Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents components of the Company’s provision for income taxes as for the period presented (in thousands):

	December 31,
	2021		2020		2019
Current expense (benefit):
Federal	$	—	$	—	$	—
State	223		181		—
Foreign	150		59		68
Total current tax expense (benefit)	373		240		68
Deferred expense (benefit):
Federal	—		—		—
State	—		—		—
Foreign	(6)		(11)		(3)
Total deferred tax expense (benefit)	(6)		(11)		(3)
Total Tax Expense (benefit)	$	367	$	229	$	65

The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company’s tax expense for the period presented (in thousands):

	December 31,
	2021		2020		2019
Tax at statutory federal rate	$	(21,198)	$	(9,172)	$	(11,446)
State income taxes, net of federal benefit	223		181		—
Stock-based compensation	(7,049)		(20,762)		(5,560)
Meals and Entertainment	182		177		409
Section 162(m) limitation - officers compensation	4,856		544		—
Other	(347)		89		614
Tax credits	(381)		(1,426)		(1,128)
Foreign Rate Differential	(30)		(9)		—
Change in valuation allowance	24,111		30,607		17,176
Provision for income taxes	$	367	$	229	$	65

Deferred income taxes reflect the net 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 deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	114,856	$	91,034
Tax credit carryforwards	9,174		7,110
Share-based compensation	9,812		8,831
Allowances and other	20,988		14,996
Lease obligation	23,868		22,624
Total deferred tax assets	178,698		144,595
Valuation allowance	(154,734)		(123,803)
Net deferred tax assets	23,964		20,792
Deferred Tax Liabilities:
Depreciation and Amortization	(3,212)		(108)
Right of use asset	(20,696)		(20,634)
Total deferred tax liability	(23,908)		(20,742)
Total deferred tax assets	$	56	$	50

Due to the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company has provided a full valuation allowance against its U.S. deferred tax assets, and, therefore, no benefit has been recognized for the net operating loss carryforwards and other deferred tax assets. The U.S. valuation allowance increased by $30.9 million and $35.4 million for the years ended December 31, 2021 and December 31, 2020, respectively. The current year change in the U.S. valuation allowance is primarily related to the increase in net operating loss carryforwards generated during the year. The Company recorded an immaterial deferred tax asset related to the Company’s foreign operations in the United Kingdom.

The valuation allowance for deferred tax assets consisted of the following activity for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	Balance at beginning of year		Additions		Deductions		Balance at end of year
Year Ended December 31, 2021	$	123,803	$	30,931	$	—	$	154,734
Year Ended December 31, 2020	$	88,433	$	35,370	$	—	$	123,803
Year Ended December 31, 2019	$	66,435	$	21,998	$	—	$	88,433

As of December 31, 2021, the Company had approximately $464.3 million of federal and $279.1 million of state net operating loss carryforwards available to offset future taxable income which expires in varying amounts beginning in 2027 and 2020 respectively.

As of December 31, 2021, the Company had research tax credit carryforwards of approximately $7.4 million, and $6.1 million available to reduce future taxable income, if any, for both federal and state purposes, respectively. The federal tax credit carryforwards expire beginning in 2028 and the state tax credits can be carried forward indefinitely.

Section 382 of the Internal Revenue Code, and similar state provisions, limits the use of net operating loss and tax credit carryforwards in certain situations where equity transactions result in a change of ownership as defined by Internal Revenue Code Section 382. In the event the Company should experience an ownership change, as defined, utilization of its net operating loss carryforwards and tax credits could be limited.

Effective January 1, 2019, the Company adopted ASC 740-10 (formerly known as FIN 48), Accounting for Income Taxes, guidance that addresses the recognition, measurement, and disclosure of uncertain tax positions.

A reconciliation of the Company’s unrecognized tax benefit amount is as follows (in thousands):

	Year Ended December 31,
	2021		2020		2019
Balance at beginning of year	$	2,302	$	1,842	$	1,459
Additions for tax positions taken in current year	772		488		383
Increases in balance related to prior year tax positions	236		—		—
Decreases in balance related to prior year tax positions	—		(28)		—
Balance at end of year	$	3,310	$	2,302	$	1,842

The total amount of gross unrecognized tax benefits was $3.3 million, $2.3 million, and $1.8 million as of December 31, 2021, 2020, and 2019 respectively. None of the Company’s unrecognized tax benefits that, if recognized, would affect its effective tax rate. The Company does not anticipate the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes. Management determined that no accrual for interest or penalties was required as of December 31, 2021, 2020 and 2019.

The Company files income tax returns in the U.S. and UK jurisdictions. All of the Company's tax years are open to examination by the US federal and state tax authorities. The UK is open to examination for tax years starting 2017 and forward. The Company currently has no federal, state or foreign tax examinations in progress, nor has it had any federal or state examinations since inception.