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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,
20222021
Deferred income tax assets:
Federal U.S. net operating loss carryforward$163,071 $175,802 
State net operating loss carryforward44,784 49,965 
Research and development credit, net65,084 60,514 
Orphan drug credit, net35,703 24,858 
Operating lease liabilities9,585 7,008 
Deferred revenue— 1,245 
Section 174 deferred tax asset43,192 — 
Depreciation158 — 
Other19,733 16,727 
Gross deferred income tax assets381,310 336,119 
Valuation allowance(372,267)(327,595)
Net deferred income tax assets9,043 8,524 
Deferred income tax liabilities:
Depreciation— (1,688)
Operating lease ROU assets(7,522)(4,576)
Prepaid expenditures(1,521)(2,260)
Gross deferred income tax liabilities(9,043)(8,524)
Net deferred income tax asset/(liability)$— $— 
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 $763.0 million of NOLs is not limited and can be offset against future taxable income, subject to certain limitations for newly enacted tax legislation.
The reconciliation of the reported estimated income tax benefit to the amount that would result by applying the U.S. federal statutory tax rate to the net income is as follows (in thousands):
Year Ended December 31,
202220212020
United States federal tax at statutory rate$(25,149)$(42,445)$(27,245)
State taxes (net of federal benefit)(7,385)(12,806)(8,100)
Deferred income tax adjustments308 473 344 
Research credit, net(4,569)(10,243)(14,691)
Orphan drug credit, net(10,846)(1,449)(528)
Other permanent items1,362 1,199 1,156 
Equity-based compensation1,604 1,079 554 
Change in valuation allowance44,675 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,
202220212020
Beginning balance$7,197 $6,126 $4,950 
Increases for current year tax positions548 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.