Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes

Income Taxes

15. Income Taxes

The Company has recognized a full tax valuation allowance against its deferred tax assets as of March 31, 2023 and December 31, 2022. The tax benefit related to the exercise of stock options is recognized as a deferred tax asset that is offset by a corresponding valuation allowance. As such, the Company’s effective tax rate is zero for the three months ended March 31, 2023 and 2022.

Historically, the Company’s benefit from income taxes related to state R&D tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program, which permits qualified small businesses engaged in R&D activities within Connecticut to exchange their unused R&D tax credits for a cash amount equal to 65% of the value of the exchanged credits. It was not eligible to exchange its R&D tax credit for cash during the three months ended March 31, 2023 and 2022, therefore there was no benefit from income taxes for the three months ended March 31, 2023 and 2022. As of March 31, 2023, the Company recorded $697 within income tax receivable which related to the 2020 R&D credit.

The Inflation Reduction Act of 2022 included tax legislation that became effective during the three months ended March 31, 2023. Significant legislation for corporate taxpayers includes a corporate alternative minimum tax of 15.0% for companies with $1,000,000 or more in average net financial statement profits over the three previous years, as well as a 1.0% indirect excise tax on the repurchase of shares by a publicly traded company. The Company does not expect this legislation to have an effect on its tax provision as of March 31, 2023; however, the Company will continue to evaluate the effect on the tax provision each reporting period.