Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table represents the significant components of our deferred tax assets and liabilities for the periods presented:

	December 31,
	2023		2022
Deferred income tax assets
Net operating loss carryforwards	$	160,329	$	164,242
Business interest limitation carryforwards	35,402		34,445
Tax credit carryforwards	23,968		23,240
Lease liabilities	11,472		15,019
Capitalized research and development costs	50,780		32,216
Other	15,108		30,719
Gross deferred income tax assets	297,059		299,881
Valuation allowance	(257,563)		(245,212)
Total deferred income tax assets, net of valuation allowance	39,496		54,669
Deferred income tax liabilities
Intangible assets	(29,608)		(40,069)
Right-of-use assets	(8,155)		(11,225)
Other	(1,997)		(3,618)
Total deferred income tax liabilities	(39,760)		(54,912)
Net deferred income tax assets and liabilities	$	(264)	$	(243)

In determining the realizability of the net U.S. federal and state deferred tax assets, we consider numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies, and the industry in which we operate. Management reassesses the realization of the deferred tax assets each reporting period, which resulted in a valuation allowance against the full amount of our U.S. deferred tax assets for all periods presented. To the extent that the financial results of our U.S. operations improve in the future and the deferred tax assets become realizable, we will reduce the valuation allowance through earnings.

The following table represents our net operating loss ("NOL") carryforwards as of December 31, 2023 and 2022:

	December 31,
	2023		2022
Federal	$	642,212	$	651,498
Various states	32,234		34,718
Foreign	5,363		5,255

Federal NOL carryforwards are available to offset federal taxable income with NOL carryforwards of $449,434 generated after 2017 available to offset future U.S. federal taxable income over an indefinite period, and the remainder expiring between 2024 and 2037. State NOL carryforwards are available to offset future taxable income and begin to expire in 2024. NOL carryforward periods for the various states jurisdictions generally range from 5 to 20 years. Foreign NOL carryforward periods for foreign federal and provincial jurisdictions are generally 20 years and will begin to expire in 2039.

Net research and development credit carryforwards of $23,968 and $23,240 are available as of December 31, 2023 and 2022, respectively, to reduce future tax liabilities. The research and development credit carryforwards begin to expire in 2026.

Deductible but limited federal business interest expense carryforwards of $149,464 and $145,296 are available as of December 31, 2023 and 2022, respectively, to offset future U.S. federal taxable over an indefinite period.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of NOL and income tax credit carryforwards that could be utilized annually in the future to offset taxable income and income tax liabilities. Any such annual limitation may significantly reduce the utilization of the NOLs and income tax credits before they expire. A Section 382 limitation study performed as of March 31, 2017 determined that we experienced an ownership change in 2006 with $1,506 of the 2006 NOL, and $32 of the 2006 research and development tax credit unavailable for future use. Furthermore, in connection with the acquisition of Rent., Rent. experienced an ownership change that triggered Section 382. As of September 30, 2021, Rent. completed a Section 382 limitation study and, based on this analysis, we do not expect a reduction in our ability to fully utilize Rent.’s pre-change NOLs.

The components of loss from continuing operations before benefit for income taxes for the years ended December 31, 2023, 2022, and 2021 were $(125,110), $(246,880), and $(95,873), for federal purposes, respectively, and $(303), $(2,801), and $(1,458), for foreign purposes, respectively.

The following table is a reconciliation of the U.S. federal income tax at statutory rate to our effective income tax rate:

	December 31,
	2023		2022		2021
U.S. federal income tax at statutory rate	21.00	%	21.00	%	21.00	%
State taxes (net of federal benefit)	3.26		5.02		9.31
Stock-based compensation	(5.18)		(3.24)		17.70
Permanent differences	(0.36)		(0.18)		(0.14)
Federal research and development credit	0.58		1.77		6.43
Change in valuation allowance	(11.62)		(20.12)		(44.33)
Other	(0.82)		0.26		(1.99)
Acquisition costs	—		(0.02)		(1.71)
Expiration of tax attribute carryforwards	(7.63)		(4.54)		—
Effective income tax rate	(0.77)	%	(0.05)	%	6.27	%

The difference between the U.S. federal income tax at statutory rate of 21% for the years ended December 31, 2023, 2022, and 2021, and our effective tax rate in all periods is primarily due to a full valuation allowance related to our U.S. deferred tax assets and the impact of U.S. states where we incur current income tax expense.

We recorded an income tax expense of $979 for the year ended December 31, 2023, which in part consists of current state income tax expense recorded for the year ended December 31, 2023. Tax expense for the year ended December 31, 2023 also includes federal and state deferred income tax expense generated by an increase to an indefinite-lived deferred tax liabilities created through our April 2, 2021 acquisition of Rent. and our April 1, 2022 acquisition of Bay Equity. We recorded an income tax expense of $116 for the year ended December 31, 2022, which is primarily a result of a deferred tax liability created through our April 2, 2021 acquisition of Rent. and can be used to realize certain deferred tax assets against which we had previously recorded a full valuation allowance. Our deferred income tax benefit was partially offset by current state income tax expense recorded for the year ended December 31, 2022. We recorded an income tax benefit of $6,107 for the year ended December 31, 2021, which is primarily a result of a deferred tax liability created through our April 2, 2021 acquisition of Rent. and can be used to realize certain deferred tax assets against which we had previously recorded a full valuation allowance. Our deferred income tax benefit was partially offset by current state income tax expense recorded for the year ended December 31, 2021.

The following table summarizes the components of our income tax expense (benefit) from continuing operations for the periods presented:

	December 31,
	2023		2022		2021
Current income tax expense:
U.S. - State	$	959	$	1,074	$	1,215
Total current income tax expense	959		1,074		1,215
Deferred income tax benefit:
U.S. - Federal	16		97		—
U.S. - State	4		(1,055)		(7,322)
Total deferred income tax benefit	20		(958)		(7,322)
Total income tax expense (benefit)	$	979	$	116	$	(6,107)

We account for uncertainty in income taxes in accordance with ASC 740. Tax positions are evaluated utilizing a two-step process, whereby we first determine whether it is more likely than not that a tax position will be sustained upon examination by the tax authority, including resolutions of any related appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The following table summarizes the activity related to unrecognized tax benefits:

	December 31,
	2023		2022		2021
Unrecognized benefit—beginning of year	$	5,809	$	4,692	$	3,105
Gross (decreases) increases—prior year tax positions	(527)		(210)		32
Gross increases—current year tax positions	709		1,327		1,555
Unrecognized benefit—end of year	$	5,991	$	5,809	$	4,692

All of the unrecognized tax benefits as of December 31, 2023 and 2022 are accounted for as a reduction in our deferred tax assets. Due to our valuation allowance, none of the $5,991 and $5,809 of unrecognized tax benefits would affect our effective tax rate, if recognized. We do not believe it is reasonably possible that our unrecognized tax benefits will significantly change in the next 12 months.

We recognize interest and penalties related to unrecognized tax benefits as income tax expense. There was no interest or penalties accrued related to unrecognized tax benefits for each year ended December 31, 2023 and 2022 and no liability for accrued interest or penalties related to unrecognized tax benefits as of December 31, 2023.

Our material income tax jurisdictions are the United States (federal) and Canada (foreign). As a result of NOL carryforwards, we are subject to audit for all tax years for federal and foreign purposes. All tax years remain subject to examination in various other jurisdictions that are not material to our consolidated financial statements.