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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before income taxes consisted of the following (in thousands):
Year Ended December 31,
20222021
Domestic$9,620 $(37,291)
Foreign(224)69 
Income (loss) before income taxes$9,396 $(37,222)
Provision for income taxes consisted of the following (in thousands):
Year Ended December 31,
20222021
Current:
Federal$— $— 
State— 4 
Foreign16 16 
Total Current16 20 
Deferred:
Federal— — 
State— — 
Foreign— — 
Total Deferred— — 
Provision for income taxes$16 $20 

The effective tax rate of the Company's provision for income taxes differs from the federal statutory rate as follows:
Year Ended December 31,
20222021
U.S. federal provision (benefit) at statutory rate21.0 %21.0 %
State taxes, net of federal benefit(19.4)— 
Other permanent items(0.8)0.6 
Stock-based compensation4.4 (2.0)
Research and development credits(8.3)2.0 
Transaction costs(8.2)— 
Change in valuation allowance183.5 (21.7)
Remeasurement of earnout liability(172.1)— 
Effective tax rate0.2 %(0.1)%

For the year ended December 31, 2022, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to remeasurement of earnout liability, transaction costs, and the Company’s full valuation allowance on its U.S. deferred tax assets. For the year ended December 31, 2021, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to the Company’s full valuation allowance on its U.S. deferred tax assets.
The Company’s deferred income tax assets and liabilities as of December 31, 2022 and 2021 were as follows (in thousands):
December 31,
20222021
Deferred tax assets:
Net operating loss carryforward$28,199 $20,082 
Section 174 capitalized research and development expenses5,489 — 
Research and development credits5,319 3,323 
Stock-based compensation1,373 191 
Other779 309 
Valuation allowance(41,159)(23,875)
Total deferred tax assets— 30 
Deferred tax liabilities:
Depreciation and amortization— (30)
Total deferred tax liabilities— (30)
Net deferred tax assets (liabilities)$— $— 

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that the Company assesses that realization is “more likely than not”. Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance as of December 31, 2022 and 2021. The Company’s valuation allowance balance increased by $17.3 million and $8.1 million for the years ended December 31, 2022 and 2021, respectively.
As of December 31, 2022 and 2021, the Company had total net operating loss carryforwards for federal income tax purposes of approximately $119.8 million and $83.4 million, respectively, out of which $2.4 million and $2.1 million net federal operating loss carryforwards will begin to expire in 2037 if not utilized. For tax years beginning January 1, 2018 onward, any federal net operating losses generated can be carried forward indefinitely, as opposed to the original expiration of 20 years. As of December 31, 2022 and 2021, the Company had $117.4 million and $81.3 million of federal net operating losses, respectively, that can be carried forward indefinitely. The Company also had a state net operating loss carryforward of approximately $46.4 million and $33.3 million as of December 31, 2022 and 2021, respectively, which will expire beginning in the year 2037.
As of December 31, 2022 and 2021, the Company had federal research and development credit carryforwards of approximately $4.3 million and $2.2 million, respectively, which begin to expire in 2038, and California research and development credit carryforward of approximately $5.8 million and $4.2 million, respectively, which do not expire.
Utilization of the research and development credit carryforward may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of the research and development credits before utilization. The amount of such elimination, if any, has not been determined.
As of December 31, 2022 and 2021, the total amount of unrecognized tax benefits was $4.0 million and $2.6 million, respectively, none of which would affect income tax expense, if recognized, after consideration of any valuation allowance. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months. The following table summarizes the aggregate changes in the total gross amount of unrecognized tax benefits (in thousands):
Year Ended December 31,
20222021
Unrecognized tax benefits as of the beginning of the year$2,569 $1,471 
Increases related to prior year tax provisions244 159 
Increase related to current year tax provisions1,216 939 
Unrecognized tax benefits as of the end of the year$4,029 $2,569 
The Company is subject to income taxes in the U.S. federal, state, and various foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. All of the Company’s tax years will remain open for examination by the federal and state tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or research and development credits. The Company does not have any federal or state tax audits pending.
As a qualified small business, the Company applies a portion of its post-2015 federal research and development credit against payroll tax liabilities, instead of income tax liabilities. As of December 31, 2022 and 2021, the related payroll tax receivable balance is $0.9 million and $1.0 million, respectively.