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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company has reported pre-tax operating losses for all periods presented. The Company’s net losses are derived solely from within the U.S. The Company has not reflected any benefit for corresponding tax net operating loss carryforwards in the accompanying consolidated financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.
As of December 31, 2022 and 2021, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $383.3 million and $271.0 million, respectively, which were available to reduce future taxable income and do not expire. The Company also had U.S. state NOL carryforwards of $372.5 million that begin to expire in 2038. The Company had gross U.S. federal and state tax credits of $15.8 million and $9.8 million as of December 31, 2022 and 2021,
respectively, which may be used to offset future tax liabilities. The federal NOL carryforward period is indefinite, while the tax credits will begin to expire in 2039. The attributed carryforwards may become subject to annual limitations in the event of certain cumulative changes in the ownership interest of significant stockholders. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:
Year Ended December 31,
202220212020
Federal statutory tax
21.00 %21.00 %21.00 %
State tax, net of federal benefit
5.10 6.39 4.71 
Valuation allowance
(28.89)(22.43)(24.60)
Collaboration revenue
6.72 — — 
Stock-based compensation
(6.11)(5.92)(1.77)
Tax credits
2.33 0.99 0.95 
Other
(0.15)(0.03)(0.29)
Effective income tax rate
0.00 %0.00 %0.00 %
The principal components of the Company’s net deferred tax assets were as follows (in thousands):
Year Ended December 31,
20222021
Deferred tax assets:
Net operating loss carryforwards
$106,530 $70,855 
Tax credit carryforwards
14,317 8,338 
Accrued liabilities and allowances
3,692 3,879 
Deferred revenue
904 8,224 
Amortization
4,585 15,961 
Capitalized research and development26,199 — 
Investment basis difference
14,235 13,587 
Lease liability
17,656 18,429 
Stock-based compensation
7,471 2,872 
Other
1,171 2,613 
Gross deferred tax assets
196,760 144,758 
Valuation allowance
(180,132)(127,226)
Deferred tax assets, net of valuation allowance
16,628 17,532 
Deferred tax liabilities:
Operating lease right-of-use assets
(11,277)(12,647)
Property and equipment
(5,351)(4,885)
Deferred tax liabilities
(16,628)(17,532)
Net deferred tax assets
$— $— 
The Tax Cuts and Jobs Act contained a provision that requires the capitalization of Section 174 costs incurred in years beginning on or after January 1, 2022. Section 174 costs are expenditures that represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software or technique. This provision changes the treatment of Section 174 costs such that the expenditures are no longer allowed as an immediate deduction but rather must be capitalized and amortized over five years for domestic research and development and fifteen years for foreign research and development. The Company has included the impact of this provision, which results in a deferred tax asset of approximately $26.2 million as of December 31, 2022.
The Company maintains a full valuation allowance on its net U.S. deferred tax assets. The assessment regarding whether a valuation allowance is required considers the evaluation of both positive and negative evidence when concluding
whether it is more likely than not that deferred tax assets are realizable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative loss in recent years and its forecasted losses in the near-term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, Accounting for Income Taxes (“ASC 740”), the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its U.S. net deferred tax assets will be maintained. The valuation allowance relates primarily to net U.S. deferred tax assets from net operating loss carryforwards, research and development tax credit carryforwards, research and development expenses capitalized and amortized for tax but deducted for GAAP and stock-based compensation.
The Company will continue to assess the realizability of its deferred tax assets and adjust the valuation allowance as required by ASC 740. The increase in the valuation allowance was $52.9 million and $56.1 million for the years ended December 31, 2022 and 2021, respectively.
The Company evaluates its uncertain tax positions based on a determination of whether it is more likely than not such position will be sustained based upon its technical merits and upon examination by the relevant income tax authorities with all facts known. The Company applies judgment in its measurement of an uncertain tax position recorded in its consolidated financial statements and tax return. As of December 31, 2022 and 2021, there are no penalties or accrued interest recorded in the consolidated financial statements.
The Company is generally subject to examination by the U.S. federal and local income tax authorities for all tax years in which a loss carryforward is available. The Company is currently not under examination by the Internal Revenue Service or other jurisdictions for any tax years.
The following table summarized changes to the Company’s unrecognized tax benefits (in thousands):
Year Ended December 31,
20222021
Beginning balance$796 $— 
Additions based on tax position related to the current year— 396 
Adjustments based on prior year tax positions(396)400 
Ending balance$400 $796