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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax benefit (expense) consisted of the following:
Year Ended December 31,202320222021
Current:
Federal$(3,180)$— $— 
State5,060 (20,812)(3,541)
Total current tax benefit (expense)
$1,880 $(20,812)$(3,541)
Deferred:
Federal$(11,427)$121,520 $2,066 
State(6,131)35,940 1,611 
Total deferred benefit (expense)
$(17,558)$157,460 $3,677 
Income tax benefit (expense)
$(15,678)$136,648 $136 

Income tax expense for the year ended December 31, 2023 was $15.7 million. The effective tax rate differs from the statutory rate due to the impact of state taxes, the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation and stock-based compensation, and the change in unrecognized tax benefits. Income tax benefit for the year ended December 31, 2022 was $136.6 million, primarily due to the release of a $175.6 million valuation allowance against the Company’s deferred tax assets, of which $143.5 million was primarily based on the Company’s reassessment of the future realizability of its deferred tax assets. Income tax benefit for the year ended December 31, 2021 was $136 thousand, primarily related to a tax benefit associated with the Acquisition, partially offset by income tax expense for state jurisdictions that limit net operating loss carryforward utilization.

The table below presents a reconciliation of the income tax benefit (expense) at the statutory federal income tax rate to the income tax benefit (expense) at the effective income tax rate:
Year Ended December 31,202320222021
Statutory federal tax expense
$(11,470)$(32,140)$(3,873)
State tax, net of federal tax benefit(903)11,951 (1,524)
Stock-based compensation tax benefit (expense)(4,392)271 11,839 
Research and development tax credits4,600 10,907 4,354 
Change in valuation allowance— 154,081 (7,867)
Change in unrecognized tax benefit(1,380)(3,438)(2,177)
Non-deductible expenses(2,351)(4,737)(742)
Other218 (247)126 
Income tax benefit (expense)
$(15,678)$136,648 $136 
The significant components of the Company’s net deferred tax asset were as follows:
December 31,20232022
Deferred tax assets:
Net operating loss carryforwards
$60,432 $64,288 
Allowance for loan and lease losses
84,119 89,718 
Stock-based compensation7,399 10,121 
Unrealized loss on AFS securities12,484 17,214 
Deferred compensation6,574 12,690 
Reserves and accruals12,651 13,474 
Operating lease liabilities10,185 20,999 
Goodwill10,203 12,267 
Tax credit carryforwards27,924 26,913 
Other3,926 4,249 
Gross deferred tax assets
235,897 271,933 
Valuation allowance(46,108)(47,721)
Total deferred tax assets
$189,789 $224,212 
Deferred tax liabilities:
Internally developed software$(9,934)$(11,687)
Servicing assets(2,171)(2,634)
Operating lease assets(7,157)(17,353)
Leases(13,121)(15,694)
Other(5,995)(3,157)
Total deferred tax liabilities$(38,378)$(50,525)
Deferred tax assets, net
$151,411 $173,687 

In 2022, the Company evaluated both positive and negative evidence when assessing the recoverability of its net deferred tax assets. Several factors were considered, which primarily included the Company’s business model transition and resulting increase in profitability and the expectation of continued profitability. These factors resulted in the release of the majority of the Company’s valuation allowance against its deferred tax assets during 2022. As of December 31, 2023, the Company maintained a valuation allowance of $46.1 million solely related to certain state net operating loss carryforwards (NOLs) and state tax credit carryforwards.

As of December 31, 2023, the Company had federal and state NOLs (prior to the application of statutory tax rates) of approximately $88.8 million and $534.5 million, respectively. Federal and state NOLs of approximately $88.8 million and $28.9 million, respectively, carry forward indefinitely while the remaining state NOLs primarily start expiring in 2030. The carryforwards, net of the valuation allowance for certain states, are expected to be fully utilized prior to expiration. Additionally, as of December 31, 2023, the Company had federal and state research and development credit carryforwards of $31.8 million and $24.9 million, respectively. The federal research credit carryforwards will expire beginning in 2036 and the state research credits may be carried forward indefinitely.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits was as follows:
Year Ended December 31,202320222021
Beginning balance$27,850 $22,512 $17,626 
Gross increase for tax positions related to prior years(161)2,488 1,272 
Gross increase for tax positions related to the current year2,373 2,850 3,614 
Ending balance$30,062 $27,850 $22,512 

As of December 31, 2023, $19.5 million of unrecognized tax benefits, if recognized, would impact the Company’s effective tax rate. The Company had approximately $0.4 million and $0.2 million accrued for the payment of interest and penalties related to unrecognized tax benefits as of December 31, 2023 and 2022, respectively. The Company does not expect any significant increases or decreases to its unrecognized benefits within the next twelve months.

The Company files income tax returns in the United States and various state jurisdictions. As of December 31, 2023, the Company’s federal tax returns for 2019 and earlier, and state tax returns for 2018 and earlier were no longer subject to examination by the taxing authorities. However, tax periods closed in a prior period may be subject to audit and re-examination by tax authorities for which tax carryforwards are utilized in subsequent years.