Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

Income tax (benefit) expense consists of the following (in thousands):

	Years Ended December 31,
	2021		2020			2019
Current tax provision:
Current federal provision	$	—	$	(673	)	$	669
Current state provision		—		47			135
Total current provision		—		(626	)		804
Deferred tax provision:
Deferred federal provision		—		—			—
Deferred state provision		—		—			—
Total tax provision	$	—	$	(626	)	$	804

Tax rate reconciliation

A reconciliation of the expected income tax (benefit) expense computed at the statutory federal rate to income taxes as reflected in the consolidated financial statements was as follows:

	Years Ended December 31,
	2021			2020			2019
Income tax benefit computed at federal statutory tax rate		21.0	%		21.0	%		21.0	%
Stock-based compensation		(1.3	)%		(0.1	)%		(0.4	)%
State tax—net of federal		6.0	%		11.2	%		6.5	%
State credits		1.7	%		1.2	%		0.6	%
Federal credits		3.1	%		3.5	%		1.1	%
Valuation allowance		(30.2	)%		(34.1	)%		(32.1	)%
Net operating loss carryback benefits		—			1.0	%		—
Tax attributes true up due to net operating loss carryback		—			(1.0	)%		—
Other permanent differences		(0.3	)%		(1.8	)%		0.9	%
Total		0.0	%		0.9	%		(2.4	)%

Significant components of deferred taxes

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (b) operating losses and tax

credit carryforwards. Significant components of the Company’s deferred tax assets and deferred tax liabilities were as follows (in thousands):

	As of December 31,
	2021			2020
Deferred tax assets:
Capitalized start-up costs	$	875		$	1,075
Operating lease liability		9,290			3,859
Stock-based compensation		3,675			1,344
Net operating losses		46,339			19,399
R&D and investment tax credits		9,560			5,578
Unrealized gain/loss		195			—
Deferred revenue		15,053			23,157
Other		426			168
Total gross deferred tax assets		85,413			54,580
Deferred tax liabilities:
Right-of-use asset		(9,242	)		(3,967	)
Fixed assets		(725	)		(744	)
Unrealized gain/loss		—			(3	)
Less: valuation allowance		(75,446	)		(49,866	)
Net deferred taxes	$	—		$	—

The Company has evaluated the positive and negative evidence bearing upon the realizability of the deferred tax assets. As of December 31, 2021 and 2020, based on the Company’s historical operating losses, the Company has concluded that it is more-likely-than-not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for the deferred tax assets as of December 31, 2021 and 2020. The valuation allowance for deferred tax assets as of December 31, 2021 and 2020 was $75.4 million and $49.9 million, respectively. The net valuation allowance increase of $25.6 million during the year ended December 31, 2021 was primarily due to the increase in net operating loss and tax credits carryforward and a decrease in deferred revenue recognized during the year.

As of December 31, 2021 and 2020, the Company had $152.2 million and $59.7 million gross United States federal net operating loss, or NOL, carryforwards, respectively, which may be available to offset future income tax liabilities. The Tax Cuts and Jobs Act, or TCJA, which was enacted in December 2017, will generally allow federal losses generated after 2017 to be carried over indefinitely, but will generally limit the NOL deduction to the lesser of the NOL carryover or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended, or IRC). In addition, there will be no carryback for losses generated after 2017. Losses generated prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s NOL carryover or 100% of a corporation’s taxable income and be available for twenty years from the period the loss was generated. For U.S. federal income tax purposes, the Company has federal NOLs generated after 2017 of $152.2 million, which do not expire. The Company does not have any available NOLs generated prior to 2018 as they were fully utilized in 2019. The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, temporarily allows the Company to carryback net operating losses arising in 2018, 2019 and 2020 to the five prior tax years. In addition, net operating losses generated in these years could fully offset prior year taxable income without the 80% of the taxable income limitation under the TCJA.

As of December 31, 2021 and 2020, the Company has total gross United States state net operating loss carryforwards of $216.8 million and $106.3 million, respectively, which may be available to offset future income tax liabilities that expire at various dates through 2041.

At December 31, 2021 and 2020, the Company has United States federal research credit carryforwards of $7.3 million and $4.7 million, respectively, which are available to offset future federal income tax liabilities, which expire at various dates through 2041. At December 31, 2021 and 2020, the Company has United States state research credit carryforwards of $2.9 million and $1.1 million, respectively, which are available to reduce future tax liabilities which expire at various dates through 2036.

Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the IRC, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. In 2020, the Company completed a study of ownership changes from inception through December 31, 2020, to assess whether an ownership change has occurred or whether there have been multiple ownership changes since its formation. The result of this study indicated that the Company experienced ownership changes as defined by IRS Section 382 of the Code, however there are no net operating loss carryforwards that will be limited and expire unused as a result of such ownership changes. 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.

The Company will recognize interest and/or penalties related to uncertain tax benefits in income tax expense as they arise. As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax benefits.

The Company files income tax returns in the United States, California, Florida, and Massachusetts. The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2018 through present. To the extent that the Company has tax attribute carryforwards, the tax years in which the attributes were generated may still be adjusted upon examination by the Internal Revenue Services or State tax authorities to the extent utilized in a future period. The Company is not currently under examination by any tax authorities.