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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company files its U.S. and Irish income tax returns and income taxes are presented in the Consolidated Financial Statements using the asset and liability method prescribed by the accounting guidance for income taxes.
Income (loss) before provision for income taxes by country for each of the fiscal periods presented is summarized as follows (in thousands):
Year Ended 
December 31,
202320222021
Ireland$(153,920)$(119,571)$65,456 
U.S.(6,560)(6,034)6,465 
Income (loss) before provision for income taxes$(160,480)$(125,605)$71,921 
Components of the provision for income taxes for each of the fiscal periods presented consisted of the following (in thousands):
Year Ended 
December 31,
202320222021
Current:
U.S. Federal$2,200 $2,422 $356 
U.S. State 37 55 16 
Ireland— — — 
Total current provision$2,237 $2,477 $372 
Deferred:
U.S. Federal$(15,647)$(11,039)$4,581 
U.S. State (42)(94)(7)
Ireland— — — 
Total deferred benefit$(15,689)$(11,133)$4,574 
Provision for (benefit from) income taxes$(13,452)$(8,656)$4,946 
The Company recorded a net tax shortfall (windfall) from stock option exercises of $(3.5) million, $(3.2) million, and $(2.3) million for the years ended December 31, 2023, 2022 and 2021, respectively, all of which were recorded as part of its income tax provision in the Consolidated Statements of Operations.
The provision for income taxes differs from the statutory tax rate of 12.5% applicable to Ireland primarily due to Irish net operating losses for which a tax provision benefit is not recognized and U.S. income taxed at different rates. Following is a reconciliation between income taxes computed at the Irish statutory tax rate and the provision for income taxes for each of the fiscal periods presented (in thousands):
Year Ended 
December 31,
 202320222021
Taxes at the Irish statutory tax rate of 12.5%$(20,060)$(15,700)$8,990 
Income tax at rates other than applicable statutory rate(7,072)(2,338)(398)
Change in valuation allowance22,406 22,681 4,108 
Share-based payments615 518 5,173 
Tax credits(9,382)(8,949)(5,355)
Income not subject to tax— (5,000)(7,587)
Other41 132 15 
Provision for (benefit from) income taxes$(13,452)$(8,656)$4,946 
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s net deferred tax assets as of December 31, 2023, and 2022 are as follows (in thousands):
December 31,
20232022
Deferred tax assets:
Net operating loss carryforwards$156,046 $136,487 
Tax credits23,728 23,193 
Lease liability2,686 1,398 
Accruals and other1,887 1,587 
Capitalized R&D25,067 10,544 
Share-based compensation9,364 7,628 
Gross deferred tax assets218,778 180,837 
Valuation allowance(181,713)(161,098)
Net deferred tax assets37,065 19,739 
Deferred tax liability:
Operating lease right-of-use assets(2,706)(1,355)
Fixed Assets(466)(180)
Net deferred tax assets$33,893 $18,204 

The Company's deferred tax assets (“DTA”) are composed primarily of its Irish subsidiaries' net operating loss carryforwards, state net operating loss carryforwards available to reduce future taxable income of the Company's U.S. subsidiaries, federal and California tax credit carryforwards, share-based compensation, capitalized R&D, and other temporary differences. The Company maintains a valuation allowance against certain U.S. federal and state and Irish deferred tax assets. Each reporting period, the Company evaluates the need for a valuation allowance on its deferred tax assets by jurisdiction.

For the year ended December 31, 2023, the Company recorded an increase in DTA of $15.7 million, primarily due to Section 174 R&D Capitalization requirements of $14.5 million, which became effective in 2022. For the year ended December 31, 2022, the Company recorded an increase in DTA of $11.1 million, primarily due to Section 174 R&D Capitalization requirements of $10.5 million, which became effective in 2022.

Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. Based upon the weight of available evidence, especially the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company believes it is not yet more likely than not that certain deferred tax assets will be fully realizable. Accordingly, the Company has provided a valuation allowance of $181.7 million against its deferred tax assets as of December 31, 2023, primarily in relation to deferred tax assets arising from Federal and California tax credits and net operating losses. The deferred tax assets recognized net of the valuation allowance, $33.9 million as of December 31, 2023, consisted predominantly of U.S. federal temporary differences. Due to expected future U.S. operating income, the Company expects to realize such deferred tax assets. The net increase of $20.6 million in the valuation allowance during the year ended December 31, 2023, was primarily due to Irish net operating losses.

As of December 31, 2023, certain of the Company’s Irish entities had trading loss carryovers of $1.1 billion and non-trading loss carryovers of $24.1 million, each of which can be carried forward indefinitely. Trading losses are available against income from the same trade/trades while non-trading losses (excess management expenses) are available against future investment income in the company in which they arise. In addition, as of December 31, 2023, the Company had state net operating loss carryforwards of approximately $126.2 million, which are available to reduce future taxable income, if any, for the Company’s U.S. subsidiary. If not utilized, the state net operating loss carryforward begins expiring in 2032.

The Company also has federal and California research and development credit carryforwards of $17.7 million and $19.4 million, respectively, at December 31, 2023. The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of net operating losses and tax credit carryforwards in the event that there is a change in ownership as provided by Section 382 of the Internal Revenue Code and similar state provisions. Such a limitation could result in the expiration of the net operating loss carryforwards and tax credits before utilization, which could result in increased future tax
liabilities. The federal research and development credit carryforwards will expire starting in 2041 if not utilized. The California tax credits can be carried forward indefinitely.

Cumulative unremitted earnings of the Company’s U.S. subsidiaries total approximately $175.4 million at December 31, 2023. The Company's U.S. subsidiaries' cash balances at December 31, 2023, are committed for its working capital needs and are considered to be indefinitely invested. As such, no provision for income tax in Ireland has been recognized on undistributed earnings of the Company’s U.S. subsidiaries. The determination of a hypothetical unrecognized deferred tax liability as of December 31, 2023 is not practicable because of the complexity and variety of assumptions necessary to compute the tax.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
20232022
Gross Unrecognized Tax Benefits at January 1$11,564 $8,329 
Additions for tax positions taken in the current year2,355 2,243 
Additions for tax positions taken in the prior year— 992 
Reductions for tax positions taken in the prior year (565)— 
Gross Unrecognized Tax Benefits at December 31 $13,354 $11,564 
If recognized, none of the Company's unrecognized tax benefits as of December 31, 2023, would reduce its annual effective tax rate, primarily due to corresponding adjustments to its deferred tax valuation allowance. As of December 31, 2023, the Company has not recorded a liability for potential interest or penalties. The Company also does not expect its unrecognized tax benefits to change significantly over the next 12 months.
The tax years 2013 to 2023 remain subject to examination by the U.S taxing authorities and the tax years 2018 to 2023 remain subject to examination by the Irish taxing authorities as of December 31, 2023.