Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

16.Income Taxes

Income (loss) before provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2021		2020			2019
Domestic	$	535,989	$	(309,697	)	$	(138,724	)
Foreign		13,813		11,086			(35,805	)
Total income (loss) before provision for income taxes	$	549,802	$	(298,611	)	$	(174,529	)

The components of income tax expense consist of the following (in thousands):

	Year Ended December 31,
	2021		2020			2019
Current:
Federal	$	3,526	$	—		$	—
State		105		—			—
Foreign		2,401		106			154
		6,032		106			154
Deferred:
Federal		15,186		(21	)		—
State		—		(31	)		—
		15,186		(52	)		—
Provision for income taxes	$	21,218	$	54		$	154

A reconciliation between the expected income tax provision at the federal statutory rate and the reported income tax expense is as follows:

	Year Ended December 31,
	2021			2020			2019
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%
Foreign tax at less than federal statutory rate		(0.2	)		0.9			(0.3	)
Prior year tax rate adjustment		—			(1.9	)		—
State taxes, net of federal benefit		0.7			2.7			2.4
Research and development tax credit		(1.6	)		1.8			2.0
Permanent items		1.8			1.3			(0.8	)
Changes in valuation allowance		(17.9	)		(25.3	)		(24.3	)
Other		0.1			(0.5	)		(0.1	)
Effective income tax rate		3.9	%		0.0	%		(0.1	)%

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020, are related to the following:

	December 31,
	2021			2020
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	15,030		$	117,433
Research and development tax credit carryforward		11,375			12,246
Equity compensations		15,065			4,193
Reserves and accruals		7,115			10,804
Lease liabilities		28,612			16,184
Intangible assets		19,657			23,006
Deferred tax assets		96,854			183,866
Deferred tax liabilities:
Unrealized gain on investments		(30,170	)		—
ROU assets		(28,483	)		(16,147	)
Property and equipment		(2,422	)		(2,570	)
IPR&D		(8,511	)		(8,511	)
Deferred tax liabilities		(69,586	)		(27,228	)
Valuation allowance		(45,707	)		(159,891	)
Net deferred tax liabilities	$	(18,439	)	$	(3,253	)

Although the Company has taxable income for the year ended December 31, 2021, it has otherwise incurred accumulated tax losses since inception. Based on the available objective evidence, the Company cannot conclude it is more likely than not that the net deferred tax assets will be fully realizable. Accordingly, the Company has provided a valuation allowance against its net deferred tax assets. For the year ended December 31, 2021, the Company recorded a valuation allowance release of $114.2 million, based on the estimated 2021 taxable income. For the years ended December 31, 2020 and 2019, the valuation allowance increased by $74.1 million and $42.3 million, respectively. As of December 31, 2021, the Company has net operating loss carryforwards of $24.2 million for federal purposes and $126.6 million for state tax purposes. If not utilized, these carryforwards will begin expiring in 2035 for federal and in 2031 for state tax purposes. The federal net operating losses generated after December 31, 2017, have an infinite carryforward period and subject to 80% deduction limitation based upon pre-NOL deduction taxable income. As of December 31, 2021, the Company also has net operating loss carryforwards of $5.4 million for Australian tax purposes, which has an infinite carryforward period, and no net operating loss carryforward for Swiss tax purposes.

Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss carryforwards may be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. The Company completed its Section 382 analysis as of December 31, 2021 and based on this analysis, it does not expect that the annual limitations will significantly impact its ability to utilize its net operating loss or tax credit carryforwards prior to expiration.

As of December 31, 2021, the Company has research tax credit carryforwards of $6.0 million and $11.0 million for federal and state tax purposes, respectively. If not utilized, the federal carryforward will expire in various amounts beginning in 2036. The California credits can be carried forward indefinitely. To the extent they were not utilized, Oregon carryforward began expiring in 2022.

The Tax Cuts and Jobs Act of 2017 subjects a U.S. shareholder to current tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

Uncertain Tax Positions

As of December 31, 2021 and 2020, the Company had an unrecognized tax benefit of $7.4 million and $4.9 million, respectively, related to transfer pricing and research and development tax credits. No amount of unrecognized tax benefits as of December 31, 2021, if recognized, would reduce the Company’s effective tax rate because the benefits would be in the form of net operating loss and tax credit carryforwards, which would attract a full valuation allowance. There are no provisions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. Because the statute of limitations does not expire until after the net operating loss and credit carryforwards are actually used, the statutes are still open on calendar years ending December 31, 2017 forward for federal and state purposes.

The Company did not recognize any expense for interest and penalties related to uncertain tax positions during 2021, 2020 and 2019, and the Company does not have any amounts related to interest and penalties accrued at December 31, 2021. The Company files U.S. federal, state, Switzerland and Australia tax returns. The Company’s tax years remain open for all years. As of December 31, 2021, the Company was not under examination by the Internal Revenue Service or any state or foreign tax jurisdiction.

A reconciliation of the beginning and ending amounts of the liability for uncertain tax positions is as follows:

	Year Ended December 31,
	2021			2020			2019
	(in thousands)
Gross unrecognized tax benefits at January 1	$	4,877		$	2,725		$	2,404
Addition for tax positions taken in the prior years		—			—			133
Reduction for tax positions taken in the prior years		(62	)		(588	)		(1,596	)
Addition for tax positions taken in current year		2,607			2,740			1,784
Gross unrecognized tax benefits at December 31	$	7,422		$	4,877		$	2,725