Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income (loss) before provision for income taxes are as follows (in thousands):

	Year Ended December 31,
	2021		2020		2019
United States	$	331,447	$	49,973	$	(1,266,677)
Foreign	(10,476)		(176,993)		(94,162)
Income (loss) before provision for income taxes	$	320,971	$	(127,020)	$	(1,360,839)

Provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	—	$	—	$	—
State	2,303		79		—
Foreign	2,957		691		1,677
Total current tax expense	5,260		770		1,677
Deferred:
Federal	6		654		(555)
State	6		5		(76)
Foreign	(739)		(126)		(514)
Total deferred tax expense (benefit)	(727)		533		(1,145)
Provision for income taxes	$	4,533	$	1,303	$	532

The difference between income taxes computed at the statutory federal income tax rate and the provision for income taxes is attributable to the following (in thousands):

	Year Ended December 31,
	2021		2020		2019
Tax at U.S. statutory rate	$	67,404	$	(26,674)	$	(285,776)
State income taxes, net of benefit	2,307		84		(77)
Foreign losses not benefited	4,448		37,716		20,932
Permanent book/tax differences	954		1,051		2,453
Legal settlement	—		2,290		—
Share-based compensation	(269,009)		(303,245)		(84,366)
Change in valuation allowance	278,761		352,410		422,315
Tax credits	(79,787)		(63,205)		(74,399)
Other	(545)		876		(550)
Provision for income taxes	$	4,533	$	1,303	$	532

The primary difference between our effective tax rate and the federal statutory rate is the full valuation allowance we have established on our federal, state and foreign net operating losses and credits.

Significant components of our deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	1,036,254	$	784,721
Research tax credits	401,219		269,658
Reserves, accruals, and other	29,641		18,106
Lease obligation	58,860		44,446
Share-based compensation	63,798		96,932
Total deferred tax assets	1,589,772		1,213,863
Less: valuation allowance	(1,539,889)		(1,176,910)
Deferred tax assets, net of valuation allowance	49,883		36,953
Deferred tax liabilities:
Depreciation and amortization	(47,952)		(34,576)
Prepaid expenses	(2,036)		(1,523)
Total deferred tax liabilities	(49,988)		(36,099)
Deferred tax assets (liabilities)	$	(105)	$	854

Due to our history of losses we believe it is more likely than not that our U.S. and Irish deferred tax assets will not be realized as of December 31, 2021. Accordingly, we have established a full valuation allowance on our U.S. and Irish deferred tax assets. Our valuation allowance increased by $363.0 million and $439.9 million during the years ended December 31, 2021 and 2020, respectively, primarily due to U.S. federal and state tax losses and credits incurred during the period.

As of December 31, 2021, we had federal, California and other state net operating loss carryforwards of $4,314.0 million, $500.8 million and $1,677.0 million, respectively. If not utilized, these will begin to expire in 2028, 2028 and 2026, respectively. Utilization of our net operating loss carryforwards may be subject to annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. Our net operating loss carryforwards could expire before utilization if subject to annual limitations. As of December 31, 2021, we had $51.9 million and $2.0 million of Irish and Other Foreign net operating loss carryforwards, respectively that can be carried forward indefinitely.

As of December 31, 2021, we had federal and California research and development credit carryforwards of $355.6 million and $275.4 million, respectively. If not utilized, our federal carryforwards will begin to expire in 2030. Our California carryforwards do not expire.

Changes in gross unrecognized tax benefits were as follows (in thousands):

	Gross Unrecognized Tax Benefits
Balance as of December 31, 2019	$	129,185
Increases for tax positions of prior years	886
Decreases for tax positions of prior years	(37,250)
Increases for tax positions of current year	47,339
Balance as of December 31, 2020	$	140,160
Increases for tax positions of prior years	2,906
Increases for tax positions of current year	61,993
Balance as of December 31, 2021	$	205,059

Recognizing the $205.1 million of gross unrecognized tax benefits we had as of December 31, 2021 would affect our effective tax rate by $2.6 million. The remaining $202.5 million of gross unrecognized tax benefits would be offset by

the reversal of related deferred tax assets, which are subject to a full valuation allowance. We do not expect our gross unrecognized tax benefits to change significantly within the next 12 months. We recognize interest and penalties related to uncertain tax positions in provision for income taxes. Accrued interest and penalties are not material as of December 31, 2021 and 2020.

We are subject to taxation in the U.S. and various other state and foreign jurisdictions. As we have net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years. For material foreign jurisdictions, the tax years open to examination include the years 2016 and forward. We are currently under examination of our U.S. consolidated federal income tax return by the Internal Revenue Service for calendar years 2018 and 2019. We believe that we have adequately reserved for any adjustments to the provision for income taxes or other tax items that may ultimately result from these examinations.

We have not recognized deferred taxes for the difference between the financial reporting basis and the tax basis of our investment in our foreign subsidiaries because we have the ability and intent to maintain our investments for the foreseeable future.