Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

15. Income Taxes

Loss before provision for income taxes was as follows:

	Year Ended December 31,
	2021			2020			2019
	(in thousands)
United States	$	(89,000	)	$	(96,555	)	$	(63,200	)
Foreign		15,182			15,740			12,427
Total	$	(73,818	)	$	(80,815	)	$	(50,773	)

The (provision) benefit for income taxes consists of the following:

	Year Ended December 31,
	2021			2020			2019
	(in thousands)
Current income tax provision
Federal	$	(709	)	$	(406	)	$	(238	)
State		(570	)		(487	)		(241	)
Foreign		(5,609	)		(5,508	)		(3,293	)
Total current income tax provision		(6,888	)		(6,401	)		(3,772	)
Deferred income tax benefit (expense)
Federal		989			(116	)		160
State		—			—			—
Foreign		1,880			2,301			639
Total deferred income tax benefit		2,869			2,185			799
Total income tax provision	$	(4,019	)	$	(4,216	)	$	(2,973	)

The following reconciles the differences between income taxes computed at the federal statutory rate of 21% for 2021, 2020 and 2019 and the provision for income taxes:

	Year Ended December 31,
	2021			2020			2019
	(in thousands)
Expected income tax benefit at the federal statutory rate	$	15,459		$	16,899		$	10,665
State taxes net of federal benefit		13,975			4,618			3,700
Stock-based compensation		79,800			25,196			16,055
Executive compensation limitation		(9,000	)		(3,004	)		(7,244	)
Difference in foreign tax rates		486			830			693
U.S. tax credits		15,995			11,529			24,170
GILTI inclusion		—			—			(1,645	)
Meals and entertainment		(450	)		(478	)		(1,208	)
Acquisition		1,033			—			—
Foreign withholding taxes		(1,006	)		(536	)		(375	)
Change in valuation allowance		(119,843	)		(62,182	)		(47,523	)
Other		(468	)		2,912			(261	)
Income tax provision	$	(4,019	)	$	(4,216	)	$	(2,973	)

Deferred Tax Assets and Liabilities — Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows:

	Year Ended December 31,
	2021			2020
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	295,430		$	190,555
Research and investment credits		62,710			46,729
Accruals and reserves		17,508			15,278
Depreciation		2,532			2,223
Intangible assets		—			164
Stock-based compensation		9,622			7,354
Interest expense		9,705			8,650
Total deferred tax assets		397,507			270,953
Deferred tax liabilities:
Intangible assets		(2,474	)		(2,546	)
Convertible debt		(16,911	)		(21,873	)
Capitalized costs		(27,665	)		(17,009	)
Depreciation		(234	)		(231	)
Total deferred tax liabilities		(47,284	)		(41,659	)
Valuation allowance		(346,381	)		(227,062	)
Net deferred tax assets	$	3,842		$	2,232

The Company reviews all available evidence to evaluate the realizability of its deferred tax assets, including its recent history of accumulated losses over the most recent three years as well as its ability to generate income in future periods. The Company has provided a valuation allowance against its U.S. net deferred tax assets as it is more likely than not that these assets will not be realized given the nature of the assets and the likelihood of future utilization.

The valuation allowance increased by $119.3 million in 2021, $47.0 million in 2020 and $47.3 million in 2019, primarily due to the increase in the U.S. net operating loss deferred tax asset. The Company does not expect any significant changes in its valuation allowance positions within the next 12 months.

The Company had federal and state net operating loss carryforwards of $1.2 billion and $737.8 million at December 31, 2021 and $760.0 million and $507.7 million at December 31, 2020. The Company also had international net operating loss carryforwards of $8.0 million at December 31, 2021 and 2020. As a result of the Tax Cut and Jobs Act of 2017, enacted on 1/1/2018, all federal net operating losses, created after January 1, 2018, have an indefinite carryforward period. All federal net operating losses, created before January 1, 2018, are subject to a 20 year carryforward period and will begin to expire in 2027. State net operating losses will begin to expire in 2023. The Company has a federal interest expense carryforward of $39.9 million at December 31, 2021, and $35.2 million at December 31, 2020, which have an indefinite carryforward period.

The Company had federal research and development credit carryforwards of $44.8 million, net of UTP, at December 31, 2021 that begin to expire in 2027. The Company also has state research and investment tax credit carryforwards of $17.9 million, net of UTP, that begin to expire in 2022.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in the Company's ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of net operating loss carryforwards before they expire.

Uncertain Tax Positions —The Company accounts for uncertainty in income taxes using a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination by a 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 summarizes activity related to unrecognized tax benefits:

	Year Ended December 31,
	2021		2020		2019
	(in thousands)
Unrecognized benefit—beginning of the year	$	8,448	$	5,445	$	3,925
Gross increases—current period positions		4,375		3,003		2,387
Gross decrease—prior period positions		—		—		(867	)
Unrecognized benefit—end of period	$	12,823	$	8,448	$	5,445

All of the gross unrecognized tax benefits represent a reduction to the research and development tax credit carryforward. The gross decrease to prior period positions is a result of the Company completing its documentation of credits generated between 2015 and 2018.

All of the unrecognized tax benefits decrease deferred tax assets with a corresponding decrease to the valuation allowance. None of the unrecognized tax benefits would affect the Company’s effective tax rate if recognized in the future.

The Company has elected to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. No interest or penalties have been recorded through December 31, 2021 as the Company had no tax due because of significant NOL carryforwards.

The Company does not expect any significant change in its unrecognized tax benefits within the next 12 months.

The Company files tax returns in the United States and various jurisdictions throughout the world where the Company has operations or established a taxable presence. All of the Company’s tax years remain open to examination in the United States, as carryforward attributes generated in past years may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in future periods. The Company is no longer subject to examination for years prior to 2017 in Ireland and continues to be routinely examined by various taxing authorities.