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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table presents components of loss before provision for (benefit from) income taxes for the periods presented (in thousands):
Year Ended December 31,
202320222021
United States$(571,265)$(445,720)$(239,855)
International1,692 453 607 
Loss before provision for (benefit from) income taxes$(569,573)$(445,267)$(239,248)
Provision for (benefit from) income taxes for the periods presented consisted of (in thousands):
Year Ended December 31,
202320222021
Current:
U.S. federal$(150)$— $— 
U.S. state(56)— — 
Foreign1,966 440 — 
Total current:1,760 440 — 
Deferred:
U.S. federal(43)204 (1,262)
U.S. state(21)28 — 
Total deferred:(64)232 (1,262)
Total provision for (benefit from) income taxes$1,696 $672 $(1,262)
The reconciliation between the U.S. federal statutory income tax rate of 21% to the Company’s effective tax for the periods presented is as follows:
Year Ended December 31,
202320222021
U.S. federal provision at statutory rate21.0 %21.0 %21.0 %
State income taxes5.2 5.7 4.4 
Foreign taxes
(0.1)0.0 0.0 
Tax credits1.0 2.4 1.5 
Fair value of financial instruments0.1 0.4 (2.3)
Stock-based compensation expense(3.7)(3.4)2.0 
Executive compensation(0.5)(0.8)(1.1)
Other permanent items(0.2)0.2 (0.3)
Unrecognized tax benefits
0.3 (1.4)(0.8)
Change in valuation allowance(23.4)(24.3)(24.0)
Effective tax rate(0.3 %)(0.2 %)0.4 %
The Company’s effective tax rates differ from the federal statutory rate primarily due to the change in valuation allowance, non-deductible stock-based compensation expense net of excess windfall stock compensation deductions, nondeductible executive compensation, R&D tax credits, state income taxes, unrecognized tax benefits and the fluctuation of fair value on instruments treated as debt for GAAP and equity for tax purposes, which is not taxable/deductible for income tax purposes, for 2023, 2022 and 2021.
The Company’s deferred income tax assets and liabilities as of December 31, 2023 and 2022 were as follows (in thousands):
Year Ended December 31,
20232022
Deferred tax assets:
Net operating loss carry forward$235,624 $161,881 
Tax credits27,311 16,322 
Accruals and reserves3,473 3,309 
Stock-based compensation expense17,029 14,535 
Lease liability (ASC 842)12,333 6,268 
Section 174 R&D capitalization78,673 43,240 
Inventory reserves4,584 1,961 
Depreciation and amortization9,924 2,170 
Other24 20 
Total deferred tax assets388,975 249,706 
Valuation allowance(377,214)(243,811)
Total deferred tax asset11,761 5,895 
Deferred tax liabilities:
Other124 162 
ROU asset (ASC 842)11,637 5,801 
Total deferred tax liabilities11,761 5,963 
Net deferred tax assets (liabilities)$— $(68)
The Company assesses the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of deferred tax assets will not be realized. Due to the history of losses incurred by the Company, management believes it is not more likely than not that substantially all of the U.S. domestic deferred tax assets can be realized. Accordingly, the Company established and recorded a full valuation allowance on
its U.S. domestic net deferred tax assets of $377.2 million and $243.8 million as of December 31, 2023 and 2022, respectively. The valuation allowance increased by $133.4 million in 2023.
No deferred tax liabilities for foreign withholding taxes have been recorded relating to the earnings of the Company’s foreign subsidiaries since all such earnings are intended to be indefinitely reinvested. The amount of the unrecognized deferred tax liability associated with these earnings is immaterial.
Utilization of the net operating loss and tax credit carryforwards is subject to a substantial annual limitation due to the “ownership change” limitations provided by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (“IRC”) and other similar state provisions. Any annual limitation may result in the expiration of net operating loss and tax credit carryforwards before utilization. As of December 31, 2023, the Company had $844.3 million of U.S. federal net operating loss carryforwards available to reduce future taxable income, of which $801.1 million will be carried forward indefinitely for U.S. federal tax purposes and $43.2 million will expire beginning in 2035 to 2037. The Company also has $805.3 million of U.S. state net operating loss carryforwards that will expire beginning in 2028.
The Company also has federal and state research and development (“R&D”) tax credit carryforwards of $26.8 million and $7.4 million, respectively, as of December 31, 2023. The federal research credit carryforwards will begin expiring in 2035 and although a small portion, less than $0.6 million, of the state research credit carryforwards will begin expiring in 2024, $6.8 million of the state research credit carryforwards do not expire.
Under the Tax Cuts and Jobs Act (“TCJA”), for tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business which represent costs in the experimental or laboratory sense. Specifically, costs for U.S.-based R&D activities must be amortized over 5 years and costs for foreign R&D activities must be amortized over 15 years. As a result of this provision TCJA, the Company capitalized $235.9 million and $184.6 million of research expenses in 2023 and 2022, respectively. As of December 31, 2023, there is insufficient Internal Revenue Service guidance on how to treat capitalizable R&D expenditures. The Company will continue to monitor the status of any new guidance that might be issued and will update its estimated capitalized R&D, accordingly.
In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law. The IRA provides several tax incentives, including the expanded Internal Revenue Code (IRC) Section 179D deduction, increased ability to leverage the R&D credit to offset payroll taxes for eligible start-up businesses, and 15% alternative minimum tax (AMT) for corporations with average income of more than $1 billion for the past three tax periods. The IRA did not have a material impact on the Company’s consolidated financial statements; however, the Company continues to examine the impacts the above-mentioned tax legislation may have on its business, results of operations, financial condition and liquidity.
Unrecognized Tax Benefits
The Company reports income tax related interest and penalties within its provision for income tax in its consolidated statements of operations. The Company had no interest and penalties accrued through December 31, 2023. The Company does not expect the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):
Year Ended December 31,
202320222021
Unrecognized tax benefits as of the beginning of the year$8,604 $6,296 $3,975 
Increases related to prior year tax positions65 — 535 
Decreases related to prior year tax provisions(4,230)(3,723)— 
Increase related to current year tax positions2,389 6,031 1,786 
Unrecognized tax benefits as of the end of the year$6,828 $8,604 $6,296 
None of the Company’s unrecognized tax benefits, if recognized, would affect the effective tax rate since the tax benefits would increase a deferred tax asset that is currently fully offset by a full valuation allowance. The Company and its subsidiaries file federal, state and foreign income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities, for which the Company’s major tax jurisdictions are the United States and various states. The Company’s federal, state and foreign income tax returns from inception to December 31, 2023 remain subject to examination.