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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss before provision for income taxes were as follows (in thousands):
Year Ended December 31,
202120202019
(in thousands)
United States$(384,976)$(246,463)$(69,930)
Foreign506 559 207 
Total(384,470)(245,904)(69,723)
The components of the provision for income taxes are as follows:
Year Ended December 31,
202120202019
(in thousands)
Current:
State$4$5$3 
Foreign118242266 
Total current tax expense
$122$247$269 
Deferred:
Federal $108$184$(1,652)
State2034(311)
Foreign50(86)(178)
Total deferred tax expense
$178$132$(2,141)
Total provision for income taxes
$300$379$(1,872)
Deferred income taxes reflect the tax effects of 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 Company’s deferred tax assets are as follows:
As of December 31,
20212020
(in thousands)
Deferred tax assets:
Net operating losses carryforwards
$232,657 $133,015 
Property, equipment and intangible assets13,233 14,198 
Accruals and reserves
10,326 10,117 
Research and development credits
33,977 19,022 
Stock-based compensation
10,217 28,745 
Lease liabilities
59,465 12,092 
Other
948 65 
Total deferred tax asset
$360,823 $217,254 
Deferred tax liabilities:
Section 481 (a) adjustment(305)(607)
Right-of-use asset(47,130)(9,383)
Unrealized gain/loss on investments— (571)
Debt discount— (81,964)
Other(14)— 
Total deferred tax liabilities
(47,449)(92,525)
Less: valuation allowance(313,125)(124,433)
Net deferred tax assets$249 $296 
The following table presents a reconciliation of the income tax expense computed at the statutory federal rate and the Company’s income tax expense for the periods presented:
Year Ended December 31,
202120202019
(in thousands)
Tax at the statutory federal rate$(80,739)$(51,639)$(14,642)
Other nondeductible items1,399 786 887 
Stock-based compensation1,354 (13,382)(33,042)
Research and development credits(14,956)(7,890)(5,266)
Change in valuation allowance106,227 81,395 59,049 
State taxes, net of federal benefits
(14,998)(11,119)(8,253)
Other
2,013 2,228 (605)
Total provision for (benefit from) income taxes
$300 $379 $(1,872)
The Company’s actual tax expense differed from the statutory federal income tax expense using a tax rate of 21% for the year ended December 31, 2021, 2020 and 2019, primarily due to state and foreign income taxes, nondeductible expenses, research and development tax credits, the acquisition of Bellwether Bio, Inc., or "Bellwether Bio", and the change in valuation allowance. The benefit from income taxes for the year ended December 31, 2019 included a release of a valuation allowance of $1.6 million associated with nondeductible intangible assets recorded as a result of the acquisition of Bellwether Bio. In connection with the acquisition of Bellwether Bio, a deferred tax liability was established for the book-tax basis differences related to the non-goodwill intangible assets. The net deferred tax liability from this acquisition creates an additional source of income to offset the Company’s deferred tax assets. The benefit from income taxes for the year ended December 31, 2019 also included a benefit of $0.4 million associated with the utilization of tax losses from continuing operations against other comprehensive income gains in accordance with intra-period tax allocation under ASC Topic 740.
As of December 31, 2021 and 2020, the Company had a net operating loss carryforwards of $956.9 million and $547.3 million for federal purposes, and $542.0 million and $306.7 million for state and local purposes, respectively, which may be subject to limitations as described below. If not utilized, these carryforwards will begin to expire in 2031 for federal, and 2022 for state and local purposes. Federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. Some but not all states conform to the federal treatment of net operating losses.
As of December 31, 2021 and 2020, the Company had research and development tax credit carryforwards for federal tax purposes of $21.4 million and $11.9 million, and state research and development tax credit carryforwards of $15.9 million and $9.1 million, respectively. The federal research and development tax credit carryforwards will expire at various dates beginning in the year 2032. The Company’s state research and development tax credit carryforwards do not expire.
Utilization of the net operating loss, or NOL, carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. Current laws impose substantial restrictions on the utilization of NOL carryforwards and credits in the event of an “ownership change” within a three-year period as defined by the Internal Revenue Code Section 382, or Section 382. If there should be an ownership change, the Company’s ability to utilize its NOL carryforwards and credits could be limited. The Company has not performed a Section 382 analysis.
Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Due to the Company’s history of U.S. operating losses, the Company believes that the recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized and, accordingly, have provided a full valuation allowance against net U.S. deferred tax assets. The net change in total valuation allowance was an increase of $188.7 million, a decrease of $0.8 million and an increase of $59.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The Company has not recorded a provision for deferred U.S. tax expense that could result from the remittance of foreign undistributed earnings since the Company intends to reinvest the earnings in its foreign subsidiaries indefinitely.
The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income, or GILTI, taxes as a current period expense rather than including these amounts in the measurement of deferred taxes.
Uncertain Tax Positions
The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company recorded unrecognized tax benefits for uncertain tax positions of $20.1 million and $11.3 million as of December 31, 2021 and 2020, respectively, of which an immaterial amount would impact the Company’s effective tax rate if recognized, because the benefit would be offset by an increase in the valuation allowance.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows:
Year Ended December 31,
202120202019
(in thousands)
Unrecognized tax benefits - Beginning of period$11,269 $6,543 $3,427 
Increases related to current year’s tax positions8,223 4,666 3,116 
Increases related to prior years’ tax positions608 60 — 
Unrecognized tax benefits - End of period$20,100 $11,269 $6,543 
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2021, 2020 and 2019, the Company recognized no interest and penalties associated with unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.
Due to the net operating loss carryforwards, all years remain open for income tax examination by tax authorities in the United States, various states and foreign tax jurisdictions in which the Company files tax returns.