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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The components of our provision for income taxes for the years ended December 31, 2023, 2022 and 2021, are as follows (in thousands):
Year Ended December 31,
202320222021
Current:
State$47 $8 $4 
Foreign500 — — 
Total current547 8 4 
Deferred:
Federal— — — 
Total deferred— — — 
Provision for income taxes$547 $8 $4 
A reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:
Year Ended December 31,
202320222021
Income tax at the federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit3.4 1.9 0.4 
Tax credits1.7 1.5 1.0 
Stock based compensation0.1 (2.3)(1.3)
Foreign withholding tax(0.8)— — 
Executive compensation disallowed under IRC Sec 162(m)(1.9)(1.6)(1.1)
Other— (0.8)— 
Change in valuation allowance(24.3)(19.7)(20.0)
Income tax provision(0.8)%— %— %
Deferred income taxes reflect the 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. Significant components of our deferred tax assets are as follows as of December 31, 2023 and 2022 (in thousands):
December 31,
20232022
Deferred tax assets:
Amortization and depreciation$64,919 $64,111 
Net operating loss carryforwards98,702 86,547 
Tax credits15,375 14,411 
Stock-based compensation6,946 5,244 
Deferred royalty obligation
4,907 2,577 
Other6,707 4,909 
Gross deferred tax assets197,556 177,799 
Valuation allowance(196,197)(175,670)
Deferred tax assets net of valuation allowance1,359 2,129 
Deferred tax liabilities:
Right-of-use asset(1,359)(2,129)
Other— — 
Net deferred tax assets$— $— 
Realization of deferred tax assets is dependent on future taxable income, if any, the timing and the amount of which are uncertain. We assess the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant component of objective negative evidence evaluated was our cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2023, 2022 and 2021, a full valuation allowance has been recorded against our net deferred tax asset. The valuation allowance increased by $20.5 million in 2023 primarily due to increases in net operating losses. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.
As of December 31, 2023, we had net operating loss carryforwards for federal income tax purposes of approximately $479.0 million, of which approximately $328.8 million can be carried forward indefinitely and the remaining net operating losses expire beginning in 2030, if not utilized. Federal research and development tax credit carryforwards of approximately $17.8 million that expire beginning in 2027, if not utilized, and foreign tax credit carryforwards of approximately $1.7 million that begin to expire in 2027, if not utilized.
In addition, we had net operating loss carryforwards for California income tax purposes of approximately $92.9 million that expire beginning of 2030, if not utilized, and state research and development tax credit carryforwards of approximately $8.9 million which can be carried forward indefinitely. We had approximately $0.1 million of minimum tax credit carryovers for California income tax purposes. The minimum tax credits have no expiration date. We had other state net operating losses of approximately $50.5 million that begin to expire in 2031.
The future utilization of net operating loss and tax credit carryforwards and credits may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future. Due to the existence of the valuation allowance, limitations under Section 382 and 383 will not impact our effective tax rate.
Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement did not have a material impact on our deferred tax assets and did not result in a cash tax liability as we have historically elected to capitalized research and development expenses for tax purposes.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
December 31,
202320222021
Balance at beginning of year$24,075 $24,426 $23,624 
Additions based on tax positions related to current year262 460 1,613 
Additions based on tax positions related to prior year99 — — 
Subtractions based on tax positions related to prior year(811)(811)(811)
Balance at end of year$23,625 $24,075 $24,426 
We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition at the effective date to be recognized. None of our unrecognized tax benefits would impact the effective tax rate if recognized, because the benefit would be offset by an increase in the valuation allowance.
We have elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2023, 2022 and 2021, we did not recognize accrued interest and penalties related to unrecognized tax benefits. Although the timing and outcome of an income tax audit is highly uncertain, we do not anticipate that the amount of existing unrecognized tax benefits will significantly change during the next 12 months.
We file a U.S. federal income tax return and income tax returns in various state and local jurisdictions. Due to our net operating loss and tax credit carryforwards, the income tax returns remain open to U.S. federal and state tax examinations. We are not currently under examination in any tax jurisdiction.