Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

The provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into consideration in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment to the provision.

The Company did not record a provision for income taxes for the three months ended September 30, 2022 and 2021. The Company’s provision for income taxes was $1.0 million and zero for the nine months ended September 30, 2022 and 2021, respectively, with an effective tax rate of -0.5% and 0%, respectively. The effective tax rate differs from the U.S. statutory tax rate primarily due to the valuation allowances on the Company’s deferred tax assets and state income taxes.

The income tax provision includes the effects of the mandatory capitalization and amortization of research and development expenses starting in 2022, as required by the 2017 Tax Cuts and Jobs Act.

As of September 30, 2022 and December 31, 2021, the Company has provided a valuation allowance against U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination. The Company recognizes interest and penalties associated with uncertain tax benefits as part of the income tax provision. To date, the Company has not recognized

any interest and penalties in its condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 ("The Inflation Act") into law. The Inflation Act contains tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax on stock buy-backs. The various provisions of the Inflation Act do not have a material impact on the Company's condensed consolidated financial statements.

The Company is subject to taxation in the U.S. and various foreign jurisdictions. The tax years subsequent to 2015 remain open and subject to examination by federal, state, and foreign taxing authorities in which the Company is subject to tax.