Income taxes

12 Months Ended

Dec. 31, 2023

Income taxes

Income taxes

13. Income taxes

The Company evaluates its tax positions on an annual basis. The current tax expense recorded for the year ended December 31, 2023 is the residual tax due, after utilization of tax attributes, associated with revenue from collaboration agreements. The provision for incomes taxes is as follows:

	Year ended December 31,
	2023		2022		2021
	(in thousands)
Current
Federal	$	1,248	$	—	$	—
State		160		16		—
Total current		1,408		16		—
Deferred
Federal		—		—		—
State		—		—		—
Total deferred		—		—		—
Total tax provision	$	1,408	$	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, 2023, 2022, and 2021 is as follows:

	Year ended December 31,
	2023			2022			2021
Income tax computed at federal statutory tax rate		21.0	%		21.0	%		21.0	%
State taxes, net of federal benefit		5.4	%		5.2	%		6.6	%
Provision to return		0.9	%		3.2	%		4.9	%
General business credit carryovers		(0.4)	%		(3.5)	%		3.2	%
Non-deductible expenses		0.5	%		(4.6)	%		(3.8)	%
Other		(0.4)	%		—	%		—	%
Change in valuation allowance		(26.0)	%		(21.3)	%		(31.9)	%
Total		1.00	%		—	%		—	%

The Company has historically incurred net operating losses (“NOLs”). As of December 31, 2023, the Company had federal and state net operating loss carryforwards of $55.3 million and $33.2 million, respectively. As of December 31, 2023, the Company had federal and state research and development tax credit carryforwards of $19.6 million and $10.8 million, respectively, which expire beginning in 2033. As of December 31, 2022, the Company had state investment credits of $0.4 million, which expire beginning in 2024.

The significant components of the Company’s deferred tax assets and (liabilities) as of December 31, 2023 and 2022 are as follows:

	As of December 31,
	2023		2022
	(in thousands)
Deferred tax assets:
Net operating loss carryforward	$	13,724	$	47,282
Tax credit carryforward		28,427		32,060
Lease liability		5,544		6,318
Deferred revenue		1,675		17,984
Stock compensation		5,157		4,630
Non-deductible accruals and reserves		2,613		1,603
Capitalized research expenses		31,347		14,351
Intangibles		554		610
Other temporary differences		—		(1)
Total deferred tax assets		89,041		124,837
Less valuation allowance		(82,612)		(117,416)
Net deferred tax assets		6,429		7,421
Deferred tax liabilities
Right of use assets		(3,691)		(4,231)
Depreciation and amortization		(2,738)		(3,190)
Other temporary differences		—		—
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, tax credit carryforwards, and capitalized research expenses. 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 $82.6 million and $117.4 million has been established at December 31, 2023 and 2022, respectively. The state NOLs will expire beginning in 2041 while the federal NOLs do not expire. The valuation allowance decreased by $34.8 million for the year ended December 31, 2023 primarily as a result of the utilization of the NOL carryforwards and tax credits in 2023.

At December 31, 2023 and 2022, the Company had no unrecognized tax benefits. The Company is in the process of completing a study of its research and development credit carryforwards. The Company has recorded an adjustment in the current year to reflect the preliminary results of the research and development study. The completion of the study may result in an additional adjustment to the Company’s research and development credit carryforwards; however, until a study is completed, 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 and comprehensive income (loss) 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, 2023 and 2022, 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.