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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table summarizes the Company’s (loss) income before income taxes by region for the years presented, in thousands:
Years ended December 31,
202120202019
United States$(570,860)$(386,292)$298,315 
Foreign(45,573)(18,442)209,573 
Total (loss) income before income taxes$(616,433)$(404,734)$507,888 
The Company did not record a benefit for income taxes for the years ended December 31, 2021 and December 31, 2020 because it had a full valuation allowance. The Company recorded an expense for income taxes for the year ended December 31, 2019, due to the usage of the deferred tax assets used to offset the taxable gain resulting from the United Therapeutics transaction.
The Company’s effective income tax rate differs from the statutory federal rate of 21% for 2021, 2020 and 2019 due to the following, in thousands:
Years ended December 31,
202120202019
(Benefit) Provision for income taxes at statutory federal rate$(129,451)$(84,994)$106,657 
Change in federal and foreign valuation allowance173,118 101,091 34,712 
Deferred adjustment related to foreign net operating losses— — 15,133 
Capital loss on foreign subsidiary liquidation— — (43,685)
State Tax, net of federal benefit(38,323)(4,837)592 
Share-based compensation expense(1,114)(5,906)1,624 
Foreign losses at lower effective rates8,400 3,856 21 
Research and development and Orphan Drug credits(13,744)(9,617)(4,730)
Permanent differences and other1,114 407 9 
Provision for income taxes$— $— $110,333 
The components of the Company’s net deferred tax assets are as follows, in thousands:
December 31,
20212020
Deferred tax assets:
Federal and California NOL carryforwards$371,499 $230,994 
Federal and California research and development credit carryforwards97,548 83,589 
Foreign NOL carryforwards977 472 
Share-based compensation expense16,718 13,572 
Depreciation3,250 3,015 
Lease liability1,922 2,200 
Other, net17,596 1,217 
Total deferred tax assets509,510 335,059 
Deferred tax liabilities:
Right-of-use assets(1,777)(2,051)
Equity investment(4,119)(2,512)
Total deferred tax liabilities(5,896)(4,563)
Net deferred tax assets503,614 330,496 
Valuation allowance(503,614)(330,496)
Net deferred tax assets$— $— 
A valuation allowance is recorded against all of the Company’s deferred tax assets, as realization of any of these assets does not meet the more-likely-than-not criteria for recognition. The realization of the Company’s deferred tax assets is dependent upon future taxable income. The Company’s ability to generate taxable income is analyzed regularly on a jurisdiction-by-jurisdiction basis. At such time as it is more-likely-than-not that the Company will generate taxable income in a jurisdiction, it will further reduce or remove the valuation allowance. The valuation allowance increased by $173.1 million from December 31, 2020, to December 31, 2021.
At December 31, 2021, the Company had federal NOL carryforwards of $1,437.6 million that will begin to expire in 2028 unless previously utilized. At the same date, the Company had California NOL carryforwards of $951.2 million, which begin expiring in 2028. Federal net operating losses generated after December 31, 2017 carry forward indefinitely. At December 31, 2021, the Company had $1,047.2 million of net operating losses with no expiration. Federal net operating losses generated after December 31, 2017 are also subject to an 80% limitation if utilized after 2020.
At December 31, 2021, the Company had federal and California research and development tax credit carryforwards, net of reserves, of $58.9 million and $29.5 million, respectively. At December 31, 2021, the Company had a Federal Orphan Drug Credit carryforward, net of reserves, of $15.0 million. Federal credit carryforwards will begin to expire after 2026 unless previously utilized. The California research and development credit carries forward indefinitely.
Additionally, utilization of net operating loss and R&D tax credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to Sections 382 and 383 of the IRC. The Company has completed an analysis under Sections 382 and 383 of the IRC through 2021 and no ownership changes limiting its utilization of tax attribute carryforwards has occurred since 2010. Future ownership changes may occur that limit the Company's ability to utilize its tax attribute carryforwards.
In accordance with authoritative guidance, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
The following table reconciles the beginning and ending amount of unrecognized tax benefits for the years presented, in thousands:
Years ended December 31,
202120202019
Gross unrecognized tax benefits at the beginning of the year$11,710 $9,954 $9,033 
Additions from tax positions taken in the current year2,555 1,706 1,017 
Additions from tax positions taken in prior years12 50 — 
Reductions from tax positions taken in prior years— — (96)
Gross unrecognized tax benefits at end of the year$14,277 $11,710 $9,954 
Of the Company’s total unrecognized tax benefits at December 31, 2021, $12.8 million will impact its effective tax rate in the event the valuation allowance is removed. The Company does not anticipate that there will be a substantial change in unrecognized tax benefits within the next 12 months.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Because the Company has incurred net losses since its inception, it did not have any accrued interest or penalties included in its consolidated balance sheets at December 31, 2021, or 2020, and did not recognize any interest and/or penalties in its consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2021, 2020, and 2019.
The Company is subject to income taxation in the United States at the Federal and state levels. Tax years beginning in 2003 are subject to examination by US and California tax authorities due to the carryforward of unutilized NOLs and tax credits. The Company is also subject to foreign income taxes in the countries in which it operates. To the Company’s knowledge, it is not currently under examination by any taxing authorities.