Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The Company’s benefit from income taxes is as follows:

	December 31,
	2020		2019		2018
Current:
Federal	$	—	$	—	$	—
State		(691)		(816)		(389)
		(691)		(816)		(389)
Deferred:
Federal		—		—		—
State		—		—		—
		—		—		—
Benefit from income taxes	$	(691)	$	(816)	$	(389)

The Company’s tax benefits relate to state R&D tax credits exchanged for cash. The State of Connecticut provides companies with the opportunity to exchange certain R&D credit carryforwards for cash in exchange for foregoing the carryforward of the R&D credit. The program provides for such exchange of the R&D credits at a rate of 65% of the annual R&D credit, as defined.

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:

	December 31,
	2020		2019		2018
Income taxes using U.S. federal statutory rate	21.00	%	21.00	%	21.00	%
State income taxes, net of federal benefit	(58.68)	%	(1.99)	%	6.82	%
Tax Cuts and Jobs Act	0.00	%	0.00	%	0.00	%
Impact of R&D tax credit on effective tax rate	(52.06)	%	4.34	%	3.48	%
Stock option shortfalls and cancellations	0.35	%	(0.17)	%	(0.43)	%
Permanent items and other	(5.08)	%	0.36	%	(0.15)	%
Change in valuation allowance	84.61	%	(22.76)	%	(31.76)	%
Provision to return	0.92	%	(0.02)	%	0.03	%
Non-taxable revenue	0.00	%	0.00	%	1.54	%
	(8.94)	%	0.76	%	0.53	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2020		2019
Valuation allowance	$	(120,666)	$	(114,136)
Net operating loss carryforwards		93,507		84,608
Federal and state tax credits		19,982		16,624
Deferred revenue		—		5,994
Stock-based compensation expense		6,732		4,481
Other		2,414		3,409
Deferred tax assets		122,635		115,116
Other		(1,969)		(980)
Deferred tax liabilities:		(1,969)		(980)
Net deferred tax asset:	$	—	$	—

A 100% valuation allowance has been recorded on the deferred tax asset as of December 31, 2020 and 2019 because management believes it is more likely than not that the asset will not be realized. The change in the valuation allowance during 2020 and 2019 was an increase of $6,530 and $24,321, respectively.

The financial statements reflect expected future tax consequences of such positions presuming the taxing authorities possess full knowledge of the position and all relevant facts. As of December 31, 2020 and 2019, the Company had no unrecognized tax benefits or related interest and penalties accrued. In the event the Company determines that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of income tax expense.

At December 31, 2020, the Company had federal and state net operating loss carryforwards of $368,237 and $273,041, respectively. The federal and state tax loss carryforwards will begin to expire in 2026 and 2027, respectively, unless previously utilized. The federal net operating losses arising in taxable years beginning in 2018 and forward have an unlimited carryforward period, and, in the case of such federal net operating losses arising in taxable years beginning before 2021, may be carried back five years due to the Coronavirus Aid, Relief, and Economic Security Act of 2020, or

the CARES Act. The federal losses may also be subject to limitation pursuant to Internal Revenue Code section 382. The Company also had federal and state R&D tax credit carryforwards of $18,358 and $1,795, respectively. The federal credits will begin expiring in 2025 unless previously utilized. The Connecticut credit carryforwards have no expiration period. Because of the net operating loss and research credit carryforwards, tax years 2006 through 2020 remain open to U.S. federal and state tax examinations.

On March 27, 2020, President Trump signed into law the CARES Act (H.R. 748), which was further expanded with the signing of the Consolidation Appropriations Act of 2021 (H.R. 133) on December 27, 2020. The CARES Act (and December expansion) includes a variety of economic and tax relief measures intended to stimulate the economy, including loans for small businesses, payroll tax credits/deferrals, and corporate income tax relief. Due to the Company’s history of tax loss carryforwards and full valuation allowance, the CARES Act did not have a significant effect to the income tax provision, as the corporate income tax relief was directed towards cash taxpayers.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act, or the TCJA. The TCJA, which is also commonly referred to as “U.S. tax reform”, significantly changes U.S. corporate income tax laws by, among other provisions, reducing the maximum U.S. corporate income tax rate from 35% to 21% starting in 2018. As of December 31, 2020 and 2019, the Company did not have any foreign subsidiaries and the international aspects of the TCJA were not applicable.

On December, 22, 2017, Staff Accounting Bulletin 118, or SAB 118, was issued by the SEC due to the complexities involved in accounting for the TCJA. SAB 118 requires the Company to include in its financial statements a reasonable estimate of the impact of the TCJA on earnings to the extent such estimate has been determined. The Company finalized its accounting for the TCJA as of December 31, 2018, which resulted in insignificant adjustments.