Income taxes

12 Months Ended

Dec. 31, 2022

Income taxes

Income taxes

13. Income taxes

The Company recognized deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of the assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all the deferred tax assets will not be realized. The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position. The Company evaluates its tax positions on an annual basis. The provision for incomes taxes is as follows:

	Year ended December 31,
	2022		2021		2020
	(in thousands)
Current
Federal	$	—	$	—	$	—
State		16		—		—
Total current		16		—		—
Deferred
Federal		—		—		—
State		—		—		—
Total deferred		—		—		—
Total tax provision	$	16	$	—	$	—

A reconciliation of the expected income tax provision computed using the federal statutory income tax rate at the Company’s effective tax rate for the years ended December 31, 2022, 2021, and 2020 is as follows:

	Year ended December 31,
	2022			2021			2020
Income tax computed at federal statutory tax rate		21.0	%		21.0	%		21.0	%
State taxes, net of federal benefit		5.2	%		6.6	%		(2.3)	%
Provision to return		3.2	%		4.9	%		—	%
General business credit carryovers		(3.5)	%		3.2	%		(20.6)	%
Non-deductible expenses		(4.6)	%		(3.8)	%		5.0	%
Other		—	%		—	%		1.9	%
Change in valuation allowance		(21.3)	%		(31.9)	%		(5.0)	%
Total		—	%		—	%		—	%

The Company has historically incurred net operating losses (“NOLs”). As of December 31, 2022, the Company had federal and state net operating loss carryforwards of $175.1 million and $166.5 million, respectively. As of December 31, 2022, the Company had federal and state research and development tax credit carryforwards of $24.0 million and $9.6 million, respectively, which expire beginning in 2033. As of December 31, 2021, the Company had state investment credits of $0.5 million, which expire beginning in 2023.

The significant components of the Company’s deferred tax assets and (liabilities) as of December 31, 2022 and 2021 are as follows:

	As of December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Net operating loss carryforward	$	47,282	$	56,756
Tax credit carryforward		32,060		30,122
Lease liability		6,318		12,012
Deferred revenue		17,984		11,485
Stock compensation		4,630		7,784
Non-deductible accruals and reserves		1,603		1,507
Capitalized research expenses		14,351		—
Intangibles		610		664
Other temporary differences		(1)		—
Total deferred tax assets		124,837		120,330
Less valuation allowance		(117,416)		(107,563)
Net deferred tax assets		7,421		12,767
Deferred tax liabilities
Right of use assets		(4,231)		(9,128)
Depreciation and amortization		(3,190)		(3,632)
Other temporary differences		—		(7)
Net deferred taxes	$	—	$	—

As required by ASC 740, management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which principally comprise NOL carryforwards, research and development credit carryforwards, and lease liability. Management has determined that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets, and as a result, a valuation allowance of $117.4 million and $107.6 million has been established at December 31, 2022 and 2021, respectively. The change in valuation allowance was $9.8 million for the year ended December 31, 2022. The primary reason for the difference between the income tax provision recorded by the Company and the amount of income tax provision at statutory income tax rates was the change in the valuation allowance.

At December 31, 2022 and 2021, the Company had no unrecognized tax benefits. The Company has not as yet conducted a study of its research and development credit carryforwards. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits, and if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations if an adjustment were required.

Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statements of operations. As of December 31, 2022 and 2021, the Company has no accrued interest related to uncertain tax positions. Since the Company is in a loss carryforward position, it is generally subject to examination by the U.S. federal, state, and local income tax authorities for all tax years in which a loss carryforward is available.