Income Tax Expense

12 Months Ended

Dec. 31, 2021

Income Tax Expense

Income Tax Expense

12.  Income Tax Expense

Income (loss) before income taxes attributable to domestic and international operations, consists of the following:

	Year ended December 31
(in thousands)	2021		2020		2019
Domestic	$	(40,540)	$	(71,344)	$	(78,761)
Foreign		(8,420)		1,999		(3,902)
Loss before income taxes	$	(48,960)	$	(69,345)	$	(82,663)

Income tax expense consists of the following:

	Year ended December 31
(in thousands)	2021		2020		2019
Current tax
Domestic	$	—	$	—	$	—
Foreign		(490)		(139)		(101)
Deferred tax
Domestic		—		—		—
Foreign		—		—		—
Total income tax expense	$	(490)	$	(139)	$	(101)

The reconciliation to our effective tax rate from the Irish statutory income tax rate of 12.5% for the years ended December 31, 2021, 2020 and 2019 is as follows:

	Year ended December 31
(% of pre-tax income)	2021		2020		2019
Statutory income tax rate	12.5	%	12.5	%	12.5	%
Non-deductible expenses	—		—		(0.1)
Income not subject to tax	0.4		0.2		0.3
Tax credits	—		0.6		0.4
Foreign operations	(7.3)		3.0		0.6
Tax audit assessments	—		—		(11.8)
Other	(1.7)		2.3		0.8
Valuation allowance	(4.9)		(18.8)		(2.8)
Effective income tax rate	(1.0)	%	(0.2)	%	(0.1)	%

The following table summarizes the components of deferred income tax balances:

	As of December 31,
(in thousands)	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	111,220	$	108,095
Tax loss on liquidation of subsidiary		2,501		4,029
Equity compensation		4,067		4,449
Non-deductible reserves		905		447
Total deferred tax assets		118,693		117,020
Valuation allowance		(118,583)		(116,200)
Net deferred tax assets		110		820
Deferred tax liabilities:
Financial liabilities		100		757
Property, plant and equipment		10		63
Total deferred tax liability		110		820
Deferred tax, net	$	—	$	—

The table below summarizes changes in the deferred tax valuation allowance:

	Year ended December 31,
(in thousands)	2021		2020		2019
Balance at beginning of year	$	(116,200)	$	(103,185)	$	(100,832)
Tax benefit		(2,383)		(13,015)		(2,353)
Balance at end of year	$	(118,583)	$	(116,200)	$	(103,185)

The following table summarizes carryforwards of net operating losses as of December 31, 2021.

(in thousands)	Amount		Expiration
Ireland	$	297,453	Indefinite
Austria	$	239,510	Indefinite
United States	$	10,403	Indefinite
United States	$	35,516	2033

Due to uncertainty regarding the ability to realize the benefit of deferred tax assets primarily relating to net operating loss carryforwards and the fact that the Company is in a three year pretax cumulative loss position, a full valuation allowance has been established.

The Company’s U.S. subsidiary has net operating loss and tax credit carryforwards that may be subject to annual limitations due to ownership changes as defined by Sections 382 and 383 of the Internal Revenue Code. These limitations could restrict the amount of tax attributes that can be utilized annually to offset future U.S. taxable income or tax liabilities.

On the basis of this evaluation, as of December 31, 2021, 2020 and 2019, the Company has recorded a valuation allowance of $118.6 million, $116.2 million and $103.2 million, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

At December 31, 2021, the Company had no uncertain tax positions and did not expect any material increase or decrease in income tax expense related to examinations or changes in uncertain tax positions. The Company’s U.S. subsidiary, Nabriva Therapeutics US, Inc., resolved its examination for tax year 2018 with the Internal Revenue Service with a decrease in a research and development tax credit carryforward of $0.1 million.

The Company files income tax returns in Ireland. In addition, the Company’s foreign subsidiaries file separate income tax returns in Austria and the United States and state jurisdictions in which they are located. Tax years 2017 and forward remain open for examination for Ireland tax purposes and 2016 and forward remain open for examination for Austrian tax purposes and years 2018 and forward remain open for examination for United States tax purposes.

The Company’s policy is to record interest and penalties related to tax matters in income tax expense.