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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
As of December 31, 2022, the Company has a federal and state net operating loss (“NOL”) carryover of approximately $170.6 million and $90.4 million, respectively, available to offset future income for income tax reporting purposes. Of our federal net operating carryovers, $1.4 million would expire between the years 2025-2037 and $50.4 million for state, which would expire between the years 2027-2042. The Company’s ability to use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382. A limitation may apply to the use of the net operation loss and credit carryforwards, under provisions of the Internal Revenue Code that are applicable if we experience an “ownership change”. That may occur, for example, as a result of trading in our stock by significant investors as well as issuance of new equity. Should these limitations apply, the carryforwards would be subject to an annual limitation resulting in a substantial reduction in the gross deferred tax asset.

We periodically evaluate our NOL carryforwards and whether certain changes in ownership have occurred that would limit our ability to utilize a portion of our NOL and tax credit carryforwards. We have evaluated whether we experienced an ownership change, as defined under Section 382, and determined that an ownership change did occur as of July 9, 2020 and January 22, 2021. NOL carryovers of approximately $66.2 million subject to the July 9, 2020 ownership change date are subject to a base $0.1 million annual limitation for each year following said ownership change. The Company will be able to utilize the annual limitation of the NOL carryforwards to offset future taxable incomes. NOL carryovers of approximately $17.9 million that occurred between the July 9, 2020 and January 22, 2021 ownership change dates are subject to a base $11.9 million annual limitation for each year following said ownership change.
The following table sets forth the tax effects of temporary differences that give rise to significant portions of the Company’s net deferred tax assets (in thousands):

 
December 31,
 20222021
Deferred tax assets, net:  
Net operating loss carryforwards$40,511 $29,398 
Operating lease assets(371)(1,405)
Operating lease liabilities410 1,489 
Depreciation9,145 3,840 
Stock compensation2,027 1,146 
Business interest expense1,033 1,165 
Capitalized research cost3,334 — 
Other temporary differences691 886 
Deferred tax assets56,780 36,519 
Valuation allowance(56,780)(36,519)
Net deferred tax assets$— $— 

The Company had a change in accounting principle (discussed in Note 9 above) effective as of December 31, 2022, resulting in the de-election of the practical expedient to combine lease and non-lease components under ASC 842. The company has adjusted the December 31, 2021 balance to reflect the modified retrospective treatment the deferred tax table has been updated to reflect the modified retrospective treatment. To reflect the update, the Company reduced the operating lease asset deferred tax liability by $6.5 million, a reduction to the operating lease liability deferred tax asset of $6.6 million, and an increase in the net operating loss deferred tax asset of $0.1 million.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to amortize them over five years pursuant to IRC Section 174. The mandatory capitalization requirement increases the deferred tax asset for Capitalized Research Costs by $3.3 million for the year ended December 31, 2022.

ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Based on management’s review of both the positive and negative evidence, which includes our historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting results, we have concluded that it is not more likely than not that we will be able to realize all of our U.S. deferred tax assets. Therefore, we have provided a full valuation allowance against deferred tax assets at December 31, 2022 and 2021, respectively.

The following table sets forth reconciling items from income tax computed at the statutory federal rate:

 Year Ended December 31,
 20222021
Federal income tax at statutory rate21.0 %21.0 %
State income taxes, net of federal benefits1.6 %3.8 %
Permanent deductions(2.2)%0.3 %
Valuation allowance(20.4)%(25.2)%
Effective tax rate— %— %

Accounting literature regarding liabilities for unrecognized tax benefits provides guidance for the recognition and measurement in financial statements of uncertain tax positions taken or expected to be taken in a tax return. The Company’s evaluation was performed for the tax periods from inception to December 31, 2022. The Company is subject to examination by major tax jurisdictions for the years ended December 31, 2016 to 2022.
The Company recognizes uncertain tax positions net, against any operating losses or applicable research credits as they arise. Currently, there are no uncertain tax positions recognized at December 31, 2022 and 2021, respectively.On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law and is effective for taxable years beginning after December 31, 2022. The IRA includes multiple incentives to promote clean energy and remains subject to additional guidance releases. While the clean energy provisions in the IRA are expected to have a material impact on the Company, there are no significant current tax expense impacts with the newly enacted law during the year ended December 31, 2022.