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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

15. Income Taxes

During the years ended December 31, 2023, 2022 and 2021 the Company recorded an income tax (expense) benefit of $(3,860), $(64) and $5,376, respectively. The December 31, 2023 income tax provision is primarily due to foreign income taxes in Israel. The December 31, 2022 income tax provision is primarily due to foreign income taxes in Israel partially offset by losses in Ireland. The December 31, 2021 income tax benefit is primarily due to a partial release of valuation allowance in the U.S. resulting from the deferred tax liabilities established as part of the Acquisitions consummated during the year (see Note 8).

For the years ended December 31, 2023, 2022 and 2021, the Company’s loss before income taxes is primarily generated in the United States as the pre-tax loss from the Company’s foreign subsidiaries is not significant.

The components of our current and deferred portions of the provision for income taxes are presented in the table below:

 

 

 

Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Current income tax (provision) benefit:

 

 

 

 

 

 

 

 

 

Federal

 

$

(237

)

 

$

—

 

 

$

—

 

State

 

 

(167

)

 

 

(22

)

 

 

(41

)

Foreign

 

 

(3,614

)

 

 

(3,256

)

 

 

(828

)

Total Current

 

$

(4,018

)

 

$

(3,278

)

 

$

(869

)

Deferred income tax (provision) benefit:

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

5,730

 

State

 

 

—

 

 

 

—

 

 

 

(1

)

Foreign

 

 

158

 

 

 

3,214

 

 

 

516

 

Total Deferred

 

$

158

 

 

$

3,214

 

 

$

6,245

 

Total (provision) benefit for income taxes

 

$

(3,860

)

 

$

(64

)

 

$

5,376

 

The following reconciles the differences between income taxes computed at the federal statutory rate and the provision for income taxes:

 

 

 

Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Federal statutory income tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State taxes, net of federal benefit

 

 

1.1

 

 

 

3.7

 

 

 

4.5

 

Valuation allowance

 

 

(7.1

)

 

 

(18.5

)

 

 

(24.5

)

Stock-based compensation

 

 

(1.3

)

 

 

(5.1

)

 

 

1.9

 

Permanent differences

 

 

(14.0

)

 

 

(0.7

)

 

 

—

 

Other

 

 

(0.3

)

 

 

(0.4

)

 

 

0.1

 

Effective income tax rate

 

 

(0.6

)%

 

 

—

%

 

 

3.0

%

Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows:

 

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

229,264

 

 

$

201,495

 

Research and development credit carryforwards

 

 

1,660

 

 

 

1,603

 

Deferred revenue

 

 

2,687

 

 

 

3,395

 

Deferred compensation

 

 

5,687

 

 

 

7,590

 

Leasing obligation

 

 

3,087

 

 

 

3,932

 

Capitalized research expense

 

 

43,476

 

 

 

27,147

 

Other

 

 

2,415

 

 

 

1,224

 

Total deferred tax assets

 

 

288,276

 

 

 

246,386

 

Total valuation allowance

 

 

263,001

 

 

 

214,776

 

Total net deferred tax assets

 

 

25,275

 

 

 

31,610

 

Joint venture investment basis difference

 

 

(1,054

)

 

 

(1,321

)

Intangibles

 

 

(20,879

)

 

 

(26,672

)

Right-of-use assets

 

 

(2,738

)

 

 

(3,578

)

Other

 

 

(1,902

)

 

 

(1,499

)

Total deferred tax assets (liabilities)

 

 

(26,573

)

 

 

(33,070

)

Net deferred tax liabilities

 

$

(1,298

)

 

$

(1,460

)

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company's history of cumulative net losses incurred in the U.S. since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net domestic deferred tax assets as of December 31, 2023, 2022 and 2021. Management reevaluates the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2023, 2022 and 2021 related primarily to the increase in net operating loss carryforwards in 2023, 2022 and 2021 and were as follows:

 

 

 

Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Valuation allowance as of beginning of the year

 

$

214,776

 

 

$

164,391

 

 

$

118,795

 

Increases recorded to income tax provision

 

 

48,225

 

 

 

50,403

 

 

 

51,348

 

Decreases recorded as a benefit to income tax provision

 

 

—

 

 

 

(18

)

 

 

(5,752

)

Valuation allowance as of end of year

 

$

263,001

 

 

$

214,776

 

 

$

164,391

 

As of December 31, 2023, the Company has federal net operating loss carryforwards of approximately $865,981, which begin to expire in 2026. The Company’s federal net operating losses generated for the years ended after December 31, 2017, which amounted to a total of $636,756, can be carried forward indefinitely. The Company has tax effected state net operating losses of approximately $41,847, which began to expire in 2024. In addition, the Company has federal and state research and development tax credit carryforwards of $1,602 and $58, which begin to expire in 2027 and 2035, respectively.

Utilization of the Company's net operating loss ("NOL") carryforwards and research and development ("R&D") credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 ("Section 382") as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. Since its formation, the Company has raised capital through the issuance of capital stock on several occasions. These financings, combined with the purchasing shareholders' subsequent disposition of those shares, could result in a change of control as defined by Section 382. The Company conducted an analysis under Section 382 to determine if historical changes in ownership through December 31, 2021 would limit or otherwise restrict its ability to utilize its NOL and R&D credit carryforwards. As a result of this analysis, it was determined that $1,680 federal and $6,391 state net operating loss carryforwards generated through December 31, 2021 will expire unused. However, changes in ownership occurring after December 31, 2021, could affect the limitation in future years, and any limitation may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization.

The Company does not have unrecognized tax benefits related to uncertain tax positions. The Company recognizes both accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not recorded any interest and penalties on any unrecognized tax benefits since its inception. The tax years 2006 through 2023 remain open to examination by major taxing jurisdictions to which the Company is subject, which is primarily in the United States (U.S.), as carryforward attributes generated in prior years may still be adjusted upon examination by the Internal Revenue Service (IRS) or state tax authorities if they have or will be used in a future period. The Company files income tax returns in the U.S. federal and various state jurisdictions. There are currently no federal or state audits in progress by the IRS or any other jurisdictions for any tax years.