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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Historically, Legacy PCT was a limited liability company which had elected to be treated as a partnership for income tax purposes. As such, the Company was not directly liable for income taxes for federal purposes. As of the date of the Business Combination (March 2021), the operations of the Company ceased to be taxed as a partnership resulting in a change in tax status for federal and state income tax purposes. This change in tax status requires immediate recognition of any deferred tax assets or liabilities as of the transaction date as the Company will now be directly liable for income taxes. The recognition of these initial deferred balances, if any, would be recorded as additional tax expense in the period of the transaction. In addition, the Company will accrue current and deferred tax expense based on ongoing activity from that date.
Loss from continuing operations before income taxes, classified by source of income, were as follows (in thousands):
Years ended December 31,
202220212020
Domestic$(84,746)$(77,502)$(52,992)
Total$(84,746)$(77,502)$(52,992)
The components of the provision (benefit) for income taxes were as follows (in thousands):
Years ended December 31,
202220212020
Current:
Federal$— $— $— 
State and local— — — 
Foreign— — — 
Total current provision (benefit)$— $— $— 
Deferred:
Federal— — — 
State and local— — — 
Foreign— — — 
Total deferred provision (benefit)$— $— $— 
Total provision (benefit) for income taxes$— $— $— 
The effective tax rate differs from the statutory tax rates as follows (in thousands):
Years ended December 31,
202220212020
Tax at statutory federal rate$(17,797)21.0 %$(16,275)21.0 %$— — %
Rates different than the statutory rate— — %2,677 (3.5)%— — %
State income tax(1,433)1.7 %— — %— — %
Compensation expense805 (0.9)%2,973 (3.8)%— — %
Warrant expense and other permanent items1,247 (1.5)%241 (0.3)%— — %
Change in tax status— — %(4,100)5.3 %— — %
Tax Credits(3,571)4.2 %— — %— — %
Prior period adjustment(1,880)2.2 %— — %— — %
Tax rate change(712)0.8 %— — %— — %
Valuation allowance24,136 (28.5)%15,205 (19.6)%— — %
Other(795)0.9 %(721)0.9 %— — %
Provision (benefit) for income taxes$— — %$— — %$— — %
Deferred income tax assets and liabilities result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes, and from the recognition of the tax benefits of net operating loss carryforwards.
The components of the deferred income tax assets and liabilities were as follows (in thousands):
Years ended December 31,
20222021
Deferred tax assets:
Net operating losses and tax credit carry-forward$32,918 $3,585 
Stock-based compensation1,837 728 
Start-up expenses10,301 10,819 
Property, plant, and equipment— 1,107 
Interest expense carryforwards— 306 
Deferred revenue1,370 1,090 
Lease liabilities4,604 — 
Other859 788 
Gross deferred tax asset$51,889 $18,423 
Less valuation allowance
(39,340)(15,205)
Net deferred tax asset$12,549 $3,218 
Deferred tax liabilities:
Research and experimental expenses(1,662)(2,691)
Property, plant, and equipment(5,821)— 
Right of use assets(4,415)— 
Other accruals
(651)(527)
Total deferred tax liability$(12,549)$(3,218)
Net deferred tax asset (liability)$— $— 
As of December 31, 2022, the Company has $128.8 million of gross U.S. federal net operating loss carryforward, $2.0 million post apportioned gross state net of operating loss carryforwards, and $3.9 million of research and development tax credit carryforwards. As of December 31, 2021, the Company had $14.9 million of gross U.S. federal net operating loss carryforward, $0.1 million post apportioned gross state net of operating loss carryforwards, and $0.3 million of research and development tax credit carryforwards. The attributes will be available to offset future income tax liabilities. The U.S. federal net operating losses can be carried forward indefinitely, the state net operating losses in certain jurisdictions can be carried forward indefinitely while certain jurisdictions expire at various dates, and the research and development tax credit can be carried forward for up to 20 years.
Valuation allowances are established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The valuation allowance on our deferred tax assets was $39.3 million as of December 31, 2022 and 15.2 million as of December 31, 2021, resulting in a net change of $24.1 million year-over-year. The valuation allowance mainly relates to U.S. federal and state net operating loss carryforwards and start-up expenses. As the Company is pre-revenue, insufficient projected taxable income and lack of other sources of taxable income gives rise to need of a valuation allowance.
As of December 31, 2022 and 2021, the Company does not have any accumulated undistributed earnings and profits in foreign operations, as the Company did not perform any activities in foreign locations during the year.
As of December 31, 2022 and 2021, the Company has not recorded an amount of gross unrecognized tax benefits for uncertain tax positions for the current or prior year planned tax filing positions. No unrecognized tax benefits are applicable for prior periods.
The Company files returns in the U.S. federal jurisdiction and in various state jurisdictions based on existing tax laws. The Company remains generally subject to examination in the U.S. for year beginning on or after January 1, 2019, however, for any tax years prior to March 2021, such audits are not expected to impact the Company
while the Company operated as a flow-through entity. The Company is not currently under audit in any jurisdiction.
The Company actively monitors domestic and global tax law changes to account for the effects in the period the legislation is enacted, as applicable.