Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

7.Income Taxes

The Company did not record net income tax benefits for the operating losses incurred during the periods presented due to the uncertainty of realizing a tax benefit from those losses. Accordingly, any benefit recorded related to these deferred tax assets was offset by a valuation allowance reflecting management’s conclusion that realization of those assets was not more likely than not.

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

	Year Ended December 31,
	2021			2020			2019
Federal statutory income tax rate		(21.0	)%		(21.0	)%		(21.0	)%
State income taxes		(16.6	)		(7.4	)		(8.9	)
Research and development tax credits		(8.7	)		(1.8	)		(5.1	)
Stock-based compensation		(16.8	)		(1.3	)		1.2
162m		0.2			-			-
Change in valuation allowance		62.9			31.5			33.8
Effective income tax rate		—	%		—	%		—	%

The Company’s net deferred tax assets (liabilities) consisted of the following:

	December 31,
	2021			2020
	(in thousands)
Deferred tax assets:
Intangibles, including acquired in-process    research and development	$	1,010		$	981
Capitalized start-up costs		334			378
Net operating loss carryforwards		216,629			101,807
Research and development credit carryforwards		61,698			23,166
Operating lease liability		20,055			10,713
Deferred revenue		13,922			4,680
Equity-based compensation		7,774			8,574
Accruals and allowances		3,718			2,200
Prepaid rent		1,393			-
Equity investment adjustments		359			-
Gross deferred tax assets		326,892			152,499
Deferred tax asset valuation allowance		(304,781	)		(140,868	)
Total deferred tax assets		22,111			11,631
Deferred tax liabilities:
Fixed assets		(669	)		(970	)
Operating lease right-of-use assets		(21,442	)		(10,661	)
Total deferred tax liabilities		(22,111	)		(11,631	)
Net deferred tax asset (liability)	$	-		$	-

As of December 31, 2021 and 2020, the Company had federal net operating loss carryforwards of $800.5 million and $372.5 million, respectively, which may be available to offset future income tax liabilities.

Approximately $37.2 million of the federal net operating losses generated prior to 2018 will begin to expire in 2034, unless previously utilized. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s net operating loss carryover or 100% of a corporation’s taxable income and be available for twenty years from the period the loss was generated. The federal net operating losses generated after 2017 of approximately $763.3 million will be carried over indefinitely, but will generally limit the net operating loss deduction to the lesser of the net operating loss carryforward or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). Also, there will be no carryback for losses incurred after 2017.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, (the “CARES Act”) was enacted in the U.S. The CARES Act temporarily removes the 80% limit for taxable years beginning before 2021 to allow an net operating loss carryforward to fully offset an organization’s income. The CARES Act allows a five-year carryback of any net operating loss generated in a taxable year beginning after December 31, 2017, and before January 1, 2021. The impact of the CARES Act was not material to the Company.

As of December 31, 2021 and 2020, the Company also had state net operating loss carryforwards of $767.8 million and $373.1 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2034.

As of December 31, 2021 and 2020, the Company had federal tax credit carryforwards of approximately $37.9 million and $15.0 million, respectively, which begin to expire in 2034. As of December 31, 2021 and 2020, the Company had state research and development and other credit carryforwards of approximately $30.2 million and $10.3 million, which begin to expire in 2029.

The Company evaluated the expected realizability of its net deferred tax assets and determined that there was significant negative evidence due to its net operating loss position and insufficient positive evidence to support the realizability of these net deferred tax assets. The Company concluded it is more likely than not that its net deferred

tax assets would not be realized in the future; therefore, the Company has provided a full valuation allowance against its net deferred tax asset balance as of December 31, 2021 and 2020. The valuation allowance increased by $163.9 million in 2021, $42.4 million in 2020, $34.5 million in 2019.

Utilization of the net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax expense, respectively. The Company has not yet conducted a study to assess whether a change of control, as defined in Section 382, has occurred or whether there have been multiple changes in control since inception, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the net operating loss carryforward or research credit carryforward before utilization. A full valuation allowance has been provided against the Company’s net operating loss and tax credit carryforwards 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 sheet or statement of operations if an adjustment is required.

As of December 31, 2021, the Company had not identified any unrecognized tax benefits. The Company files income tax returns in the U.S. federal tax jurisdiction and Massachusetts and various other state tax jurisdictions. The Company is subject to examination by the Internal Revenue Service, Massachusetts taxing authorities and state taxing authorities for tax year 2018 through present. The returns in these jurisdictions since inception remain open for examination; however, there are currently no pending tax examinations. The Company will recognize interest and/or penalties related to uncertain tax benefits in income tax expense if they arise.