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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The components of our provision for income taxes were as follows:
Year Ended December 31,
(in thousands)202420232022
Current
State$266 $47 $8 
Foreign— 500 — 
Total current266 547 8 
Deferred
Federal— — — 
Total deferred— — — 
Provision for income taxes$266 $547 $8 
A reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:
Year Ended December 31,
202420232022
Income tax at the federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit4.0 3.4 1.9 
Tax credits0.6 1.7 1.5 
Stock based compensation5.2 0.1 (2.3)
Foreign withholding tax— (0.8)— 
Executive compensation disallowed under IRC Sec 162(m)(5.8)(1.9)(1.6)
Other(0.6)— (0.8)
Change in valuation allowance(25.0)(24.3)(19.7)
Effective tax rate(0.6)%(0.8)%— %
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their income tax bases, as well as from net operating loss and tax credit carryforwards. Significant components of our deferred tax assets were as follows:
December 31,
(in thousands)20242023
Deferred tax assets
Amortization and depreciation$64,237 $64,919 
Net operating loss carryforwards103,643 98,702 
Tax credits15,529 15,375 
Stock-based compensation11,226 6,946 
Deferred royalty obligation6,409 4,907 
Other8,122 6,707 
Deferred tax assets209,166 197,556 
Valuation allowance(208,568)(196,197)
Deferred tax assets net of valuation allowance598 1,359 
Deferred tax liabilities
Right-of-use asset(598)(1,359)
Deferred tax liabilities(598)(1,359)
Net deferred taxes$— $— 
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, 2024. 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, 2024, 2023 and 2022, a full valuation allowance has been recorded against our deferred tax assets. The valuation allowance increased by $12.4 million in 2024 primarily attributable to net operating loss carryforwards and stock-based compensation. The amount of the deferred tax assets considered realizable could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence, such as cumulative losses, are no longer present. In such cases, additional weight may be given to subjective evidence, such as our projections for growth.
As of December 31, 2024, we had net operating loss carryforwards for federal income tax purposes of approximately $495.0 million, of which approximately $344.8 million can be carried forward indefinitely and the remaining net operating losses begin to expire in 2030, if not utilized. We had approximately $17.8 million of federal research and development tax credit carryforwards and approximately $1.7 million of foreign tax credit carryforwards that begin to expire in 2027, if not utilized.
In addition, we had net operating loss carryforwards for California income tax purposes of approximately $94.7 million that begin to expire in 2030, if not utilized, and state research and development tax credit carryforwards of approximately $9.2 million that do not expire. We had approximately $0.1 million of minimum tax credit carryovers for California income tax purposes that do not expire. We had other state net operating losses of approximately $64.0 million that begin to expire in 2031.
The future utilization of net operating loss and tax credit carryforwards 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.
Effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S. tax purposes. 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 capitalize research and development expenses for tax purposes.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
(in thousands)202420232022
Balance at beginning of year$23,625 $24,075 $24,426 
Additions based on tax positions related to current year105 262 460 
Additions based on tax positions related to prior year— 99 — 
Subtractions based on tax positions related to prior year(811)(811)(811)
Balance at end of year$22,919 $23,625 $24,075 
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, 2024, 2023 and 2022, 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.