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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
 
The following table reflects Net (loss) income before income taxes by source for the years ended December 31, 2023 and 2022 (in thousands):
 
Year ended December 31,
20232022
U.S.$(254,054)$30,734 
Outside the U.S.— 432 
Net (loss) income before income taxes$(254,054)$31,166 

The following table reflects the provision (benefit) for income taxes for the years ended December 31, 2023 and 2022 (in thousands):
 
Year ended December 31,
20232022
Current:
Federal$829 $1,023 
State858 893 
Total current taxes$1,687 $1,916 
Deferred:  
Federal$62,883 $(61,077)
State13,318 (19,298)
Total deferred taxes76,201 (80,375)
Total provision (benefit) for income taxes$77,888 $(78,459)
 
The following table reflects a reconciliation of income taxes at the statutory federal income tax rate to the actual tax rate included in the Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2023 and 2022 (in thousands): 
Year ended December 31,
 20232022
Tax at federal statutory rate$(53,352)$6,545 
State tax, net of federal benefit(8,217)1,358 
Disallowed officers' compensation 938 829 
Non-deductible transaction cost969 — 
Stock-based compensation(361)1,998 
Change in valuation allowance136,766 (89,251)
Uncertain tax provisions211 198 
Tax return benefit1,848 — 
State deferred change(1,299)— 
Return to provision— (171)
Other385 35 
Total tax provision (benefit) $77,888 $(78,459)

During the year ended December 31, 2023, the Company recorded an income tax expense of $77.9 million, principally due to the recording of a full valuation allowance in the current year. As part of its valuation allowance assessment as of December 31, 2023, the Company was no longer able to rely on its projected availability of future taxable income from pre-tax income forecasts. As such, the Company primarily relied on its reversing taxable temporary differences to assess its valuation allowance, which resulted in recording of the full valuation allowance for the year ended December 31, 2023. The current year income tax provision also includes the valuation allowance for utilization of the Company’s deferred tax assets (“DTA”) to offset the deferred tax liabilities (“DTL”) of Spectrum recorded through acquisition accounting.

During the year ended December 31, 2022, the Company recorded an income tax benefit of $78.5 million, principally due to the reversal of previously recorded valuation allowances. During the year ended December 31, 2022, we reversed a majority of our previously recorded valuation allowances against the net deferred tax asset based on our assessment of the availability of future taxable income from pre-tax income forecasts and the reversal of taxable temporary differences.

Utilization of the Company’s net operating loss and credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.
Deferred income taxes reflect the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table reflects significant components of the Company’s deferred income taxes as of December 31, 2023 and 2022 (in thousands): 
December 31,
 20232022
Deferred tax assets:  
Net operating losses$244,628 $67,927 
Tax credit carryforwards18,918 1,362 
Intangible assets6,849 — 
Stock-based compensation2,394 1,529 
Operating lease liabilities 587 96 
Reserves and other accruals not currently deductible19,774 22,519 
Section 174 R&D Capitalization12,224 — 
Disallowed interest carryforward10,443 12,060 
Other assets1,017 — 
Total deferred tax assets316,834 105,493 
Valuation allowance for deferred tax assets(316,467)(12,524)
 $367 $92,969 
Deferred tax liabilities:  
Intangible assets$— $(12,554)
Fixed assets(53)(180)
Operating lease right-of-use assets(314)(33)
Net deferred tax asset$— $80,202 

During the year ended December 31, 2023, the Company recorded a full valuation allowance of $316.5 million to offset, in full, the benefit related to its net deferred tax assets as of December 31, 2023 because the realization of future benefit is uncertain. The Company reviewed both positive evidence such as, but not limited to, the projected availability of future taxable income and negative evidence such as the history of cumulative losses in recent years. As part of its valuation allowance assessment, the Company primarily relied on the reversal of existing taxable temporary differences to be considered as positive evidence in analyzing future use of existing deferred tax assets as the Company is now forecasting losses due to the acquisition of Spectrum and the impairment of intangible assets. No indefinite DTLs were identified as part of the valuation allowance assessment, nor are there years in which DTL reversals are expected to exceed DTA reversals that might suggest a net DTL is required after a valuation allowance is recorded. The Company will continue to assess the realizability of its deferred tax assets on a quarterly basis and assess whether an additional reserve or a release of the valuation allowance is required in future periods.

The valuation allowance increased $303.9 million to $316.5 million during the year ended December 31, 2023, and decreased $89.3 million to $12.5 million during the year ended December 31, 2022.

As of December 31, 2023, the Company had federal NOLs of $839.1 million with no expiration, and $267.4 million expiring between 2033 and 2036. NOL carryforwards for state income tax purposes are $231.2 million, which begin to expire in 2026. The Company also had federal and state credit carryforwards of $18.9 million, which begin to expire in 2033. Utilization of the Company’s NOL and credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

The Company does not have any significant federal or state tax examinations in process as of December 31, 2023. The federal and state statute of limitations remains open primarily for the 2017 through 2022 tax years. The California statute of limitations is open for the 2007 through 2022 tax years.
The following table reflects activity related to the Company’s unrecognized tax benefits for the years ended December 31, 2023 and 2022 (in thousands):
 
Unrecognized tax benefits—December 31, 2021$4,101 
Increases related to current year tax positions— 
Changes in prior year tax positions— 
Decreases related to lapse of statutes— 
Unrecognized tax benefits—December 31, 2022$4,101 
Increases related to current year tax positions— 
Increase related to current year acquisition3,641 
Changes in prior year tax positions— 
Decreases related to lapse of statutes— 
Unrecognized tax benefits—December 31, 2023$7,742 
 
The total amount of unrecognized tax benefit that would affect the effective tax rate is $7.7 million and $4.1 million as of December 31, 2023 and December 31, 2022, respectively.

The Company does not expect a significant change to its unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.