Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

The components of loss before income taxes were as follows (in thousands):

	Year Ended December 31,
	2023		2022		2021
Domestic	$	(1,151,493)	$	(916,592)	$	(472,141)
Foreign	(6,990)		(13,997)		(31,659)
	$	(1,158,483)	$	(930,589)	$	(503,800)

The components of the provision for/(benefit from) income taxes were as follows (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current provision:
Federal	$	(144)	$	144	$	—
State	(561)		2,405		678
Foreign	1,255		1,582		—
Total current provision	550		4,131		678
Deferred provision:
Federal	—		(474)		(878)
State	—		(105)		(120)
Foreign	(96)		—		—
Total deferred provision	(96)		(579)		(998)
Provision for/(benefit from) income taxes	$	454	$	3,552	$	(320)

The provision for/(benefit from) income taxes differs from the amount estimated by applying the statutory income (loss) before taxes as follows:

	Year Ended December 31,
	2023		2022		2021
Federal tax at statutory rate	21	%	21	%	21	%
State tax at statutory rate, net of federal benefit	2		2		2
Research and development credits	6		2		10
Change in valuation allowance	(27)		(21)		(117)
Stock-based compensation	(3)		(4)		84
Other	1		0		0
Provision for/(benefit from) income taxes	0	%	0	%	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 components of the Company’s deferred tax assets (liabilities) for the periods presented (in thousands):

	Year Ended December 31,
	2023		2022		2021
Deferred tax assets:
Accrued expenses	$	14,231	$	13,593	$	11,466
Deferred revenue	246,144		198,130		107,221
Net operating loss carryforwards	599,804		490,309		505,668
Tax credit carryforwards	155,246		85,527		65,855
Stock-based compensation	29,083		28,238		35,368
Operating lease liabilities	176,007		130,688		56,897
Capitalized research and development	366,898		178,488		—
Interest	—		—		1,556
Other	2,914		1,988		1,369
Total gross deferred tax asset	1,590,327		1,126,961		785,400
Less: valuation allowance	(1,222,211)		(907,226)		(711,297)
Net deferred tax assets	368,116		219,735		74,103
Deferred tax liabilities:
Fixed assets	(28,645)		(92,009)		(13,889)
Intangible assets	(2,735)		(6,694)		(9,060)
Operating lease right-of-use assets	(154,334)		(121,032)		(51,154)
Deferred cost of revenue	(182,495)		—		—
Total deferred tax liabilities	(368,209)		(219,735)		(74,103)
Net deferred tax liabilities	$	(93)	$	—	$	—

We have not provided U.S. income taxes or foreign withholding taxes on the undistributed earnings of our profitable foreign subsidiaries because we intend to permanently reinvest such earnings in foreign operations. As of December 31, 2023 and 2022, the cumulative amount of earnings upon which income taxes have not been provided is not material.

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. There are immaterial deferred tax assets and deferred tax liabilities in our foreign jurisdictions without valuation allowance.

The Company’s valuation allowance increased by $315.0 million, $195.9 million, and $589.0 million, in the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, we had federal net operating loss carryforwards of $2,382.3 million, which do not expire, federal net operating loss carryforwards of $52.2 million, which begin to expire in 2035, state net operating loss carryforwards of $1,261.4 million, which begin to expire in 2024, and foreign net operating loss carryforwards of $66.8 million, which begin to expire in 2024.

As of December 31, 2023, we had U.S. federal and California research and development tax credits of approximately $201.3 million and $139.3 million, respectively. The federal research and development credits begin to expire in 2030, while California credits do not expire.

Under Internal Revenue Code Section 382 (“Section 382”), an 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, 2023. 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):

	As of December 31,
	2023		2022		2021
Unrecognized tax benefits at beginning of year	$	96,372	$	72,919	$	19,386
Increases related to current year tax positions	59,917		25,458		53,440
Increases related to prior year tax positions	16,100		865		93
Decreases related to prior year tax positions	—		(2,870)		—
Unrecognized tax benefits at end of year	$	172,389	$	96,372	$	72,919

We classify uncertain tax positions as non-current liabilities unless expected to be paid within one year or otherwise directly related to an existing deferred tax asset, in which case the uncertain tax position is recorded as an offset to the deferred tax asset on the consolidated balance sheet. As of December 31, 2023, we had gross unrecognized tax benefits of approximately $172.4 million, of which $1.4 million would impact income tax expense if recognized. As of December 31, 2022, we had gross unrecognized tax benefits of approximately $96.4 million. The Company does not anticipate any significant change within twelve months of this reporting date.

Our policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. The Company accrued interest and penalties of $0.4 million and $0.2 million in the years ended December 31, 2023 and December 31, 2022, respectively. The Company did not accrue interest and penalties related to unrecognized tax benefits as of December 31, 2021.

The Company is subject to taxation in the United States, various states, and foreign jurisdictions. All tax years for U.S. federal and California tax returns currently remain open for examination by the tax authorities. As of December 31, 2023, we are no longer subject to foreign examinations by tax authorities for years before 2019. As of December 31, 2023, the Company is under examination in a foreign jurisdiction and is not under examination by the Internal Revenue Service or any state tax jurisdictions.

On January 1, 2022, a provision of the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures and instead requires taxpayers to amortize such costs over five years. This change did not have a significant impact to the Company’s provision for income tax for the years ended December 31, 2023 and 2022 as the Company has net operating loss carryforwards to offset the impact of the change and maintains a full valuation allowance against its deferred tax assets. Further, the Company does not anticipate this change to have a significant impact to the provision for income tax for the year ended December 31, 2024 and will continue to evaluate the impact on its business in future periods.