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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

14. Income Taxes

Loss before the provision for income taxes consisted of the following:

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Canada

 

$

(110,433

)

 

$

(55,446

)

 

$

(27,355

)

Foreign

 

$

1,847

 

 

$

704

 

 

$

334

 

Loss before provision for income taxes

 

$

(108,586

)

 

$

(54,742

)

 

$

(27,021

)

The components of the provision for income taxes are as follows:

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Current income tax provision - foreign

 

$

530

 

 

$

(45

)

 

$

327

 

Deferred income tax benefit - foreign

 

 

(2,208

)

 

 

(1,280

)

 

 

(132

)

Total provision for income taxes

 

$

(1,678

)

 

$

(1,325

)

 

$

195

 

 

A reconciliation between tax expense and the product of accounting income multiplied by the statutory income tax rate is as follows:

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Loss before income taxes

 

$

(108,586

)

 

$

(54,742

)

 

$

(27,021

)

Income tax at statutory rate

 

 

26.5

%

 

 

26.5

%

 

 

26.5

%

Computed income tax recovery

 

 

(28,775

)

 

 

(14,507

)

 

 

(7,160

)

Effect on income tax resulting from:

 

 

 

 

 

 

 

 

 

Federal investment tax credit

 

 

(4,093

)

 

 

(2,347

)

 

 

(985

)

Accounting charges not deductible for tax purposes

 

 

1,078

 

 

 

1,088

 

 

 

143

 

Equity compensation

 

 

2,220

 

 

 

(742

)

 

 

134

 

Other

 

 

644

 

 

 

(306

)

 

 

(16

)

Change in valuation allowance

 

 

27,248

 

 

 

15,489

 

 

 

8,079

 

Tax (benefit) expense

 

$

(1,678

)

 

$

(1,325

)

 

$

195

 

The Company's applicable statutory tax rate is the Canadian combined rate applicable in the jurisdictions in which the Company operates.

During the year ended December 31, 2020, the Company applied operating loss carryforwards to offset taxable income in Canada, arising primarily from the upfront payment received from the collaboration agreement with Bristol Myers Squibb.

As of December 31, 2021, the Company had tax losses of approximately $113.6 million, which are available to offset future taxable income in Canada. The Company has not recognized the tax benefit of these losses. These losses expire as follows:

 

 

 

 

 

 

(in thousands)

 

2041

 

$

94,231

 

2040

 

 

—

 

2039

 

 

11,394

 

2038

 

 

7,052

 

2037

 

 

883

 

Total

 

$

113,560

 

As of December 31, 2021, the Company had Scientific Research and Experimental Development (“SR&ED”) expenditures of approximately $40.2 million for Canadian federal and Québec purposes, which have not been deducted. These expenditures are available to reduce future taxable income and have an unlimited carryforward period. SR&ED expenditures are subject to verification by the tax authorities and, accordingly, the amounts may vary.

As of December 31, 2021, the Company had non-refundable Canadian federal investment tax credits of approximately $6.5 million, which may be utilized to reduce Canadian federal income taxes payable. The Company has not recognized the tax benefits related to the non-refundable investment tax credits. The investment tax credits expire as follows:

 

 

(in thousands)

 

2041

 

$

2,217

 

2040

 

 

1,702

 

2039

 

 

1,362

 

2038

 

 

776

 

2037

 

 

455

 

2036

 

 

24

 

Total

 

$

6,536

 

 

 

As of December 31, 2021, the Company had U.S. federal research and development credit carryforwards of approximately $1.5 million, which begin to expire in 2041. As of December 31, 2021, the Company also had U.S. state research and development credit carryforwards of approximately $0.3 million, which expire in 2036.

 

The Company’s deferred tax assets as of December 31, 2021 and 2020 consisted of the following:

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Net operating loss carryforwards

 

$

30,093

 

 

$

5,087

 

Net research and development expenditures

 

 

10,656

 

 

 

7,478

 

Share issuance costs

 

 

3,538

 

 

 

4,506

 

Net federal investment tax credits

 

 

4,805

 

 

 

3,181

 

U.S. research and development tax credits

 

 

1,775

 

 

 

961

 

Tax basis of property and equipment in excess of carrying values

 

 

—

 

 

 

(86

)

Operating lease right-of-use assets

 

 

(1,995

)

 

 

(1,240

)

Operating lease liability

 

 

1,950

 

 

 

1,063

 

Accrued expense and other liabilities

 

 

760

 

 

 

345

 

Deferred revenue

 

 

13,656

 

 

 

15,372

 

Share-based compensation

 

 

988

 

 

 

103

 

Total deferred tax assets

 

 

66,226

 

 

 

36,770

 

Valuation allowance

 

 

(62,606

)

 

 

(35,358

)

Net deferred tax assets

 

$

3,620

 

 

$

1,412

 

The Company files income tax returns in Canada and in the United States. In the normal course of business, the Company could be subject to examination by federal and provincial or state jurisdictions, where applicable. There are currently no pending tax examinations. The Company may be subject to tax examination for 2017, 2018, 2019, 2020 and 2021 due to unexpired statute of limitation periods.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the provinces and states in which the Company operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when the Company’s judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2021 and 2020, no uncertain tax positions have been recorded in the consolidated financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and comprehensive loss. As of December 31, 2021 and 2020, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.