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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the years ended December 31, 2021, 2020 and 2019, the Company recorded no income tax benefit for the net operating losses incurred in each year, due to its uncertainty of realizing a benefit from those items.
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations as of December 31, 2021, 2020 and 2019 are as follows:
202120202019
Income tax computed at federal statutory tax rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit6.3 %6.7 %6.1 %
Permanent differences(0.2)%1.2 %(2.0)%
General business credits3.8 %3.4 %10.3 %
Stock compensation0.1 %— %— %
Impact of ownership shift— %— %(53.3)%
Change in valuation allowance(31.0)%(32.3)%17.9 %
— %— %— %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets as of December 31, 2021 and 2020 are as follows:
20212020
Deferred tax assets:
Net operating losses$106,055 $64,259 
Tax credit carryforwards12,424 5,670 
Accrued expenses6,892 4,058 
Lease liabilities3,698 3,166 
Licensed technology2,775 1,534 
Deferred revenue1,076 1,088 
Depreciation493 502 
Other71 84 
Total gross deferred tax assets133,484 80,361 
Valuation allowance(130,051)(77,375)
Net deferred tax assets less valuation allowance3,433 2,986 
Deferred tax liabilities
Right-of-use assets(3,433)(2,986)
Total gross deferred tax liabilities(3,433)(2,986)
Net deferred taxes$— $— 
The Company has incurred net operating losses (NOL) since inception. At December 31, 2021, the Company had Federal and State net operating loss carryforwards of approximately $403,579 and $337,057, respectively. Of the $403,579 of Federal net operating loss carryforwards, $34,149 expire at various dates through 2037. The remaining $369,430 of Federal net operating loss carryforwards do not expire. The State net operating loss carryforwards expire at various dates through 2041. At December 31, 2021, the Company had Federal and State research and development tax credit carryforwards of approximately $10,077 and $3,061, respectively, which expire at various dates through 2041.
As required by ASC 740, management of the Company has evaluated the evidence bearing upon the reliability of its deferred tax assets. Based on the weight of available evidence, both positive and negative, management has determined that it is more likely than not that the Company will not realize the benefits of all of these assets. Accordingly, the Company recorded a valuation allowance of $130,051 and $77,375 at December 31, 2021 and December 31, 2020, respectively. The valuation allowance increased by $52,676 and $28,468 during the years ended December 31, 2021 and 2020, respectively, primarily as a result of the Company’s net operating losses generated during the periods, respectively.
Utilization of the NOLs and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382, as well as similar state provisions. These ownership changes may limit the amount of NOLs and research and development tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. If a change in control as defined by Section 382 has occurred at any time since the Company’s formation, utilization of its NOLs or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, which could then be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOLs or research and development tax carryforwards before their utilization. The Company has determined that ownership changes have occurred through November 4, 2019 and that certain NOLs and research and development tax credit carryforwards will be subject to limitation. The amounts presented do not include NOLs or research and development tax credit carryforwards that will expire unused due to ownership changes.
The Company applies the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the
Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. As of December 31, 2021 and 2020, the Company had no unrecognized tax benefits.
The Company has not conducted a study of its research and development credit carryforwards. This study may result in an adjustment to research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations if an adjustment were required.
Interest and penalties related to uncertain tax positions would be classified as income tax expense in the accompanying statements of operations. As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the United States federal tax jurisdiction and four state jurisdictions. The Company did not have any foreign operations during the years ended December 31, 2021, 2020 and 2019. The statute of limitations for assessment by the Internal Revenue Service and state tax authorities is closed for tax years prior to 2017, although carryforward attributes that were generated prior to tax year 2017 may still be adjusted upon examination to the extent utilized in a future period. There are no federal or state audits currently in progress.