Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

14.Income Taxes

Income (loss) before provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2022		2021		2020
Domestic	$	692,445	$	535,989	$	(309,697	)
Foreign		61,835		13,813		11,086
Total income (loss) before provision for income taxes	$	754,280	$	549,802	$	(298,611	)

The components of income tax expense consist of the following (in thousands):

	Year Ended December 31,
	2022			2021		2020
Current:
Federal	$	238,550		$	3,526	$	—
State		2,432			105		—
Foreign		12,647			2,401		106
		253,629			6,032		106
Deferred:
Federal		(15,186	)		15,186		(21	)
State		—			—		(31	)
		(15,186	)		15,186		(52	)
Provision for income taxes	$	238,443		$	21,218	$	54

A reconciliation between the expected income tax provision at the federal statutory rate and the reported income tax expense is as follows:

	Year Ended December 31,
	2022			2021			2020
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%
Foreign tax at less than federal statutory rate		(0.3	)		(0.2	)		0.9
Prior year tax rate adjustment		—			—			(1.9	)
State taxes, net of federal benefit		0.1			0.7			2.7
Research and development tax credit		(2.0	)		(1.6	)		1.8
Permanent items		(7.4	)		1.8			1.3
Changes in valuation allowance		21.1			(17.9	)		(25.3	)
Other		(0.9	)		0.1			(0.5	)
Effective income tax rate		31.6	%		3.9	%		0.0	%

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021, are related to the following:

	December 31,
	2022			2021
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	14,793		$	15,030
Research and development tax credit carryforward		12,123			11,375
Equity compensations		24,250			15,065
Reserves and accruals		85,977			7,115
Capitalized research and development		75,680			—
Lease liabilities		18,553			28,612
Intangible assets		18,348			19,657
Deferred tax assets		249,724			96,854
Deferred tax liabilities:
Unrealized gain on investments		(5,880	)		(30,170	)
ROU assets		(20,834	)		(28,483	)
Property and equipment		(13,151	)		(2,422	)
IPR&D		(8,511	)		(8,511	)
Deferred tax liabilities		(48,376	)		(69,586	)
Valuation allowance		(204,601	)		(45,707	)
Net deferred tax liabilities	$	(3,253	)	$	(18,439	)

Although the Company has taxable income for the year ended December 31, 2022 and 2021, it has otherwise incurred accumulated tax losses since inception. Based on the available objective evidence, the Company cannot conclude it is more likely than not that the net deferred tax assets will be fully realizable. Accordingly, the Company has provided a valuation allowance against its net deferred tax assets. For the year ended December 31, 2022, the Company recorded a valuation allowance increase of $158.9 million, primarily based on the estimated 2022 taxable income. The valuation allowance is decreased by $114.2 million for the year ended December 31, 2021 and increased by $74.1 million for the year ended December 31, 2020. As of December 31, 2022, the Company has net operating loss carryforwards of $20.9 million for federal purposes and $111.4 million for state tax purposes. If not utilized, these carryforwards will begin to expire in 2037 for federal and in 2031 for state tax purposes. As of December 31, 2022, the Company also has net operating loss carryforwards of $10.6 million for Australian tax purposes, which have an indefinite carryforward period, and no net operating loss carryforward for Swiss tax purposes.

Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss carryforwards may be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. The Company completed its Section 382 analysis as of December 31, 2022 and based on this analysis, it does not expect that the annual limitations will significantly impact its ability to utilize its net operating loss or tax credit carryforwards prior to expiration.

As of December 31, 2022, the Company has research tax credit carryforwards of $0.4 million and $15.9 million for federal and state tax purposes, respectively. If not utilized, the federal carryforward will expire in various amounts beginning in 2036. The California credits can be carried forward indefinitely.

The Tax Cuts and Jobs Act of 2017 subjects a U.S. shareholder to current tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

Uncertain Tax Positions

As of December 31, 2022 and 2021, the Company had an unrecognized tax benefit balance of $10.6 million and $7.4 million, respectively, related to transfer pricing and research and development tax credits. A portion of the unrecognized tax benefits as of December 31, 2022, if recognized, would reduce the Company’s effective tax rate by 0.7%. Other unrecognized tax benefits as of

December 31, 2022, if recognized, would be in the form of net operating loss and tax credit carryforwards, which attract a full valuation allowance offset, and would not reduce the Company’s effective tax rate. There are no provisions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. Because the statute of limitations does not expire until after the net operating loss and credit carryforwards are actually used, the statutes are still open on calendar years ending December 31, 2017 forward for federal and state purposes.

The Company did not recognize any expense for interest and penalties related to uncertain tax positions during 2022, 2021 and 2020, and the Company does not have any amounts related to interest and penalties accrued at December 31, 2022. The Company files U.S. federal, state, Switzerland and Australia tax returns. The Company’s tax years remain open for all years. As of December 31, 2022, the Company was not under examination by the Internal Revenue Service or any state or foreign tax jurisdiction.

A reconciliation of the beginning and ending amounts of the liability for uncertain tax positions is as follows:

	Year Ended December 31,
	2022			2021			2020
	(in thousands)
Gross unrecognized tax benefits at January 1	$	7,422		$	4,877		$	2,725
Addition for tax positions taken in the prior years		—			—			—
Reduction for tax positions taken in the prior years		(12	)		(62	)		(588	)
Addition for tax positions taken in current year		3,228			2,607			2,740
Gross unrecognized tax benefits at December 31	$	10,638		$	7,422		$	4,877