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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the years ended December 31, 2022 and 2021, the amount of loss before taxes was:
(In thousands)20222021
U.S. loss before taxes$(50,722)$(94,330)
Foreign loss before taxes(356)— 
Total loss before taxes$(51,078)$(94,330)
Current income tax expense for the years ended December 31, 2022 and 2021 was nominal. Deferred income tax expense for the years ended December 31, 2022 and 2021 was $(0.1) million and $— million, respectively.
The effective tax rates for the years ended December 31, 2022 and 2021 are different from the federal statutory rate primarily due to a full valuation allowance against net deferred tax assets, in both years, as a result of insufficient sources of income. The reconciliation of tax expense at the U.S. Federal Statutory tax rate versus the recorded income tax expense is as follows for the years ended December 31, 2022 and 2021:
(In thousands)20222021
U.S. federal statutory rate$(10,726)$(19,809)
State income tax, net of federal benefit(6,856)(2,353)
(Gain) loss on earn-out(20,733)6,573 
Transaction costs(2,599)669 
Stock-based compensation1,107 31 
Permanent items104 20 
Section 162(m)2,905 667 
Other adjustments17 (216)
Rate adjustment204 (44)
Return to provision194 2 
Valuation allowance36,293 14,461 
Total income tax expense (benefit)$(90)$1 
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The principal components of the Company’s deferred tax assets for the years ended December 31, 2022 and 2021 consisted of the following:
(In thousands)20222021
Net operating loss carryforwards$62,854 $43,087 
Amortizable assets7,929 180 
Equity compensation3,011 841 
Salaries and wages983 1,277 
Deferred revenue658 101 
Operating lease liability341 613 
Fixed assets156 — 
Other229 69 
Total deferred tax assets76,161 46,168 
Less: valuation allowance(76,070)(39,777)
Net deferred tax asset91 6,391 
Operating lease ROU— (524)
Fixed assets— (5,867)
Total deferred tax liabilities— (6,391)
Net deferred tax assets (liabilities)$91 $— 
The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Due to the history of losses the Company has generated in the past, the Company believes that it is not more likely than not that all of the deferred taxes can be realized as of December 31, 2022 and 2021; accordingly, the Company has recorded a full valuation allowance on its US deferred tax assets. The valuation allowance increased $36.3 million and $14.5 million during the years ended December 31, 2022 and 2021, respectively. The foreign subsidiaries are cost-plus entities and are not expected to have any material DTAs or NOLs outside the start-up phase. As such, no valuation allowance has been applied.
At December 31, 2022, the Company has federal net operating loss (“NOL”) carryforwards of approximately $253.7 million, state NOL carryforwards of $179.1 million, and foreign NOL carryforwards of $0.2 million. As a result of Tax Cuts and Jobs Act, for U.S. income tax purposes, the NOL generated in tax years beginning before January 1, 2018 can be carried forward for 20 years, but NOL generated for tax years beginning after December 31, 2017 are carried forward indefinitely and are limited to 80% utilization against taxable income. Of the total federal NOL, $30.2 million will begin to expire in 2034 and $223.4 million will not expire but can only offset 80% of future taxable income in any given year. Of the total state NOL carryforwards, $8.7 million can be carried forward indefinitely, with the remainder first beginning to expire in 2029. Of the total foreign NOL carryforwards, $0.2 million can be carried forward indefinitely.
Pursuant to Code Sections 382 and 383, annual use of our NOLs may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed a formal study in accordance with sections 382 and 383 to determine the limitations if a change in ownership occurs or if there are any limitations on the utilization of NOL carryforwards. If NOL carryforwards are eliminated, the related tax assets would be removed from the deferred tax assets schedule with a corresponding reduction in the valuation allowance.
The Company files US. federal and various state and local income tax returns and is not under examination by any of the taxing authorities. Tax years 2019 and forward remain open for examination for federal tax purpose and tax years 2018 and forward remain open for examination for state tax purposes. Carryforward attributes that were generated in years where the statute of limitation is closed may still be adjusted upon examination by the Internal Revenue Service or other respective tax authority.
The Inflation Reduction Act (IRA) was signed into law on August 16, 2022. The IRA introduces a 15% corporate alternative minimum tax (CAMT) for corporations whose average annual adjusted financial statement income (AFSI) for any consecutive three-tax-year period ending after December 31, 2021 and preceding the tax year exceeds $1 billion and a 1% excise tax on stock repurchases made by publicly traded US corporations. Since the Company does not meet the book income threshold to be subject to CAMT, the excise tax is not an ASC 740 tax, they are not expected to have any impact. The other tax law updates are not expected to have any material impact to the Company's financial statements and related disclosures. The Company will continue to evaluate the impact and will monitor in future quarters.
The CHIPS and Science Act was signed into law on August 9, 2022. The Act introduces the advanced manufacturing investment tax credit, a 25% tax credit for investments in semiconductor manufacturing. It also includes incentives for manufacturing semiconductors, as well as specialized tooling equipment required in the semiconductor manufacturing process. The Company is not currently claiming any such tax credits, as such the tax law updates are not expected to have any material impact to the Company's financial statements and related disclosures.
The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2022 and 2021 (in thousands):

(In thousands)20222021
Unrecognized tax benefits – beginning$240 $240 
Gross increases – tax positions in prior period— — 
Gross decreases – tax positions in prior period— — 
Gross increase – current-period tax positions— — 
Gross decrease – current-period tax positions— — 
Settlements— — 
Lapse of statute of limitations— — 
Unrecognized tax benefits – ending$240 $240 
The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. Included in the balance of unrecognized tax benefits is $0.2 million that, if recognized, would not impact the Company’s effective tax rate since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months.
The Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on Global Intangible Low-taxes Income (“GILTI”) earned by certain foreign subsidiaries. Pursuant to the FASB Staff Q&A, Topic 740 No.5. Accounting for Global Intangible Low-taxed Income, the Company is allowed to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as period expense only. The Company has elected to account for GILTI in the year the tax is incurred.