The components of the provision for (benefit from) income taxes are as follows (in thousands):

	Year Ended December 31,
	2020			2019		2018
Current:
Federal	$	(2,678	)	$	—	$	—
State		105			1		(589	)
Foreign		—			18		—
Total current		(2,573	)		19		(589	)
Deferred:
Federal		(242	)		—		—
State		—			—		—
Foreign		—			—		—
Total deferred		(242	)		—		—
Provision for (benefit from) income taxes	$	(2,815	)	$	19	$	(589	)

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 Pandemic. The tax relief measures under the CARES Act for businesses include a five-year net operating loss carryback, suspension of annual deduction limitation of 80% of taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property.

The Company recognized income tax benefit of $2.8 million for the year ended December 31, 2020 due to the net operating loss carryback under the CARES Act which generated a refund of income taxes paid in 2017 and revaluation of IPR&D at year-end. The state tax expense for the year ended December 31, 2020 is due to state minimum and franchise taxes, and true-up of state tax refund.

For the rate table below the (provision for) benefit from income taxes differ from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

	Year Ended December 31,
	2020			2019			2018
Federal statutory income tax rate		21.0	%		21.0	%		21.0	%
Other permanent differences		(0.5	)%		(0.1	)%		(0.1	)%
State income taxes		6.1	%		5.1	%		3.8	%
Foreign rate differential		0.0	%		0.0	%		0.2	%
Foreign loss		0.0	%		(0.2	)%		(2.2	)%
Federal benefit from NOL carryback		6.7	%		0.0	%		0.0	%
Change in valuation allowance		(25.8	)%		(27.7	)%		(20.0	)%
Change in fair value of redeemable convertible preferred stock tranche liability and TRDF liability		(0.5	)%		1.7	%		8.7	%
Stock-based compensation		0.1	%		0.1	%		(6.0	)%
Benefit from (provision for) income taxes		7.1	%		(0.1	)%		5.4	%

The tax effects of temporary differences and carryforwards of the deferred tax assets are presented below (in thousands):

	December 31,
	2020			2019			2018
Deferred Tax Assets:
Net operating loss carryforwards	$	51,796		$	12,510		$	5,233
Operating lease right-of-use asset liability		5,686			—			—
Deferred revenue		2,857			5,719			5,125
Stock-based compensation		1,750			509			274
Intangible assets		1,195			609			804
Accruals and reserves		654			446			431
Research and development credit carryforwards		26			26			26
Gross deferred tax assets		63,964			19,819			11,893
Less: Valuation allowance		(57,715	)		(19,815	)		(11,739	)
Deferred tax assets, net of valuation allowance		6,249			4			154
Deferred tax liabilities:
Fixed assets		—			(4	)		(154	)
Basis Difference IPR&D		(313	)		—			—
Operating lease right-of-use asset		(6,061	)		—			—
Net deferred tax liability	$	(125	)	$	—		$	—

On September 15, 2020 Adicet Bio and resTORbio completed the Merger upon which Adicet Bio became the parent company of the consolidated group. The Merger did not create a step up in basis for tax basis of the asset as it was considered a tax-free merger. The above deferred tax table includes deferred related to resTORbio.

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

The valuation allowance increased by $37.9 million during 2020 and $8.1 million during 2019.

As of December 31, 2020, the Company had net operating loss carryforwards of $211.4 million, $82.2 million and $16.7 million to reduce future taxable income, if any, for federal, state and foreign income tax purposes, respectively. Of the federal net operating loss carryforwards, $7.6 million will begin to expire in 2037 if not utilized, and $203.8 million can be carried forward indefinitely. The state carryforwards will begin to expire in 2035.

The Company also had California research and development credit carryforwards of less than $0.1 million as of December 31, 2020. The California research credit can be carried forward indefinitely.

Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, 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. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed and

any limitation is known, no liability related to uncertain tax positions is recorded in the consolidated financial statements. The Company does not expect its unrecognized tax benefit balance to change materially over the next 12 months.

The Company files income tax returns in the U.S. federal jurisdiction, California, Massachusetts, New York and Israel. The tax years 2015 to 2020 remains open to U.S. federal and state examination to the extent of the utilization of net operating loss and credit carryovers.

As of December 31, 2020, the Company had unrecognized tax benefits of $0.8 million related to the transfer of certain intellectual property from its Israeli subsidiary.

A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows (in thousands):

	Year Ended December 31,
	2020		2019		2018
Balance at the beginning of the year	$	797	$	797	$	866
Adjustment based on tax positions related to prior years		—		—		(69	)
Balance at the end of the year	$	797	$	797	$	797

The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense (benefit). Management determined that no accrual for interest and penalties was required as of December 31, 2020.