Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company records income tax expense in any interim period based on the estimated effective tax rate for the fiscal year for those tax jurisdictions in which the Company can reliably estimate the effective tax rate. The calculation of the estimated effective tax rate requires an estimate of pre-tax income by tax jurisdiction as well as total tax expense for the fiscal year. Accordingly, the annual estimated effective tax rate is subject to adjustment if there are changes to the initial estimates of total tax expense or pre-tax income.

Provision for Income Taxes

The Company recorded income tax benefit of $17.4 million for the three months ended September 30, 2023 and $0.0 million for the nine months ended September 30, 2023. On a full year basis, the Company continues to forecast a current income tax liability largely driven by tax recognition of the Vertex Agreement upfront payment received in 2023 though the Company continues to be in a full valuation allowance. The combination of a forecasted current income tax liability as compared to a forecasted pre-tax loss results in a forecasted negative effective tax rate for the year ended December 31, 2023. Application of the negative effective tax rate to year to date pre-tax book income results in a tax benefit for the quarter limited to the amount of previously recognized tax expense. The Company expects to record a provision in the fourth quarter equal to the amount of the forecasted full year current tax liability. Any counterintuitive results during an interim period are mainly a result of the relationship of the quarterly and year to date results with the projected effective tax rate. The Company reported no income tax provision in the three and nine months ended September 30, 2022, as the Company generated a taxable loss, offset by an increase to the Company’s valuation allowance.

Despite the collaboration revenue, the Company continues to maintain a valuation allowance against all remaining deferred tax assets. The Company believes that it is more likely than not that it will not realize a future tax benefit of these attributes as the Company expects to continue to generate operating losses. Ultimate realization of any deferred tax asset is dependent on the Company’s ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any.

The Company currently anticipates that there will be no change in its unrecognized tax benefits in the next twelve months. As of September 30, 2023, the Company had no unrecognized tax benefits. The Company has not yet conducted a study of its research and development credit carryforwards. Such a 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 amount is being presented as an uncertain tax position.