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Income taxes
 12 Months Ended
Dec. 31, 2022
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, 2022 and for the period from November 4, 2021 through December 31, 2021 has been prepared on a stand-alone basis. The 2020 and 2021 components of loss before income taxes and rate reconciliation are presented for the full year period of activity, including for the portion of each period prior to the separation. Accordingly, the amount and composition of its tax losses, credits, and other deferred tax assets included in the consolidated and combined financial statements has changed 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,
202220212020
Domestic$(254,153)$(292,213)$(120,114)
Foreign— — — 
Total$(254,153)$(292,213)$(120,114)
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, 2022, 2021 and 2020, 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,
202220212020
Federal income tax expense at statutory rate21.0 %21.0 %21.0 %
State income tax, net of federal benefit6.6 %0.6 %3.8 %
Permanent differences(0.2)%— %0.3 %
Stock-based compensation(2.5)%0.3 %(4.1)%
Research and development credit3.2 %0.2 %13.8 %
Officer compensation limitation(1.2)%(0.4)%(1.6)%
Uncertain tax positions(0.2)%— %(1.1)%
Other(0.6)%(1.1)%— %
Change in tax rate1.3 %— %— %
Change in valuation allowance(27.4)%64.8 %(32.1)%
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,
20222021
Deferred tax assets:
U.S. net operating loss carryforwards (federal and state)$27,251 $12,142 
Tax credit carryforwards (federal and state)10,071 466 
Capitalized license fees and research and development expenses11,888 11,905 
Deferred revenue3,237 13,724 
Stock-based compensation16,719 15,824 
Lease liabilities73,719 71,941 
Accruals and other3,857 5,395 
Capitalized research and development expenses55,719 — 
Total deferred tax assets202,461 131,397 
Intangible assets— (476)
Right-of-use assets(65,181)(69,693)
Fixed assets(9,266)(2,958)
Less: valuation allowance(128,014)(58,270)
Net deferred taxes$— $— 
As of December 31, 2022, the Company had U.S. federal net operating loss carryforwards of approximately $96.1 million, which may be available to offset future income tax liabilities and which will carryforward indefinitely. As of December 31, 2022, the Company also had U.S. state net operating loss carryforwards of approximately $113.5 million, which may be available to offset future income tax liabilities and expire at various dates through 2042.
As of December 31, 2022, the Company had federal research and development and orphan drug tax credit carryforwards of approximately $8.1 million, available to reduce future tax liabilities which expire at various dates through 2042. As of December 31, 2022, the Company also had U.S. state research and development carryforwards
of approximately $3.3 million, which may be available to offset future income tax liabilities and expire at various dates through 2037. 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, 2022, the valuation allowance increased on a net basis by approximately $69.7 million primarily due to capitalization of R&D expenses and current year losses generated.
On December 22, 2017, the Tax Cuts and Jobs Act (“The TCJA”) was signed into law. Under the TCJA provisions, effective with tax years beginning on or after January 1, 2022, taxpayers can no longer immediately expense qualified research and development expenditures, including all direct, indirect, overhead, and software development costs. Taxpayers are now required to capitalize and amortize these costs over five years for research conducted within the United States or 15 years for research conducted abroad. As a result, the Company capitalized $232.1 million of research and development expenses for the year ended December 31, 2022.
The Company 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, 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 
Increases (decreases) for tax positions related to current period713 
Increases (decreases) for tax positions as part of separation adjustment— 
Balance as of December 31, 2022$749 

The unrecognized tax benefits at December 31, 2022 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, 2022, the Company’s accrued interest and penalties related to uncertain tax positions were not material.