Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

U.S and foreign components of consolidated loss before income taxes for the years ended December 31, 2022, 2021 and 2020, was as follows (in thousands):

	2022			2021			2020
Loss before income taxes:
U.S.	$	(43,096	)	$	(54,757	)	$	(61,246	)
Foreign		759			700			1,673
Loss before income taxes	$	(42,337	)	$	(54,057	)	$	(59,573	)

The provision for income taxes for the years ended December 31, 2022, 2021 and 2020, was as follows (in thousands):

	2022			2021		2020
Provision for income taxes:
Current:
Foreign	$	520		$	274	$	274
Federal		—			—		—
State		5			—		—
Total current		525			274		274
Deferred:
Foreign					—		—
Federal		(18	)		23		6
State		(19	)		22		4
Total deferred		(37	)		45		10
Provision for income taxes	$	488		$	319	$	284

The difference between the provision for income taxes and the amount computed by applying the federal statutory income tax rate to loss before taxes for the years ended December 31, 2022, 2021 and 2020, was as follows (in thousands):

	2022			2021			2020
Federal statutory tax	$	(8,891	)	$	(11,352	)	$	(12,510	)
Federal research credits		(1,874	)		(2,159	)		(1,630	)
State research credits		(822	)		(767	)		(749	)
Expiration of federal carryovers		4,858			4,651			9,200
Change in valuation allowance		6,379			10,482			6,738
Compensation related items		1,794			460			978
State taxes		(1,127	)		(1,294	)		(1,921	)
Other		171			298			178
Provision for income taxes	$	488		$	319		$	284

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at the enacted rates. The significant components of the Company’s deferred tax assets and liabilities at December 31, 2022, 2021 and 2020, were as follows (in thousands):

	December 31,
	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	136,632		$	150,523
Research and development credit carryforwards		29,242			29,411
Capitalized research and development		27,916			8,406
Compensation related items		12,014			11,951
Operating leases		3,786			4,125
Other		9,056			8,218
Total deferred tax assets		218,646			212,634
Valuation allowance		(215,903	)		(209,524	)
Net deferred tax assets	$	2,743		$	3,110
Deferred tax liabilities:
Right-of-use assets	$	2,610		$	2,895
Other		194			313
Total deferred tax liabilities	$	2,804		$	3,208

The valuation allowance increased by $6.4 million for the year ended December 31, 2022, compared to the increase of $10.5 million and $6.7 million for the years ended December 31, 2021 and 2020, respectively. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that a valuation allowance has been recorded. These factors include the Company’s history of net losses since its inception, the need for regulatory approval of the Company’s products prior to commercialization and expected near-term future losses. The Company expects to maintain a valuation allowance until circumstances change.

For the year ended December 31, 2022, the Company reported pretax net losses on its consolidated statement of operations and calculated taxable losses for both federal and state taxes. The difference between reported net loss and taxable loss are due to differences between book accounting and the respective tax laws.

The Company's tax losses and credits are subject to varying carryforward periods. The gross amounts and dates of expiration of the significant carryforwards are as follows:

			Expires		Expires		Expires		No
	Total		2023-2025		2026-2032		2033-2042		Expiration
Federal losses carryovers	$	616,922	$	69,647	$	186,833	$	169,673	$	190,769
California loss carryovers		75,192				46,641		28,551
Other state loss carryovers		37,687		601		364		36,722
Federal research credits		18,036		3,758		1,483		12,795
California research credits		14,186								14,186
Federal foreign tax credits		610				610

The Company’s ability to utilize net operating loss and research and development credit carryforwards is limited by (a) its ability to generate future taxable income, (b) varying apportionment and allocation rules, and (c) limitations pursuant to the ownership change rules in accordance with Section 382 of the Internal Revenue Code of 1986 and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions.

The Company’s unrecognized tax benefits primarily relate to federal and California research tax credits. These tax credits have not been utilized on any tax return and currently have no impact on the Company’s tax expense due to the Company’s operating losses and the related valuation allowances. There are additional unrecognized tax benefits related to foreign activities.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

	December 31,			December 31,
	2022			2021
Unrecognized tax benefits at beginning of period	$	9,366		$	10,110
Decreases related to expired carryforwards		(1,481	)		(1,296	)
Increases related to prior year tax positions		258			112
Increases related to current year tax positions		509			440
Unrecognized tax benefits at end of period	$	8,652		$	9,366

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. During the next twelve months, it is reasonably possible that the Company’s unrecognized tax benefit may decrease by as much as $0.3 million due to settlements in foreign tax jurisdictions. However, this may change as the Company continues to have ongoing negotiations with foreign taxing authorities throughout the year.