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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is in a net loss position and no material income tax benefits or expense was recorded for the years ended December 31, 2021, December 31, 2020, and December 31, 2019.
The components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
202120202019
Domestic
$(472,141)$(244,395)$(70,734)
Foreign
(31,659)(19,952)(371)
$(503,800)$(264,347)$(71,105)
The provision (benefit) for income taxes consists of the following (in thousands):
Year Ended December 31,
202120202019
Current provision:
Federal
$— $— $— 
State
678 10 9 
Foreign
— 25 — 
Total current provision678 35 9 
Deferred provision:
Federal
(878)(6,032)— 
State
(120)(659)— 
Foreign
— — — 
Total deferred provision(998)(6,691)— 
Provision (benefit) for income taxes
$(320)$(6,656)$9 
The provision (benefit) for income taxes differs from the amount estimated by applying the statutory income (loss) before taxes as follows:
Year Ended December 31,
202120202019
Federal tax (benefit) at statutory rate
21 %21 %21 %
State tax (benefit) at statutory rate, net of federal benefit
2 1 2 
Permanent differences
0 0 (4)
Research and development credits
10 3 5 
Change in valuation allowance
(117)(21)(27)
Stock-based compensation
84 0 0 
Change in statutory rate
0 0 2 
Foreign rate differential
0 (2)0 
Other
0 1 1 
Provision (benefit) for income taxes
0 %3 %0 %
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. The following table presents the significant components of the Company’s deferred tax assets for the periods presented (in thousands):
December 31,
202120202019
Deferred tax assets:
Accruals
$11,466 $5,781 $2,620 
Intangibles
— — 156 
Deferred revenue
107,221 35,026 19,948 
Net operating loss carryforwards
505,668 76,509 37,525 
Tax credit carryforwards
65,855 17,052 9,035 
Stock-based compensation
35,368 3,891 2,731 
Operating lease liability56,897 — — 
Interest1,556 — — 
Other
1,369 766 69 
Total gross deferred tax asset
785,400 139,025 72,084 
Less: valuation allowance
(711,297)(122,328)(64,435)
Net deferred tax assets
74,103 16,697 7,649 
Deferred tax liabilities:
Fixed Assets
(13,889)(10,934)(7,649)
Intangible Assets
(9,060)(5,763)— 
Operating lease right-of-use asset(51,154)— — 
Total deferred tax liabilities
(74,103)(16,697)(7,649)
Net deferred tax assets (liabilities)
$0 $0 $0 
The Company accounts for deferred taxes under ASC 740, Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. Due to our lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance.
The Company’s valuation allowance increased by $589.0 million, $57.9 million and $18.2 million, in the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively.
As of December 31, 2021, we had federal net operating loss carryforwards of $2,120.8 million, which begin to expire in 2024, state net operating loss carryforwards of $840.1 million, which begin to expire in 2027, and foreign net operating loss carryforwards of $49.6 million, which begin to expire in 2024. Of the $2,120.8 million of federal net operating losses, $2,035.2 million is carried forward indefinitely but is limited to 80% of taxable income.
As of December 31, 2021, we had U.S. federal and California research and development tax credits of approximately $84.7 million and $60.4 million, respectively. The federal research and development credits begin to expire in 2030, while California credits do not expire.
Internal Revenue Code Section 382, or Section 382, ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. The Company did experience one or more ownership changes in financial periods ending on or before December 31, 2019. In this regard, the Company has determined that based on the timing of the ownership change and the corresponding Section 382 limitations, none of its net operating losses or other tax attributes appear to expire subject to such limitation.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
December 31,
202120202019
Unrecognized tax benefits at beginning of year
$19,386 $10,121 $6,111 
Increases related to current year tax positions
53,440 8,998 3,658 
Increases related to prior year tax positions
93 481 351 
Decreases related to prior year tax positions
— (215)— 
Decreases related to expiration of prior year tax positions— — — 
Decreases related to settlements of prior year tax positions— — — 
Unrecognized tax benefits at end of year
$72,919 $19,386 $10,121 
As of December 31, 2021, we had gross unrecognized tax benefits of approximately $72.9 million of which none would impact income tax expense if recognized to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets.
Our policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. The Company did not accrue interest and penalties related to unrecognized tax benefits as of December 31, 2021, December 31, 2020, and December 31, 2019. The Company does not anticipate any significant change within twelve months of this reporting date.
The Company is subject to taxation in the U.S. and various states, for which the statutes of limitations have not expired.
On January 1, 2022, a provision of the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures and requires taxpayers to amortize such costs over five years. The Company does not anticipate this provision to have a significant impact to the full year 2022 and will continue to evaluate the impact on its business in future periods.