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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes |
13. | Income Taxes
The components of loss before income taxes are as follows (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Domestic |  | $ | (195,617 | ) |  | $ | 2,538 |  |  | $ | (38,472 | )
Foreign |  |  | 6,686 |  |  |  | (79,180 | ) |  |  | (47,644 | )
Loss before provision for income taxes |  | $ | (188,931 | ) |  | $ | (76,642 | ) |  | $ | (86,116 | )
The provision for income taxes consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | — |  |  |  | — |  |  |  | 2 |
Foreign |  |  | 360 |  |  |  | 328 |  |  |  | 302 |
Total current |  |  | 360 |  |  |  | 328 |  |  |  | 304 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |  |  |  | — |
Total deferred |  |  | — |  |  |  | — |  |  |  | — |
Total provision for income taxes |  | $ | 360 |  |  | $ | 328 |  |  | $ | 304 |
The following is the reconciliation between the statutory federal income tax rate and the Company’s effective tax rate:
| Years Ended December 31, |
| 2020 |  |  | 2019 |  |  | 2018 |
Tax at statutory federal rate |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State tax |  | — | % |  |  | — | % |  |  | — | %
Stock-based compensation expense |  | 2.4 | % |  |  | 6.3 | % |  |  | 14.5 | %
Benefit due to intercompany transfer of assets |  | 41.7 | % |  |  | — | % |  |  | — | %
Valuation allowance on intercompany transfer of assets |  | (41.7 | )% |  |  | — | % |  |  | — | %
Net operating losses not benefitted |  | (23.2 | )% |  |  | (2.9 | )% |  |  | (23.2 | )%
Foreign net operating losses not benefitted |  | 0.7 | % |  |  | (21.7 | )% |  |  | (11.6 | )%
Deduction limitation on executive compensation |  | (0.8 | )% |  |  | (2.5 | )% |  |  | (0.5 | )%
Other |  | (0.3 | )% |  |  | (0.6 | )% |  |  | (0.6 | )%
Total |  | (0.2 | )% |  |  | (0.4 | )% |  |  | (0.4 | )%
Significant components of the Company’s deferred tax assets are as follows (in thousands):
|  | December 31, |
|  | 2020 |  |  | 2019 |
Federal and state net operating loss carryforwards |  | $ | 134,033 |  |  | $ | 91,267 |
Tax credit carryforwards |  |  | 62,465 |  |  |  | 52,243 |
Foreign net operating loss carryforwards |  |  | 32,417 |  |  |  | 37,786 |
Stock-based compensation |  |  | 10,399 |  |  |  | 11,159 |
Lease obligations |  |  | 8,243 |  |  |  | 10,698 |
Reserves and accruals |  |  | 5,875 |  |  |  | 5,353 |
Deferred revenue |  |  | 13,550 |  |  |  | 13,323 |
Intangible assets |  |  | 75,915 |  |  |  | — |
Other |  |  | — |  |  |  | 284 |
Subtotal |  |  | 342,897 |  |  |  | 222,113 |
Less: Valuation allowance |  |  | (337,824 | ) |  |  | (213,847 | )
Net deferred tax assets |  |  | 5,073 |  |  |  | 8,266 |
Fixed assets |  |  | (5,073 | ) |  |  | (8,266 | )
Other |  |  | — |  |  |  | — |
Net deferred tax liabilities |  |  | (5,073 | ) |  |  | (8,266 | )
Total net deferred tax assets |  | $ | — |  |  | $ | — |
A valuation allowance has been provided to reduce the deferred tax assets to an amount management believes is more likely than not to be realized. Expected realization of the deferred tax assets for which a valuation allowance has not been recognized is based on upon the reversal of existing temporary differences and future taxable income. The valuation allowance increased by $124.0 million, $19.9 million and $34.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Due to uncertainty surrounding the realization of the favorable tax attributes in the future tax returns, the Company has established a valuation allowance against its otherwise recognizable net deferred tax assets. During 2020, the Company transferred certain intellectual property rights relating to its Chinese business between its wholly owned subsidiaries that are based in different tax jurisdictions. The transferor entity was not subject to income taxes in its local jurisdiction. The acquiring entity of the intellectual property is entitled to amortize the acquisition price of the intangible assets for tax purposes. In accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, the Company recognized a deferred tax asset of $78.7 million for the temporary difference arising from the acquirer’s excess tax basis. Furthermore, based upon the weight of available evidence, the Company recognized a full valuation allowance against this deferred tax asset since it does not currently believe that realization of this gross deductible temporary difference is more likely than not. Accordingly, this inter-company transfer did not have a material impact to the Company’s consolidated financial statements. At December 31, 2020, the Company had net operating loss carryforwards available to offset future taxable income of approximately $606.8 million and $133.6 million for federal and state tax purposes, respectively. These carryforwards will begin to expire in 2026 for federal and 2021 for state purposes, if not utilized before these dates. The Company also had foreign net operating loss carryforwards of approximately $172.9 million which expire between 2021 and 2030 if not utilized. At December 31, 2020, the Company had approximately $66.9 million of federal and $32.9 million of California research and development tax credit and other tax credit carryforwards available to offset future taxable income. The federal credits begin to expire in 2021 and the California research credits have no expiration dates. Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for tax purposes, as defined in IRC Section 382. The Company reviewed its stock ownership for year ended December 31, 2020 and concluded no ownership changes occurred which would result in a reduction of its net operating loss or in its research and development credits expiring unused. If additional ownership change occurs, the utilization of net operating loss and credit carryforwards could be significantly reduced. Uncertain Tax Positions The Company had unrecognized tax benefits of approximately $48.6 million as of December 31, 2020. Approximately $0.5 million of unrecognized tax benefits, if recognized, would affect the effective tax rate. The interest accrued as of December 31, 2020 and 2019 was immaterial. A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the three years ended December 31, 2020 is as follows (in thousands):
|  | Federal and State |
Balance as of December 31, 2017 |  | $ | 23,361 |
Increase due to prior positions |  |  | 379 |
Increase due to current year position |  |  | 4,216 |
Balance as of December 31, 2018 |  |  | 27,956 |
Decrease due to prior positions |  |  | (111 | )
Increase due to current year position |  |  | 4,418 |
Balance as of December 31, 2019 |  |  | 32,263 |
Decrease due to prior positions |  |  | (137 | )
Increase due to current year position |  |  | 16,448 |
Balance as of December 31, 2020 |  | $ | 48,574 |
Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. The Company does not anticipate a material change to its unrecognized tax benefits over the next twelve months that would affect the Company’s effective tax rate. The Company classifies interest and penalties as a component of tax expense, if any. The Company files income tax returns in the U.S. federal jurisdiction, U.S. state and other foreign jurisdictions. The U.S. federal and U.S. state taxing authorities may choose to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years, making adjustments only to carryforward attributes. The foreign statute of limitation generally remains open from 2011 to 2020. The Company is not currently under audit in any tax jurisdiction.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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