Income Taxes

12 Months Ended

Dec. 31, 2020

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


	DECEMBER 31,
(in thousands)	2020		2019		2018
Net loss before income taxes:
United States	$	(143,349)	$	(153,620)	$	(203,230)
Non-U.S.	(34,507)		(46,051)		(29,336)
Net loss before income taxes	$	(177,856)	$	(199,671)	$	(232,566)


	DECEMBER 31,
(in thousands, except percentages)	2020			2019			2018
Provision for income taxes:
Current:
United States	$	(33)		$	(90)		$	3
Non-U.S.	5,278			—			—
Total	$	5,245		$	(90)		$	3
Deferred:
United States	$	—		$	—		$	—
Non-U.S.	—			—			—
Total	—			—			—
Provision for income taxes	$	5,245		$	(90)		$	3
Effective tax rate	(2.95)		%	0.05		%	—		%

Significant components of the Company’s net deferred income tax assets as of December 31, 2020 and 2019 consist of the following:


	DECEMBER 31,
(in thousands)	2020		2019
Net deferred tax assets:
Net operating loss carryforwards	$	169,070	$	142,991
Stock-based compensation	29,884		22,785
U.S. tax credit carryforwards	13,526		10,980
Envisia asset acquisition	5,007		5,476
Basis difference in intangibles	7,625		7,625
Convertible Notes	(19,028)		(22,822)
Other assets	10,697		8,996
Other liabilities	(5,416)		(5,709)
Valuation allowance	(211,365)		(170,322)
Total net deferred income taxes	$	—	$	—

A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2020, 2019 and 2018 is as follows:


	DECEMBER 31,
	2020		2019		2018
U.S. federal tax rate	21.00	%	21.00	%	21.00	%

State income taxes, net of federal benefit	4.02	%	4.97	%	4.56	%

Non-taxable foreign loss	(4.81)	%	(4.44)	%	0.09	%
Stock-based compensation	(2.29)	%	(1.47)	%	1.97	%
Other	0.48	%	0.98	%	(1.13)	%
Change in valuation allowance	(21.35)	%	(20.99)	%	(26.49)	%
Effective tax rate	(2.95)	%	0.05	%	—	%

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. In January 2020 the IRS issued new guidance related to sequestration on the AMT tax credits which would restore the portion of the minimum tax credit refunds previously sequestered with respect to MTC refund claims in lieu of bonus depreciation under Section 168(k)(4).

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes several business tax provisions which include, but are not limited to modifications of federal net operating loss carrybacks and deductibility, changes to prior year refundable alternative minimum tax liabilities to allow the accelerated recovery of refund, increase of limitations on business interest deductions from 30 percent to 50 percent of earnings before interest, taxes, depreciation, and amortization, technical corrections of the classification of qualified improvement property making them eligible for bonus depreciation, increase of the limits on charitable contribution deductions from 10 percent to 25 percent of adjusted taxable income, modifications of the treatment of federal loans, loan guarantees, and other investments, suspension of industry specific excise taxes, deferral of the company portion of OASDI, and implementation of a refundable employee retention tax credit. During 2020, the Company received the remaining accelerated alternative minimum tax refund of $0.8 million. The CARES Act did not have a material impact on the Company's consolidated financial statements as of and for the year ended December 31, 2020.

At December 31, 2020, the Company had federal and state NOL carryforwards of approximately $585.4 million and $561.7 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 2023, 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, 2020, the Company also had foreign NOL carryforwards of $98.9 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, 2020. 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, 2020, the Company maintains a valuation allowance on all of its deferred tax assets as of December 31, 2020. 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, 2020, 2019, 2018 and 2017, the Company had a valuation allowance of $211.4 million, $170.3 million, $143.3 million and $83.4 million, respectively. The increase in valuation allowance in 2020, 2019 and 2018 of $41.1 million, $27.0 million and $59.9 million, respectively, was primarily due to the increase in NOL carryforwards.

The Company does not have any unrecognized tax benefits as of December 31, 2020. The Company is subject to taxation in the United States, Ireland, Japan and the United Kingdom. As of December 31, 2020, tax years ended December 31, 2015 through December 31, 2019 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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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