Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Year Ended December 31,
	2023		2022		2021
	(in thousands)
United States	$	(481,405)	$	(659,757)	$	(384,976)
Foreign	2,641		6,308		506
Total	$	(478,764)	$	(653,449)	$	(384,470)

The components of the provision for income taxes are as follows:

	Year Ended December 31,
	2023		2022		2021
	(in thousands)
Current:
State	$	35	$	127	$	4
Foreign	1,191		1,248		118
Total current tax expense	$	1,226	$	1,375	$	122
Deferred:
Federal	$	—	$	18	$	108
State	—		3		20
Foreign	(541)		(257)		50
Total deferred tax expense	$	(541)	$	(236)	$	178
Total provision for income taxes	$	685	$	1,139	$	300

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 and deferred tax liabilities are as follows:

	As of December 31,
	2023		2022
	(in thousands)
Deferred tax assets:
Net operating losses carryforwards	$	344,314	$	294,757
Capitalized research and development costs	122,162		89,084
Property, equipment and intangible assets	12,161		7,422
Accruals and reserves	40,172		12,917
Research and development credits	62,533		49,865
Stock-based compensation	18,278		16,507
Lease liabilities	54,564		59,757
Other	73		4,378
Total deferred tax assets	$	654,257	$	534,687
Deferred tax liabilities:
Right-of-use asset	$	(40,213)	$	(44,825)
Equity security investments	(9,044)		—
Other	(206)		(316)
Total deferred tax liabilities	$	(49,463)	$	(45,141)
Less: valuation allowance	(603,747)		(489,040)
Net deferred tax assets	$	1,047	$	506

    

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,
	2023		2022		2021
	(in thousands)
Taxes at the statutory federal rate	$	(100,553)	$	(137,276)	$	(80,739)
Capitalized research and expenditures true-up	8,212		—		—
Stock-based compensation	8,077		7,905		1,354
Research and development credits	(14,549)		(15,738)		(14,956)
Change in valuation allowance	114,707		175,916		106,227
State taxes, net of federal benefits	(19,117)		(28,522)		(14,998)
Other	3,908		(1,146)		3,412
Total provision for income taxes	$	685	$	1,139	$	300

The Company’s actual tax expense differed from the statutory federal income tax expense using a tax rate of 21% for the years ended December 31, 2023, 2022 and 2021, primarily due to the change in valuation allowance, state income taxes net of federal benefits, withholding taxes, research and development tax credits, stock-based compensation expenses, and capitalized research and expenditures true-up.

As of December 31, 2023 and 2022, the Company had net operating loss carryforwards of $1.4 billion and $1.2 billion for federal purposes, and $1.0 billion and $0.9 billion 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 purposes, and 2024 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, 2023, the Company had federal and state research and development tax credit carryforwards of $41.9 million, net of reserve of $22.6 million, and $26.1 million, net of reserve of $14.0 million, respectively. As of December 31, 2022, the Company had federal and state research and development tax credit carryforwards of $32.7 million and $21.8 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 $114.7 million, an increase of $175.9 million and an increase of $188.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a provision for deferred U.S. federal and state income tax expense and foreign withholding taxes on approximately $4.7 million of undistributed earnings of foreign subsidiaries indefinitely reinvested outside the United States. If the foreign earnings are repatriated, the income tax provision would be adjusted in the period the earnings are determined to be no longer indefinitely reinvested outside the United States.

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 $36.9 million and $29.6 million as of December 31, 2023 and 2022, respectively, which, if recognized, would not affect the effective income tax rate due to the valuation allowance that currently offsets the deferred tax assets.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows:

	Year Ended December 31,
	2023		2022		2021
	(in thousands)
Unrecognized tax benefits - Beginning of period	$	29,634	$	20,100	$	11,269
Increases related to current year’s tax positions	8,465		9,233		8,223
(Decreases) increases related to prior years’ tax positions	(1,153)		301		608
Unrecognized tax benefits - End of period	$	36,946	$	29,634	$	20,100

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, 2023, 2022 and 2021, 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.