Income Taxes

12 Months Ended

Dec. 31, 2019

The provision for income taxes is based on net loss before income taxes as follows:



	DECEMBER 31,
(in thousands)	2019			2018			2017
Net loss before income taxes:
United States	$	(153,620	)	$	(203,230	)	$	(133,113	)
Non-U.S.	(46,051		)	(29,336		)	(13,750		)
Net loss before income taxes	$	(199,671	)	$	(232,566	)	$	(146,863	)

The components of the provision for income taxes are as follows:
	DECEMBER 31,
(in thousands, except percentages)	2019			2018			2017
Provision for income taxes:
Current:
United States	$	(90	)	$	3		$	(24	)
Non-U.S.	—			—			—
Total	$	(90	)	$	3		$	(24	)
Deferred:
United States	$	—		$	—		$	(1,734	)
Non-U.S.	—			—			—
Total	—			—			(1,734		)
Provision for income taxes	$	(90	)	$	3		$	(1,758	)
Effective tax rate	0.05		%	—		%	1.20		%

Significant components of the Company’s net deferred income tax assets as of December 31, 2019 and 2018 consist of the following:



	DECEMBER 31,
(in thousands)	2019			2018
Net deferred tax assets:
Net operating loss carryforwards	$	142,991		$	112,375
Stock-based compensation	22,785			17,734
U.S. tax credit carryforwards	10,980			5,996
Envisia asset acquisition	5,476			5,888
Basis difference in intangibles	7,625			—
Convertible Notes	(22,822		)	—
Other assets	5,154			2,857
Other liabilities	(1,867		)	(1,535		)
Valuation allowance	(170,322		)	(143,315		)
Total net deferred income taxes	$	—		$	—

A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2019, 2018 and 2017 is as follows:



	DECEMBER 31,
	2019		2018		2017
U.S. federal tax rate	21.00	%	21.00	%	35.00	%
Impact of federal tax legislation	—	%	—	%	25.82	%
State income taxes, net of federal benefit	4.97	%	4.56	%	7.71	%
Non-taxable foreign loss	(4.44	)%	0.09	%	(0.51	)%
Stock-based compensation	(1.47	)%	1.97	%	(0.02	)%
Other	0.98	%	(1.13	)%	(2.19	)%
Change in valuation allowance	(20.99	)%	(26.49	)%	(64.61	)%
Effective tax rate	0.05	%	—	%	1.20	%

The U.S. Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017, introduced significant changes to U.S. income tax law, including, among other things, reducing the U.S. statutory tax rate from 35% to 21% beginning in 2018. Under U.S. GAAP, deferred tax assets and liabilities are required to be revalued during the period in which the new tax legislation is enacted. Therefore, the deferred tax assets and liabilities were remeasured as of December 31, 2017, resulting in a reduction of the deferred tax asset balance and corresponding valuation allowance of $34.2 million due to the enacted changes in tax rate. The Tax Act also repealed the corporate AMT for tax years beginning after December 31,2017, and provides that existing AMT credit carryovers are refundable in tax years beginning after December 31, 2017. In March 2019, the IRS issued new guidance related to sequestration on the AMT tax credits. For taxable years beginning after December 31, 2017, refund payments and refund offset transactions due to refundable minimum tax credits will not be reduced due to federal sequestration. The Company has approximately $1.1 million of remaining AMT credit carryovers that are expected to be fully refunded between 2020 and 2022, of which $0.7 million is recorded as a current receivable with the remainder recorded as a non-current receivable within other assets on the consolidated balance sheet as of December 31, 2019.

The Act includes certain anti-deferral and anti-base erosion provisions, including a new minimum tax on global intangible low-taxed income (“GILTI”). The Act subjects the Company to current tax on GILTI of its controlled foreign corporations. Due to current year negative tested income for the Company’s foreign subsidiaries, the Company was not subject to GILTI in 2018 or 2019.

At December 31, 2019, the Company had federal and state NOL carryforwards of approximately $495.6 million and $510.3 million, respectively. If not utilized, federal NOLs that arose prior to 2018 and state NOLs will begin to expire at various dates beginning in 2031 and 2024, respectively. Federal NOLs that arose on or after January 1, 2018 can be carried forward indefinitely against future income, but can only be used to offset a maximum of 80% of the Company’s federal taxable income in any year. As of December 31, 2019, the Company also had foreign NOL carryforwards of $68.1 million, which are available solely to offset taxable income of its foreign subsidiaries, subject to any applicable limitations under foreign law.

Federal NOLs and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2019. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. On the basis of this evaluation, as of December 31, 2019, the Company maintains a valuation allowance on all of its deferred tax assets as of December 31, 2019. The amount of deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to other subjective evidence such as projections for growth. As of December 31, 2019, 2018, 2017 and 2016, the Company had a valuation allowance of $170.3 million, $143.3 million, $83.4 million and $56.7 million, respectively. The increase in valuation allowance in 2019 and 2018 of $27.0 million and $59.9 million, respectively, was primarily due to the increase in NOL carryforwards. The increase in valuation allowance in 2017 of $26.7 million was primarily due to the increase in NOL carryforwards, offset by a reduction of the valuation allowance due to the enacted changes in tax rate and federal AMT credit carryforwards, which became fully refundable due to the Tax Act.

The Company does not have any unrecognized tax benefits as of December 31, 2019. The Company is subject to taxation in the United States, Ireland and Malta. As of December 31, 2019, tax years ended December 31, 2015 through December 31, 2018 are open under the statute of limitations and subject to tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS, state, or non-U.S. tax authorities to the extent utilized in a future period.