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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company's losses before income taxes and provision (benefit) for income taxes is as follows (in thousands):
Year ended December 31,
20242023
Loss before income taxes$(54,054)$(63,078)
Provision (benefit) for income taxes— — 
A reconciliation of the federal statutory income tax rate to the Company's effective income tax rate is as follows:
Year ended December 31,
20242023
Expected provision at statutory rate21.0 %21.0 %
State income tax, net of federal benefit5.9 %6.4 %
Tax credits3.7 %3.5 %
Change in state tax rate(2.4)%(2.8)%
Expired Capita Loss(13.2)%— %
Other, net(2.0)%(1.6)%
Change in valuation allowance(13.0)%(26.5)%
Effective tax rate— %— %
The Company's deferred tax assets (liabilities) are comprised of the following (in thousands):
As of December 31,
20242023
Deferred tax assets:
Net operating loss carryforwards$67,818 $58,324 
Capital loss carryforwards— 7,298 
Start-up costs9,699 9,699 
Accruals and reserves672 276 
Intellectual property4,074 4,565 
Stock-based compensation3,063 2,873 
Capitalization of research and development expense20,800 18,702 
Deferred revenue1,784 1,293 
Tax credits11,641 9,324 
Lease liabilities966 977 
Total deferred tax assets120,517 113,331 
Valuation allowance(119,616)(112,413)
Deferred tax assets, net of valuation allowance$901 $918 
Deferred tax liabilities:
Lease right-of-use assets(901)(918)
Net deferred tax assets$— $— 
The Company's valuation allowance increased during 2024 by approximately $7.2 million primarily due to Section 174 expenditure capitalization. The Company has evaluated both positive and negative evidence when assessing the realizability of its deferred tax assets. Management has considered the Company's history of cumulative net losses, estimated future taxable income as well as tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2024 and 2023, respectively.
As of December 31, 2024 and 2023, the Company had United States federal net operating loss ("NOL") carryforwards of $263.9 million and $226.2 million, respectively, which may be available to offset future income tax liabilities. The 2017 Tax Cut and Jobs Act generally allows federal losses generated after 2017 to be carried forward indefinitely, but also limits the NOL deduction to the lesser of the NOL carryover or 80% of a corporation's taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended ("IRC")). Additionally, there is no carryback for losses generated after 2017. Losses generated prior to 2018 are deductible using the lesser of a corporation's NOL carryover or 100% of a corporation's taxable income and have a 20 year carryforward period. The Company has federal NOLs generated after 2017 of $211.2 million, which do not expire. The federal NOLs generated prior to 2018 of $52.7 million will expire at various dates through 2037. In addition, the Company had all capital loss carryforwards expire in 2024.
As of December 31, 2024 and 2023, the Company had United States state NOL carryforwards of $262.2 million and $224.5 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2043. As of December 31, 2024 and 2023, the Company had federal tax credit carryforwards of approximately $11.5 million and $9.2 million, respectively, which are available to offset future federal tax liabilities which expire at various dates through 2043. As of December 31, 2024 and 2023, the Company had state tax credit carryforwards of approximately $0.2 million and $0.1 million, respectively, which are available to reduce future tax liabilities and expire at various dates through 2034.
NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and relevant state tax authorities. Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation under Section 382 and Section 383 of the IRC and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future federal and state tax liabilities.
The Company has not yet conducted a comprehensive study to assess whether any ownership change has occurred since its inception. A limitation may result in the expiration of a portion of the NOL or tax credit carryforwards before utilization, which would be offset by a change in the Company's valuation allowance. Until a study is completed by the Company, no NOL carryforward amounts will be offset by an unrecognized tax benefit related to Section 382.
A full valuation allowance has also been recorded against the Company's tax credits. If an adjustment is required, it would be offset by a corresponding change in the valuation allowance.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Year ended December 31,
20242023
Gross unrecognized tax benefits at beginning of year$303 $303 
Additions for tax positions taken in a prior year— — 
Additions for tax positions taken in the current year— — 
Reductions for tax positions taken in the prior year due to settlement— — 
Reductions for tax positions taken in the prior year due to statutes lapsing— — 
Gross unrecognized tax benefits at end of year$303 $303 
The uncertain tax positions giving rise to the unrecognized tax benefits of $0.3 million at December 31, 2024 and 2023 relate to the timing of certain income and deductions for federal income tax purposes taken by Histogenics prior to the Company's reverse merger with Histogenics. The reversal of unrecognized tax benefits would not have any impact on the effective tax rate in the future and is not expected to create cash liability.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In a normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company's tax years are still open from 2019 to present.