Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

For the year ended December 31, 2022, the Company recorded a benefit for income taxes of $3,590. The benefit for income taxes was primarily the result of changes in estimates between the Company’s initial provision for 2021 income taxes and the actual amounts reflected in the income tax returns as filed. For the year ended December 31, 2021, the Company recorded a provision for income taxes of $17,400.

The reconciliation of federal statutory income tax rate to the Company’s effective income tax rate is as follows:

	For the Year Ended December 31,
	2022				2021				2020
Expected income tax benefit at the federal statutory rate		21.0		%		21.0		%		21.0		%
State and local taxes		5.6				3.2				(2.6	)
Return to provision adjustments		3.4				—				—
Research and development credits		2.1				(4.1	)			12.5
Stock-based compensation		(3.8	)			—				(13.6	)
Foreign derived intangible income		-				(6.1	)			—
Uncertain tax positions		(0.2	)			4.3				—
Other		0.3				(1.4	)			—
Change in valuation allowance		(25.3	)			(4.4	)			(17.3	)
Total		3.1		%		12.5		%		0.0		%

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. The principal components of the Company’s deferred tax assets consisted of the following:

	December 31,
	2022			2021
Deferred tax assets (liabilities)
Capitalized research and development	$	14,305		$	—
Net operating loss carryforwards		5,590			—
License agreement		6,043			6,261
Stock-based compensation		12,215			5,643
Research and development credits		3,826			—
Other		70			256
Prepaid expenses		(893	)		(1,256	)
Deferred tax assets (liabilities)		41,156			10,904
Less: valuation allowance		(41,156	)		(10,904	)
Net deferred tax assets (liabilities)	$	—		$	—

As required by the 2017 tax Cut and Jobs Act, effective January 1, 2022, our research and development expenditures were capitalized and amortized, which resulted in deferred tax asset.

As of December 31, 2022, the Company had federal net operating losses of $19,392 and state net operating loss carryforwards of $30,030, which may be used to offset future tax liabilities. The Company has federal and state credit carryforwards of $2,533 and $1,294, respectively. The federal net operating losses and research and development tax credits begin to expire in 2034.

Management has evaluated the positive and negative evidence bearing upon the realizability of the Company’s deferred tax assets. Based on the Company’s projected net operating losses for 2023 and beyond, the Company determined that it is more likely than not that it will not recognize the benefits of the deferred tax assets. As a result, the Company has recorded a full valuation allowance of approximately $41,156 at December 31, 2022.

Under the provisions of Sections 382 and 383 of the Internal Revenue Code (“IRC”), net operating loss and credit carryforwards and other tax attributes may be subject to limitation if there has been a significant change in ownership of the Company, as defined by the IRC.

The Company performed an analysis through December 31, 2021 pursuant to Section 382 of the IRC to determine whether any limitations might exist on the utilization of net operating losses and other tax attributes. Based on this analysis, the Company has determined that there was no impact on the Company's ability to utilize net operating losses or credit carryforwards in 2021. The Company is in the process of completing a Section 382 study for the fiscal year 2022. To the extent that the Company raises additional equity financing or other changes in the ownership interest of significant stockholders occurs, additional tax attributes may become subject to an annual limitation. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The Company files federal and various state income tax returns. The statute of limitations for assessment by the Internal Revenue Service (“IRS”), and state tax authorities remains open for all tax years ended since the inception of the Company. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS or state tax authorities to the extent utilized in a future period. No federal or state tax audits are currently in process.

The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. During the year ended December 31, 2021, the Company recorded an unrecognized tax benefit of $5,932 related to certain tax positions. The Company did not have any unrecognized tax benefits prior to the year ended December 31, 2021.

The following table summarizes the reconciliation of the beginning and ending amount of total unrecognized tax benefits for the year ended December 31, 2022:

Balance beginning of year	$	5,932
Decrease related to current year provision to return adjustment		(943	)
Increase related to accrued interest		266
Balance at end of period	$	5,255