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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before the provision for income taxes consists of the following (in thousands):
| Years Ended December 31,
| 2022 |  | 2021
Domestic | $ | (59,361) |  |  | $ | (49,176) |
Foreign | 791 |  |  | 858 |
Total loss before provision for taxes | $ | (58,570) |  |  | $ | (48,318) |
The components of income tax expense are as follows (in thousands):
| Years Ended December 31,
| 2022 |  | 2021
Current: |  |  |
Federal | $ | — |  |  | $ | — |
State | 66 |  |  | 46 |
Foreign | 232 |  |  | 321 |
Total current expense | 298 |  |  | 367 |
Deferred: |  |  |
Federal | 32 |  |  | (18) |
State | 14 |  |  | (1) |
Foreign | 9 |  |  | (5) |
Total deferred expense | 55 |  |  | (24) |
Total income tax expense | $ | 353 |  |  | $ | 343 |
The reconciliation between the federal statutory rate and the Company’s effective tax rate is summarized below:
| Years Ended December 31,
| 2022 |  | 2021
Federal statutory rate | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit | (0.1) | % |  | (0.1) | %
Foreign earnings at different rates | (0.1) | % |  | (0.1) | %
Tax credits | 1.8 | % |  | 0.4 | %
Permanent differences | (4.6) | % |  | 4.4 | %
Prior year true-up | (0.8) | % |  | 0.0 | %
Change in valuation allowance | (17.8) | % |  | (26.3) | %
Effective tax rate | (0.6) | % |  | (0.7) | %
Deferred income taxes arise from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes, as well as operating losses and tax credit carryforwards. Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 50,316 |  |  | $ | 43,804 |
Tax credit carryforwards | 7,169 |  |  | 5,579 |
Accruals and reserves | 1,900 |  |  | 1,638 |
Depreciation | 183 |  |  | — |
Intangible assets | 4,394 |  |  | 4,952 |
Capitalized research costs | 2,838 |  |  | — |
Other | 2,035 |  |  | 1,057 |
Gross deferred tax assets | 68,835 |  |  | 57,030 |
Less: valuation allowance | (68,427) |  |  | (56,551) |
Deferred tax assets | 408 |  |  | 479 |
Deferred tax liabilities: |  |  |
Depreciation | — |  |  | (43) |
Goodwill | (502) |  |  | (473) |
Net deferred tax liabilities | $ | (94) |  |  | $ | (37) |
The Company has established a full valuation allowance against its U.S. net deferred tax assets due to the uncertainty surrounding the realization of such assets. Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the U.S. net deferred tax assets have been fully offset by a valuation allowance of $68.4 million as of December 31, 2022. The valuation allowance increased by $11.9 million and $14.6 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had a total net operating loss carryforwards for federal income tax purposes of approximately $212.2 million. If not utilized, these net federal operating loss carryforwards will begin to expire at the end of the year. The Company also had a state net operating loss carryforward of approximately $406.4 million which will expire beginning in the year 2023. For tax years in January 1, 2018 onwards, any federal net operating losses generated will be allowable for carry forward indefinitely, as opposed to the original expiration of 20 years. As of December 31, 2022, the Company had $140.3 million of federal net operating losses that can be carryforward indefinitely. The Company also had federal and state research and development (“R&D”) tax credit carryforwards of approximately $4.3 million and $5.3 million, respectively. The federal tax R&D credit carryforwards will expire beginning in 2030 while the state tax credit carryforwards have no expiration date. Utilization of the net operating loss carryforwards and R&D tax credit carryforwards may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code, as defined in Section 382, and other similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. During the year ended December 31, 2018, the Company completed a section 382 study for which the Company wrote off deferred tax assets for NOLs and credits of $3.1 million and $1.2 million, respectively. Since the Company had a full valuation allowance on these assets, there was no material impact to the tax provision. The Company completed another section 382 study for the year ended December 31, 2020 for which the Company had a change in ownership. No additional NOLs or credits will expire unused due to the 2020 annual limitation. Based on management’s analysis for the year ended December 31, 2022 no further material NOLs or credits will expire unused due to Section 382 limitations. Annually, the Company determines whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities in considering whether any tax benefit can be recorded in the consolidated financial statements. As of December 31, 2022, the Company had unrecognized tax benefits of approximately $8.6 million, none of which will affect the effective tax rate if recognized. It is unlikely that the amount of liability for unrecognized tax benefits will significantly change over the next 12 months. The following table summarizes the activity related to the Company’s gross unrecognized tax benefits (in thousands):
Balance at January 1, 2021 | $ | 8,248 |
Additions for tax positions related to prior year | 173 |
Additions for tax positions related to current year | 68 |
Balance at December 31, 2021 | $ | 8,489 |
Additions for tax positions related to prior year | 106 |
Decreases for tax positions related to prior year | (153) |
Additions for tax positions related to current year | 200 |
Balance at December 31, 2022 | $ | 8,642 |
It is the Company's policy to include penalties and interest expense related to income taxes as a component of other income (expense), net and interest expense, respectively, as necessary. The Company’s major tax jurisdictions are the United States and California, and Switzerland and Neuchâtel. All of the Company’s tax years will remain open for examination by the federal and state tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or R&D Credits. The Company does not have any tax audits or other issues pending. As currently enacted, beginning in 2022, the Tax Cuts and Jobs Act (the "Tax Act") requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which is expected to decrease the amount of the Company's generated NOL during the year.

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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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