Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of the Company's loss before income taxes for the years ended December 31, 2020, 2019, and 2018 were as follows:
The components of the Company's provision for (benefit from) income taxes for the years ended December 31, 2020, 2019, and 2018 were as follows:
A reconciliation of the U.S. federal statutory rate to the Company's effective tax rate is as follows:
In 2020, the difference in the Company's effective tax rate and the U.S. federal statutory tax rate was primarily due to the recording of a full valuation allowance on the Company's U.S. deferred tax assets, offset by the partial release of the U.S. valuation allowance in connection with the acquisition of S2, excess tax benefits from stock-based compensation deductions in the United Kingdom, and income tax expense from profitable foreign jurisdictions. In 2019 and 2018, the difference in the Company's effective tax rate and the U.S. federal statutory tax rate was also primarily due to the recording of a full valuation allowance on the Company's U.S. deferred tax assets and income tax expense from profitable foreign jurisdictions. The components of the Company's deferred tax assets and liabilities as of December 31, 2020 and 2019 were as follows:
In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are realizable. Accordingly, there is no valuation allowance in the foreign jurisdictions. A full valuation allowance has been established in the U.S. and no deferred tax assets and related tax benefits have been recognized in the consolidated financial statements. The valuation allowance as of December 31, 2020 and 2019 was $75.1 million and $63.5 million, respectively. The net change in the valuation allowance for the years ended December 31, 2020, 2019, and 2018 was an increase of $11.6 million, an increase of $25.6 million and an increase of $15.5 million, respectively. The increase in the Company’s valuation allowance compared to the prior year was primarily due to an increase in U.S. deferred tax assets from increased U.S. taxable loss, offset by the partial release of the U.S. valuation allowance in connection with the acquisition of S2 and convertible note deferred tax liability. As of December 31, 2020 and 2019, the Company had net operating loss carryforwards for federal income tax purposes of $448.7 million and $221.5 million, net of uncertain tax positions, respectively. The federal net operating loss carryforwards for tax years before December 31, 2017 will expire, if not utilized, beginning in the year 2029. Under the Tax Cuts and Jobs Act (The Tax Act), the federal net operating loss carryforwards for tax years after December 31, 2017 are carried forward indefinitely but are limited to 80% of taxable income; however, the Coronavirus Aid, Relief and Economic Security Act (The CARES Act) temporarily removes such limitations for years 2018 through 2020. Federal research and development tax credit carryforwards as of December 31, 2020 of $8.2 million, net of uncertain tax positions, will expire, if not utilized, beginning in the year 2029. In addition, as of December 31, 2020 and 2019, the Company had net operating loss carryforwards for state income tax purposes of $215.8 million and $104.7 million, net of uncertain tax positions, respectively. The state net operating loss carryforwards will expire, if not utilized, beginning in the year 2026. The Company had state research and development tax credit carryforwards as of December 31, 2020 of $6.0 million, net of uncertain tax positions. The state research and development tax credits do not expire. As of December 31, 2020 and 2019, the Company had foreign tax credit carryforwards for federal income tax purposes of $1.8 million. The federal foreign tax credit carryforwards will expire, if not utilized, beginning in the year 2025. The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of net operating losses and tax credit carryforwards in the event that there is a change in ownership as provided by Section 382 of the Internal Revenue Code and similar state provisions. Such a limitation could result in the expiration of the net operating loss carryforwards and tax credits before utilization. A reconciliation of the beginning and ending amount of the Company's total gross unrecognized tax benefits was as follows:
The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year or otherwise directly related to an existing deferred tax asset, in which case the uncertain tax position is recorded net of the asset on the consolidated balance sheet. As of December 31, 2020, $0.1 million of the Company’s gross unrecognized tax benefits, if recognized, would affect the effective tax rate and, $5.6 million would result in an adjustment to deferred tax assets with corresponding adjustments to valuation allowance. The Company does not expect any unrecognized tax benefits to be recognized within the next 12 months. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not recognize any income tax expense related to interest and penalties in the years ended December 31, 2020, 2019, and 2018, respectively. The Company’s significant tax jurisdictions include the U.S., Australia, Germany, Singapore, and the United Kingdom. Because of the net operating loss carryforwards, substantially all of the Company’s tax years remain open to federal and state tax examination. The Company’s foreign tax returns are open to audit under the statutes of limitations of the respective foreign countries in which the subsidiaries are located. The Company generally does not provide deferred income taxes for the undistributed earnings of its foreign subsidiaries as the Company intends to reinvest such earnings indefinitely. Should circumstances change and it becomes apparent that some or all of the undistributed earnings will no longer be indefinitely reinvested, the Company will accrue for income taxes not previously recognized. As of December 31, 2020, the majority of the Company's foreign subsidiaries had no cumulative undistributed earnings and, as a result, there were no unrecorded deferred tax liabilities. The amount of undistributed earnings in the Company’s other foreign subsidiaries are immaterial.
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