839 |
Increases/(decreases) for prior year tax positions | (369) |  |  | 106 |  |  | 337 |
Ending balance | $ | 7,376 |  |  | $ | 7,197 |  |  | $ | 6,126 |
As of December 31, 2022 and 2021, of the total gross unrecognized tax benefits, approximately $7.4 million and $7.2 million would favorably impact the Company's effective income tax rate, respectively. Although, due to the Company's determination that the deferred income tax asset would not more likely than not be realized, a valuation allowance would be recorded, therefore, zero net impact would result within the Company's effective income tax rate. The Company's uncertain income tax position liability has been recorded to deferred income taxes to offset the tax attribute carryforward amounts. For the years ended December 31, 2022, 2021 and 2020, the Company has not recognized any interest or penalties related to the uncertain income tax positions due to the fact such position is related to tax attribute carryforwards which have not yet been utilized. The Company does not expect its unrecognized income tax position to significantly decrease within the next twelve months. The Company's U.S. Federal and state income tax returns from 2003 forward remain open to examination due to the carryover of unused income tax credits, and from 2004 forward due to the carryover of unused net operating losses. Internal Revenue Code (IRC) Section 174 For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. Although Congress is considering legislation that would repeal or defer this capitalization and amortization requirement, it is not certain that this provision will be repealed or otherwise modified. If the requirement is not repealed or replaced, it could increase our U.S. federal and state cash taxes and reduce cash flows in 2023 and future 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. + 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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