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INCOME TAXES | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of loss before provision for income taxes are as follows for the years ended December 31, 2021, 2020, and 2019:
(in thousands) | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Loss before provision for income taxes |  |  |  |  |
United States | $ | (45,527) |  |  | $ | (29,889) |  |  | $ | (3,573) |
Foreign | 967 |  |  | (84) |  |  | (7,279) |
| $ | (44,560) |  |  | $ | (29,973) |  |  | $ | (10,852) |
Our total (provision) benefit for income taxes consists of the following for the years ended December 31, 2021, 2020, and 2019:
(in thousands) | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Current: |  |  |  |  |
Federal | $ | (185) |  |  | $ | 4,024 |  |  | $ | (425) |
State | 19 |  |  | (48) |  |  | (148) |
Foreign | (392) |  |  | (217) |  |  | (64) |
| (558) |  |  | 3,759 |  |  | (637) |
Deferred |  |  |  |  |
Federal | (75) |  |  | — |  |  | (2,686) |
State | — |  |  | — |  |  | (460) |
Foreign | (177) |  |  | 354 |  |  | 108 |
| (252) |  |  | 354 |  |  | (3,038) |
| $ | (810) |  |  | $ | 4,113 |  |  | $ | (3,675) |
The reconciliation of our effective tax rate to the statutory federal rate of 21% for the years ended December 31, 2021, 2020, and 2019, is as follows:
(in thousands) | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Income tax benefit at statutory rate | (21.00) | % |  | (21.00) | % |  | (21.00) | %
State income taxes-net of federal provision (benefit) | (5.84) | % |  | (3.77) | % |  | 6.05 | %
Foreign rate differential | 0.10 | % |  | 0.22 | % |  | (2.21) | %
Stock-based compensation | (1.77) | % |  | 3.83 | % |  | 4.61 | %
Warrant fair value adjustment | 5.01 | % |  | (0.52) | % |  | 2.57 | %
Charitable contribution | (0.06) | % |  | (0.43) | % |  | (2.57) | %
Return to provision and other | 1.67 | % |  | (0.14) | % |  | (2.45) | %
Benefits provided by the CARES Act | (0.02) | % |  | (6.22) | % |  | — | %
Uncertain tax positions | 0.66 | % |  | 1.16 | % |  | 1.64 | %
Tax credits | (2.64) | % |  | (6.93) | % |  | (4.76) | %
Other | 0.39 | % |  | — | % |  | 1.04 | %
Valuation allowance | 25.33 | % |  | 20.08 | % |  | 50.95 | %
| 1.83 | % |  | (13.72) | % |  | 33.87 | %
Significant components of our net deferred tax assets as of December 31, 2021 and 2020, which are included in other assets in the consolidated balance sheets, are as follows:
(in thousands) | December 31, 2021 |  | December 31, 2020
Deferred tax asset: |  |  |
Inventory | $ | 2,792 |  |  | $ | 1,469 |
Deferred rent | 2,339 |  |  | 1,568 |
Accruals | 1,237 |  |  | 782 |
Stock-based compensation | 1,032 |  |  | 673 |
Net operating loss carryforwards | 9,403 |  |  | 3,903 |
R&D credits | 3,246 |  |  | 1,700 |
Charitable contributions | 2,492 |  |  | 2,269 |
Intangibles | 1,473 |  |  | — |
Deferred revenue | 831 |  |  | 406 |
Advertising | 971 |  |  | 740 |
Intercompany payable | 552 |  |  | 552 |
Other | 519 |  |  | 308 |
Total gross deferred tax assets | 26,887 |  |  | 14,370 |
Less: valuation allowance | (21,607) |  |  | (10,319) |
Total deferred tax assets | 5,280 |  |  | 4,051 |
Deferred tax liabilities: |  |  |
Prepaid expenses | (88) |  |  | (205) |
Depreciation | (5,089) |  |  | (3,477) |
State taxes | — |  |  | (15) |
Total deferred tax liabilities | (5,177) |  |  | (3,697) |
Net deferred tax assets | $ | 103 |  |  | $ | 354 |
We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities. Because we have a recent history of pre-tax book losses and are expected to be in pre-tax book loss in the immediate future, both of which are considered significant negative evidence, the deferred tax assets in the United States and certain foreign jurisdictions have been reduced by a valuation allowance to an amount that is more likely than not to be realized. The United States federal tax rules generally provide for a 100% deduction for dividends received from foreign subsidiaries. Nevertheless, companies must still apply the guidance of ASC 740 to account for the tax consequences of outside basis differences and other tax impacts of their investments in foreign subsidiaries, including potential state income tax and foreign withholding taxes on distributions. We consider all of the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, as a result, no liability for US federal and state income taxes nor foreign withholding taxes has been provided. If we were to repatriate the undistributed earnings of our foreign subsidiaries of approximately $2.2 million back to the US, the impact to the financial statements would not be material. A tabular reconciliation of the total amounts of unrecognized tax benefits for the year presented is as follows:
(in thousands) | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Unrecognized tax benefits - at beginning of year | $ | 691 |  |  | $ | 417 |  |  | $ | 124 |
Increases in balances related to tax positions taken in prior years | 23 |  |  | — |  |  | 80 |
Decreases in balances related to tax positions taken in prior years | (63) |  |  | (13) |  |  | — |
Increases in balances related to tax positions taken in current year | 614 |  |  | 287 |  |  | 213 |
Lapses in statutes of limitations | — |  |  | — |  |  | — |
Unrecognized tax benefits - at end of year | $ | 1,265 |  |  | $ | 691 |  |  | $ | 417 |
We follow the guidance for accounting for uncertainty in income taxes in accordance with FASB ASC 740, which clarifies uncertainty in income taxes recognized in an enterprise’s financial statements. The standard also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken, or expected to be taken, in an income tax return. Only tax positions that meet the more likely than not recognition threshold may be recognized. In addition, the standard provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. As of December 31, 2021, 2020, and 2019, the balance of unrecognized tax benefits of $1.3 million, $0.7 million, and $0.4 million, respectively, relate to tax credits that, if recognized, would be in the form of a carryforward which is expected to require a full valuation allowance based on present circumstances. Therefore, these unrecognized tax benefits would not have an effect on the effective tax rate. The unrecognized tax benefits are not expected to materially change in the next twelve months. The total amounts of interest and penalties recognized for the years ended December 31, 2021, 2020, and 2019 were not material. Our tax years for 2016 through 2021 are still subject to examination by the tax authorities. At December 31, 2021, we had income tax net operating loss carryforwards for our United States federal, state, and foreign operations of approximately $33.8 million, $27.9 million, and $2.8 million respectively. At December 31, 2020, we had income tax net operating loss carryforwards for our United States federal, state, and foreign operations of approximately $12.6 million, $3.3 million, and $3.4 million, respectively. The federal tax loss carryforwards do not expire. The state and foreign tax loss carryforwards will begin to expire in 2031 and 2026, respectively. At December 31, 2021, we had federal and state research and development credit carryforwards of $2.6 million and $2.2 million, respectively. The federal tax credit carryforwards will begin to expire in 2035. The state tax credit carryforwards do not expire. Utilization of some of the federal and state NOL and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the IRC and similar state provisions. We do not anticipate these limitations, if any, will significantly impact our ability to utilize the NOLs and tax credit carryforwards.

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