Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

The Company did not record net income tax benefits for the operating losses incurred during the periods presented due to the uncertainty of realizing a tax benefit from those losses. Accordingly, any benefit recorded related to these deferred tax assets was offset by a valuation allowance reflecting management’s conclusion that realization of those assets was not more likely than not.

A reconciliation of the federal statutory income tax rate and the Company’s effective income tax rate is as follows:

	Year Ended December 31,
	2024	2023	2022
Federal statutory income tax rate	(21.0)%	(21.0)%	(21.0)%
State income taxes	(7.9)	(8.6)	(8.3)
Research and development tax credits	(7.4)	(6.9)	(5.3)
Stock-based compensation	2.0	1.6	(0.1)
Non-deductible officers' compensation	0.1	-	0.1
In-process research and development	-	-	2.5
Change in valuation allowance	34.2	34.9	32.1
Effective income tax rate	—%	—%	—%

The Company’s net deferred tax assets (liabilities) consisted of the following:

	December 31,
	2024			2023
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	296,766		$	258,664
Research and development credit carryforwards		200,816			151,333
Section 174 capitalized research		216,469			150,993
Operating lease liability		57,438			31,183
Deferred revenue		10,634			9,633
Stock-based compensation		34,827			30,408
Accruals and allowances		5,468			6,244
Prepaid rent		4,410			1,190
Equity investment adjustments		16,560			7,580
Intangibles, including in-process research and development		920			1,017
Capitalized start-up costs		211			249
Gross deferred tax assets		844,519			648,494
Deferred tax asset valuation allowance		(783,211	)		(616,082	)
Total deferred tax assets		61,308			32,412
Deferred tax liabilities:
Fixed assets		(1,385	)		(1,221	)
Operating lease right-of-use assets		(59,923	)		(31,191	)
Total deferred tax liabilities		(61,308	)		(32,412	)
Net deferred tax asset (liability)	$	-		$	-

The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize, rather than deduct, research and development expenditures under section 174 for tax years beginning after December 31, 2021. These rules became effective for the Company during the year ended December 31, 2022. As a result, the Company has capitalized research and development costs of $405.3 million and $365.8 million for the years ended December 31, 2024 and December 31, 2023, respectively. The Company will amortize these costs for tax purposes over 5 years if the research and development was performed in the U.S. and over 15 years if the research and development was performed outside the U.S.

As of December 31, 2024 and 2023, the Company had federal net operating loss carryforwards of $1,088.4 million and $954.0 million, respectively, which may be available to offset future income tax liabilities.

Approximately $36.9 million of the federal net operating losses generated prior to 2018 will begin to expire in 2034, unless previously utilized. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s net operating loss carryover or 100% of a corporation’s taxable income and be available for twenty years from the period the loss

was generated. The federal net operating losses generated after 2017 of approximately $1,051.5 million will be carried over indefinitely, but will generally limit the net operating loss deduction to the lesser of the net operating loss carryforward or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). Also, there will be no carryback for losses incurred after 2017.

As of December 31, 2024 and 2023, the Company also had state net operating loss carryforwards of $1,079.2 million and $922.8 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2034.

As of December 31, 2024 and 2023, the Company had federal tax credit carryforwards of approximately $139.3 million and $100.7 million, respectively, which begin to expire in 2034. As of December 31, 2024 and 2023, the Company had state research and development and other credit carryforwards of $77.9 million and $64.1 million, which begin to expire in 2029.

The Company evaluated the expected realizability of its net deferred tax assets and determined that there was significant negative evidence due to its net operating loss position and insufficient positive evidence to support the realizability of these net deferred tax assets. The Company concluded it is more likely than not that its net deferred tax assets would not be realized in the future; therefore, the Company has provided a full valuation allowance against its net deferred tax asset balance as of December 31, 2024 and 2023. The valuation allowance increased by $167.1 million in 2024, $161.3 million in 2023, and $150.0 million in 2022.

Ownership changes may limit the amount of net operating loss carryforwards or research and development tax credit carryforwards that can be utilized to offset future taxable income or tax liability. In general, an ownership change, as defined by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. If the Company has experienced a change of control, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382 and 383 of the Code. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. During 2022, the Company completed an assessment of the available net operating loss carryforwards and other tax attributes under Section 382 that covered the period from inception through December 31, 2022. The analysis did not result in a material limitation to the Company’s tax attributes and the results of this analysis are reflected herein. The Company has not completed an analysis through December 31, 2024. To the extent there was a change in control during 2023 and 2024, the Company's tax attributes could be subject to limitation. However, a full valuation allowance has been provided against the deferred tax assets related to the Company’s net operating loss and tax credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.

As of December 31, 2024, the Company had not identified any unrecognized tax benefits. The Company will recognize interest and/or penalties related to uncertain tax benefits in income tax expense if they arise.

The Company files income tax returns in the U.S. federal tax jurisdiction and Massachusetts and various other state tax jurisdictions. The Company is subject to examination by the Internal Revenue Service, Massachusetts taxing authorities and state taxing authorities for tax year 2021 through present. To the extent that the Company has tax attribute carryforwards, the tax year in which the attributes were generated may still be adjusted upon examination by the Internal Revenue Service or State taxing authorities to the extent utilized in a future period. The returns in these jurisdictions since inception remain open for examination.