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Income taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
The Company did not operate as a separate, stand-alone entity for periods prior to the separation. The Company’s statement of operations for periods prior to separation have been prepared on a carve out basis. The Company’s income tax provision for the year ended December 31, 2021 has been prepared on a stand alone basis for the period in which the Company was an independent, publicly traded Company from November 4, 2021 through December 31, 2021. Accordingly, the amount and composition of its tax losses, credits, and other deferred tax assets included in the consolidated and combined financial statements has change as the result of the Company’s separation from bluebird bio.
The components of loss before income taxes were as follows (in thousands):
Year ended December 31,
202120202019
Domestic$(292,213)$(120,114)$(320,594)
Foreign— — — 
Total$(292,213)$(120,114)$(320,594)
The Company has not recorded a provision for federal or state income taxes as it has had cumulative net operating losses since inception.
For the years ended December 31, 2021, 2020 and 2019, the Company did not recognize any income tax expense (benefit) as the Company was subject to a full valuation allowance. A reconciliation of income tax expense
(benefit) computed at the statutory federal income tax rate to the Company’s effective income tax rate as reflected in the financial statements is as follows:
Year ended December 31,
202120202019
Federal income tax expense at statutory rate21.0 %21.0 %21.0 %
State income tax, net of federal benefit0.6 %3.8 %5.5 %
Permanent differences— %0.3 %(0.1)%
Stock-based compensation0.3 %(4.1)%(0.5)%
Research and development credit0.2 %13.8 %5.6 %
Officer compensation limitation(0.4)%(1.6)%(0.7)%
Uncertain tax positions— %(1.1)%(0.4)%
Other(1.1)%— %(0.2)%
Change in valuation allowance64.8 %(32.1)%(30.2)%
Separation adjustment(85.4)%— %— %
Effective income tax rate (expense) benefit— %— %— %
Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are composed of the following (in thousands):
Year ended December 31,
20212020
Deferred tax assets:
U.S. net operating loss carryforwards (federal and state)$12,142 $149,570 
Tax credit carryforwards (federal and state)466 49,379 
Capitalized license fees and research and development expenses11,905 13,091 
Deferred revenue13,724 15,348 
Stock-based compensation15,824 21,400 
Lease liabilities71,941 34,119 
Accruals and other5,395 2,715 
Total deferred tax assets131,397 285,622 
Intangible assets(476)(1,509)
Right-of-use assets(69,693)(31,139)
Fixed assets(2,958)(5,477)
Less: valuation allowance(58,270)(247,497)
Net deferred taxes$— $— 
For the year ended December 31, 2020, deferred tax assets and liabilities are a result of the separate return calculation presentation and may not represent deferred tax assets and liability balances after the separation.
As of December 31, 2021, the Company had U.S. federal net operating loss carryforwards of approximately $47.9 million, which may be available to offset future income tax liabilities and which will carryforward indefinitely. As of December 31, 2021, the Company also had U.S. state net operating loss carryforwards of approximately $34.3 million, which may be available to offset future income tax liabilities and expire at various dates through 2041.
As of December 31, 2021, the Company had federal research and development and orphan drug tax credit carryforwards of approximately $0.5 million, available to reduce future tax liabilities which expire at various dates through 2041. An analysis of the U.S. research and development and orphan drug credits has not yet been
completed. Until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.
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, as amended (the “Internal Revenue Code”), 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 percent 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 amounts are being presented as an uncertain tax position.
A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. With respect to the period from separation through December 31, 2021, the valuation allowance increased on a net basis by approximately $58.3 million.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted. This law temporarily suspends and adjusts certain law changes enacted in the Tax Cuts and Jobs Act in 2017. In December 2020, the Consolidated Appropriations Act was enacted. This law modified the employee retention credit under the CARES Act and created credit extenders for certain credits. The Company has concluded that the provisions in the CARES Act and Consolidated Appropriations Act have an immaterial impact on the Company’s income tax expense due to its cumulative losses and full valuation allowance position.
The Company is in the process of filing its first tax return and has no history of tax audits on a standalone basis and will regularly assesses the outcome of potential examinations in each of the taxing jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Unrecognized tax benefits
Balance as of December 31, 2019$3,070 
Increases (decreases) for tax positions related to current period1,333 
Increases (decreases) for tax positions related to prior periods— 
Balance as of December 31, 20204,403 
Increases (decreases) for tax positions related to current period36 
Increases (decreases) for tax positions as part of separation adjustment(4,403)
Balance as of December 31, 2021$36 

The unrecognized tax benefits at December 31, 2021 is not material and, if recognized, would not affect the Company’s effective tax rate due to its full valuation allowance position. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company has elected to include interest and penalties related to uncertain tax positions as a component of its
provision for income taxes. For the year ended December 31, 2021, the Company’s accrued interest and penalties related to uncertain tax positions were not material.