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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes The income tax expense recorded during the year ended December 31, 2021, of $3.3 million was related to foreign withholding taxes on the up-front fee in connection with the Zai Agreement. The Company had no federal income tax expense and immaterial state tax expense for the years ended December 31, 2020 and 2019.
The differences between the effective income tax rate and the statutory tax rates during the years ended 2021, 2020 and 2019 are as follows (in thousands):

 Year Ended December 31,
 202120202019
Net loss before tax$(578,485)$(357,937)$(213,256)
Statutory U.S. federal tax rate 21.00 %21.00 %21.00 %
Tax computed at federal statutory rate(121,482)(75,167)(44,784)
State income taxes, net of federal benefit(4,657)(13,490)— 
Increase (decrease) in taxes recoverable resulting from:  
Effect of change in valuation allowance
150,487 110,985 52,719 
Non-deductible share-based compensation
4,783 2,724 1,810 
Tax deductions for share-based compensation
(17,243)(17,991)(6,917)
Tax credits
(30,289)(15,672)(8,621)
Foreign withholding taxes3,299 — — 
Change in tax rate2,972 — — 
Unrecognized tax benefits7,573 3,857 2,143 
Non-deductible officers’ compensation8,318 4,697 3,527 
Other differences
(462)57 123 
Income tax expense$3,299 $— $— 

Deferred Tax

The following table summarizes the significant components of the Company’s deferred tax assets (in thousands):

 December 31,
20212020
Deferred tax assets:  
Tangible and intangible depreciable assets$29,576 $32,180 
Stock compensation26,738 19,183 
Provisions5,740 2,510 
Lease liability9,916 8,800 
Non-current investment673 — 
Net operating loss carryforward299,204 182,536 
Capital loss carryforward 89 114 
Canada scientific research and experimental development expenditures5,471 5,471 
U.S. research and development tax credits51,550 28,834 
Total gross deferred tax assets428,957 279,628 
Less valuation allowance(421,044)(270,368)
Net deferred tax assets $7,913 $9,260 
Deferred tax liabilities:
Right-of-use asset $(7,913)$(8,377)
Non-current investment— (883)
Net deferred income taxes$— $— 

The total valuation allowance increased by $150.7 million for the year ended December 31, 2021. The Company has established a full valuation allowance against its net deferred tax assets as of December 31, 2021 due to the uncertainty surrounding the realization of such assets as evidenced by the cumulative losses from operations through December 31, 2021.

For Canadian federal income tax purposes, the Company’s Canadian federal scientific research and experimental development expenditures amounted to $19.9 million at December 31, 2021, 2020 and 2019 and for provincial income tax
purposes amounted to $21.6 million at December 31, 2021, 2020 and 2019. As operations in Canada ceased during 2014, no expenditures were incurred for the years ended December 31, 2021, 2020 and 2019. These expenditures are available to reduce future taxable income and have an unlimited carry forward period. Scientific research and development expenditures are subject to verification by the taxation authorities, and accordingly, these amounts may vary by a material amount. In addition, the Company has research and development tax credit carryforwards for U.S. federal and state income tax purposes as of December 31, 2021 of $48.5 million and $16.8 million, respectively. The federal credits will begin to expire in 2033 unless utilized and the state credits have an indefinite life. Further, the Company has orphan drug tax credit carryforwards for U.S. federal income tax purposes as of December 31, 2021 of $7.2 million. The credits will begin to expire in 2041 unless previously utilized.

At December 31, 2021, the Company’s net operating loss carry forwards (“NOLs”) for U.S. federal and state income taxes were $1.3 billion and $296.4 million, respectively, and the Company’s NOLs for Canadian federal and provincial income tax purposes were $79.5 million and $78.9 million, respectively. The NOLs expire as follows (in thousands):

USCanada
FederalStateFederalProvincial
Expires in:  
2030$4,830 $4,907 
20317,059 7,066 
203213,308 12,433 
20332,225 2,232 18,623 19,385 
20347,276 22,162 32,401 31,809 
203553,359 52,950 1,084 1,084 
203623,379 — 777 777 
203765,509 — 697 697 
2038— 3,741 — — 
2039— — 242 242 
2040— 190,783 273 273 
2041— 24,569 251 251 
Does not expire1,099,025 — — — 
$1,250,773 $296,437 $79,545 $78,924 
    
The future utilization of the U.S. federal and state NOL and credit carryforwards to offset future taxable income and tax, respectively, may be subject to an annual limitation as a result of ownership changes that may have occurred previously or may occur in the future. The Tax Reform Act of 1986 (the “Act”) limits a company’s ability to utilize certain tax credit carryforwards and net operating loss carryforwards in the event of a cumulative change in ownership in excess of 50% (by value) as defined in the Act.

During 2017, the Company completed a study to assess whether an ownership change, as defined by Section 382 of the Act, had occurred from the Company’s formation through December 31, 2017. The results of the study have been extended through December 31, 2021. Based upon the study, the Company determined an ownership change had occurred during 2017, causing the annual utilization of the NOL and credit carryforwards to be limited. The Company does not believe any of the NOL and credit carryforwards generated through December 31, 2021 would expire solely as a result of annual limitations on the utilization of those attributes. The Canadian Federal and Provincial Tax Acts maintain similar rules in the case of acquisition of control, which may limit the utilization of tax attributes.

The Company files income tax returns in the U.S. (federal and state) and Canada (federal and provincial). The Company’s U.S. operations have not been audited for any open taxation years. The Company has experienced losses for U.S. tax purposes and therefore, the taxation authorities may review any loss year, if and when the losses are utilized.

For Canadian tax purposes, the Company remains subject to federal and provincial audit for the December 31, 2016 and subsequent taxable years. Where tax years remain open, the Company considers it reasonably possible that issues may be raised or tax positions agreed to with the taxation authorities, which may result in increases or decreases of the balance of non-refundable investment tax credits (“ITCs”) and NOLs. However, an estimate of such increases and decreases cannot be currently made.
A reconciliation of the beginning and ending amounts of unrecognized tax positions are as follows (in thousands):

 FederalProvincial/State
 December 31,December 31,
 202120202019202120202019
Unrecognized tax positions, beginning of year$7,394 $4,268 $2,617 $9,652 $8,648 $8,010 
Gross increase — current period tax positions
6,482 3,126 1,651 1,367 1,004 638 
Gross decrease — prior period tax positions
— — — (78)— — 
Gross increase — prior period tax positions
— — — — — — 
Expiration of statute of limitations
— — — — — — 
Unrecognized tax positions, end of year$13,876 $7,394 $4,268 $10,941 $9,652 $8,648 
    
If recognized, none of the unrecognized tax positions would impact the Company’s income tax benefit or effective tax rate as long as the Company’s net deferred tax assets remain subject to a full valuation allowance. The Company does not expect any significant increases or decreases to the Company’s unrecognized tax positions within the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had no accrual for interest or penalties on tax matters as of December 31, 2021, 2020 and 2019.    

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Due to the Company’s history of net operating losses, the CARES Act did not have a material impact on the Company’s consolidated financial statements.