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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2021, 2020, and 2019. The Company had also not recorded any income tax benefits for the net operating losses incurred in each period due to its uncertainty of realizing a benefit from those items. All of the Company’s losses before income taxes were generated in the United States.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2021, 2020, and 2019 were as follows:
Year ended December 31,
202120202019
Federal statutory rate21.0 %21.0 %21.0 %
State taxes16.3 %(0.1)%(0.3)%
Federal research tax credit2.7 %4.1 %3.5 %
Stock compensation(1.6)%(1.7)%(2.2)%
Change in valuation allowance(38.4)%(23.3)%(22.0)%
0.0 %0.0 %0.0 %
Deferred income taxes represent the tax effect of transactions that are reported in different periods for financial and tax reporting purposes. Temporary differences and carryforwards that give rise to a significant portion of the deferred income tax benefits and liabilities were as follows at December 31, 2021 and 2020:
December 31,
(dollars in millions)20212020
Deferred income tax assets:
Loss carryforwards$97.0 $43.1 
Tax credits18.8 10.1 
Stock compensation15.4 5.0 
Deferred revenue10.0 9.0 
Other3.3 0.1 
Total deferred income tax assets144.5 67.3 
Deferred income tax liabilities:
Property, equipment and leasehold improvements(3.6)(2.4)
Other(1.4)— 
Total deferred income tax liabilities(5.0)(2.4)
Less valuation allowance(139.5)(64.9)
Net deferred income tax liability$— $— 
The Company has provided a valuation allowance against the full amount of the deferred tax assets since, in the opinion of management, based primarily upon the history of losses of the Company, it is more likely than not that the benefits will not be realized.
All, or a portion of, the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to utilize these potential tax benefits. The valuation allowance increased by $74.6 million and $27.8 million in 2021 and 2020, respectively, due increases in net operating loss carryforwards, tax credit carryforwards, stock compensation expense, and research and development tax credits.
The Company had $373.6 million and $205.1 million of federal net operating loss carryforwards as of December 31, 2021 and 2020, respectively. Federal net operating loss carryforwards as of December 31, 2017 expire at various dates through 2037 and federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such carryforwards is limited to 80% of the Company’s taxable income in the year in which carryforwards are used. The Company had $346.9 million and $63.8 million of state and local net operating loss carryforwards as of December 31, 2021 and 2020, respectively, that expire at various dates through 2041. The Company had $15.2 million and $10.1 million of federal tax credit carryforwards as of December 31, 2021 and 2020, respectively, which expire at various dates through 2041. The Company had $4.5 million and $2.7 million of state tax credit carryforwards as of December 31, 2021 and 2020, respectively, which expire at various dates through 2036.
During 2021, the Company performed a Section 382 analysis to determine whether an ownership change occurred for tax purposes. Based on this analysis, the Company determined that ownership changes occurred on July 31, 2018 and December 31, 2020 due to various equity offerings, vesting of restricted stock awards, and stock option exercises. These ownership changes resulted in Section 382 limitations on the Company’s net operating loss and tax credit carryforwards generated before these dates. However, because the amount of the Section 382 limitations (including carryover of the unused Section 382 limitations and realized built-in gains) exceeds the amount of the Company’s carryforwards generated before these dates, the limitations will not affect the Company's ability to fully utilize these carryforwards.
The Company complies with the provisions of ASC 740 in accounting for its uncertain tax positions. ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. As of December 31, 2021 and 2020, the Company had no unrecognized tax benefits.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties in tax expense. The Company had no income tax related accruals for interest and penalties at December 31, 2021 and 2020.
The Company is required to file income tax returns in the U.S. Federal and various state jurisdictions. The Company is a state franchise taxpayer due to the Company’s loss position. As a result of the Company’s net operating loss carryforwards, the Company’s federal and state statutes of limitations generally remain open for all tax years until its net operating loss and tax credit carryforwards are utilized or expire prior to utilization. The Company does not currently have any federal or state income tax examinations in progress.
For the years ended December 31, 2021, 2020, and 2019, the Company recorded a benefit from expected cash refunds to be provided by the State of Connecticut, equal to 65% of research and development credits, of $1.6 million, $1.8 million, and $1.4 million, respectively, which is included in Other income, net in the accompanying consolidated statements of operations and comprehensive loss, due to the Company being a state franchise taxpayer. The benefit results from the exchange of the state research and development tax credit carryforwards for cash refunds. At December 31, 2021 and 2020, the Company had recorded receivables of $3.4 million and $3.2 million, respectively, relating to research and development credits due to the Company.