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Income Taxes
12 Months Ended
Nov. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the year ended November 30, 2024, the Company recorded an income tax provision of $270,000. For the years ended November 30, 2023 and 2022, the Company did not record any current income tax expense or provision. The Company has generated net operating losses (NOLs) since inception and has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.
Loss before provision for income taxes includes the following component (in thousands):
November 30,
202420232022
Domestic$(193,299)$(143,948)$(180,360)
$(193,299)$(143,948)$(180,360)
The provision for income taxes consists of the following (in thousands):
November 30,
202420232022
Current:
Federal$270 $— $— 
State— — — 
Total provision for income taxes$270 $— $— 
The effective tax rate differs from the federal statutory rate as follows:
November 30,
202420232022
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income tax rate(4.9)14.1 5.9 
Research and development tax credits4.1 4.8 3.5 
Stock-based compensation(1.5)(4.2)(2.0)
Change in valuation allowance(18.6)(35.6)(28.4)
Other(0.1)(0.1)— 
Total— %— %— %
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and 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 deferred tax assets for federal and state income taxes are as follows (in thousands):
Year ended November 30,
20242023
Deferred tax assets:
Net operating loss carryforwards$91,786 $92,131 
Research and development tax credits48,307 37,052 
Deferred revenue12,683 11,143 
Stock-based compensation5,310 5,472 
Accrued expenses and other liabilities3,199 3,723 
Operating lease liabilities6,125 8,789 
Capitalized research and experimental expenses65,729 44,348 
Gross deferred tax assets233,139 202,658 
Valuation allowance(227,050)(193,717)
Total deferred tax assets6,089 8,941 
Deferred tax liabilities:  
Operating lease right-of-use assets(6,089)(8,941)
Total deferred tax liabilities(6,089)(8,941)
Net deferred tax assets$— $— 
Realization of the deferred tax assets is dependent upon future taxable income, the amount, if any, and timing of which are uncertain. The Company has established a valuation allowance to offset deferred tax assets as of November 30, 2024 and 2023 due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets. The valuation allowance increased by $33.3 million to $227.1 million during the year ended November 30, 2024, primarily related to an increase on the deferred tax asset for research and development (R&D) credits, NOL carryforwards and Section 174 research and development capitalization. The valuation allowance increased by $55.4 million to $193.7 million during the year ended November 30, 2023, primarily related to an increase on the deferred tax asset for R&D credits, NOL carryforwards and Section 174 research and development capitalization.
As of November 30, 2024, the Company had NOL carryforwards available to reduce future taxable income, if any, for federal and state income tax purposes of $263.9 million and $418.7 million, respectively. All outstanding federal NOL carryforwards were generated for tax years beginning after December 31, 2017, and carry forward indefinitely. State NOL carryforwards begin expiring in 2029. As of November 30, 2024, the Company had federal and state research credit carryforwards of $44.3 million and $25.9 million, respectively. If not utilized, the federal credit carryforwards will begin expiring in 2035 and the state credits carry forward indefinitely.
Section 382 of the Internal Revenue Code of 1986, as amended (IRC) places a limitation on the utilization of NOL and tax credit carryforwards in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points. The Company has identified ownership changes that have triggered a limitation on pre-change NOLs under Section 382. A majority of the Company’s pre-change NOLs remain available within the carryforward period provided by the IRC, subject to availability of taxable income.
Unrecognized Tax Benefits
The Company has recorded a liability related to uncertain tax positions in the consolidated financial statements. The Company has unrecognized tax benefits of $21.9 million as of November 30, 2024, all of which are offset by a full valuation allowance. There are no tax benefits included in the balance of unrecognized tax benefits that, if recognized, would affect the effective tax rate. There are no interest and penalties accrued as of November 30, 2024.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the years ended November 30, 2024, 2023 and 2022 is as follows (in thousands):
Years ended November 30,
202420232022
Balance at beginning of period$15,508 $10,261 $6,331 
Additions based on tax positions related to current period6,358 5,247 3,930 
Balance at end of period$21,866 $15,508 $10,261 
The Company files income tax returns in the United States and in various states. In January 2019, the California Franchise Tax Board (FTB) initiated an examination of the Company’s California tax return for tax years ending in 2015, 2016, 2017 and 2018. During the year ended November 30, 2021, the FTB issued proposed audit assessments related to revenue sourcing and R&D credits. The Company did not agree with the FTB’s assessments and challenged the assessments. Pursuant to a measurement analysis, the Company has not recorded an unrecognized tax benefit related to the FTB’s sourcing position. The Company maintains an unrecognized tax benefit related to its California R&D credits for all years. All of the Company’s tax years will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of the utilization of any NOLs.
In December 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law, significantly reforming the IRC. The TCJA contains a provision impacting Section 174 of the IRC whereby for tax years beginning on or after January 1, 2022, taxpayers are required to capitalize and amortize, rather than deduct, research and experimental (R&E) expenses. The R&E expenses under Section 174 must be amortized over five years for research performed in the United States and 15 years for research performed outside the United States. This rule became effective for the Company during the year ended November 30, 2023. For the years ended November 30, 2024 and 2023, the Company recorded a deferred tax asset of $65.7 million and $44.3 million, respectively, pursuant to the provisions of Section 174 of the IRC.