Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of our income taxes are as follows:

	Year Ended December 31,
(in thousands)	2024	2023	2022
Current
Federal	$23,155	$16,588	$6,974
State	3,829	2,270	3,120
Total current income tax expense	26,984	18,858	10,094
Deferred
Federal	(9,415)	(41,856)	(421)
State	(2,499)	(23,706)	(76)
Total deferred income tax benefit	(11,914)	(65,562)	(497)
Total income tax expense (benefit)	$15,070	$(46,704)	$9,597

The following is a reconciliation of the U.S. federal statutory rate of 21.0% to our effective income tax rate:

	Year Ended December 31,
(dollars in thousands)	2024	2023	2022
Income taxes computed at federal statutory rate	$6,607	$(11,670)	$(4,879)
State income taxes	1,050	(16,934)	2,465
Stock-based compensation	105	217	383
Excess tax related to stock-based compensation	3,163	6,131	4,565
Research and development credits, net of reserves	(4,589)	526	(6,401)
Nondeductible officers' compensation	6,997	10,641	12,295
Increase (decrease) in valuation allowance	533	(36,323)	68
Unrecognized tax benefits interest	532	259	133
Nondeductible penalties	3	2	318
Basis difference on disposition	—	—	659
Other	669	447	(9)
Income tax expense (benefit)	$15,070	$(46,704)	$9,597
Effective income tax rate	47.9%	84.0%	(41.3%)

Deferred tax assets, net consist of the following:

	December 31,
(in thousands)	2024	2023
Deferred tax assets
Other assets	$5,404	$4,602
Operating lease liabilities	12,599	13,279
Stock-based compensation	12,254	10,804
Research and development credits, net of reserves	13,319	11,918
Tax credit carryforward	447	827
Charitable contribution carryforward	1,283	4,510
Goodwill	3,827	7,491
Capitalized research and development expenditures	27,289	14,935
Intangible assets	5,762	4,971
Accrued legal settlement	6,830	3,160
Net operating losses	9,966	10,458
Total deferred tax assets	98,980	86,955
Valuation allowance	(8,670)	(7,818)
Deferred tax assets, net of valuation allowance	90,310	79,137
Deferred tax liabilities
Other liabilities	(340)	(404)
Operating lease right-of-use assets, net	(6,774)	(7,265)
Property and equipment	(2,379)	(3,064)
Insurance recovery receivable	(3,635)	(3,136)
Total deferred tax liabilities	(13,128)	(13,869)
Total deferred tax assets, net	$77,182	$65,268

We recognized total excess tax expense of $3.7 million, $7.1 million and $5.4 million associated with equity award

exercises and vesting in income tax (expense) benefit for the years ended December 31, 2024, 2023 and 2022, respectively.

We consider all available positive and negative evidence in our assessment of the recoverability of our net deferred tax

assets each reporting period. In 2021, we had cumulative three-year pre-tax losses adjusted for permanent book to tax

adjustments principally from substantial excess tax benefits realized in 2021 and 2020 and thus recognized a full valuation

allowance against our net deferred tax assets in excess of amortizable goodwill which we maintained through the end of

2022. During 2023, we determined that a valuation allowance against the majority of our net deferred tax assets was no

longer required primarily due to sustained tax profitability (pre-tax earnings or loss adjusted by permanent book to tax

differences), which was objective and verifiable evidence, and anticipated future earnings. As a result, we released

$54.6 million of our valuation allowance and recognized it as an income tax benefit in the consolidated statement of

operations for the year ended December 31, 2023.

As of December 31, 2024 and 2023, our valuation allowance is attributable to certain standalone tax filings' net deferred

tax assets which are not more likely than not to be realized in the future. Our judgment regarding the need for a valuation

allowance may reasonably change in future reporting periods due to many factors, including changes in the level of tax

profitability that we achieve, changes in tax laws or regulations and price fluctuations of our Class A common stock and its

related future tax effects from our outstanding equity awards.

At December 31, 2024, we had U.S. federal net operating loss carryforwards ("NOLs") of $22.6 million available to

reduce future federal income taxes which are carried over indefinitely but utilization is subject to an 80% taxable income

limitation. At December 31, 2024, we also had state NOLs of $109.0 million available to reduce future state income taxes

which will expire in varying amounts beginning 2029. Additionally, as of December 31, 2024, we had California and other

state research tax credits carryforwards of $24.1 million, of which $23.9 million generally may be carried forward indefinitely.

At December 31, 2024, tax years 2021 and forward were subject to examination by the Internal Revenue Service

(“IRS”), and tax years 2020 and forward were subject to examination by the various state taxing jurisdictions in which we are

subject to tax. At December 31, 2024, we were not subject to any federal or state income tax audits.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

(in thousands)
Gross unrecognized tax benefits at December 31, 2021	$14,796
Increases related to prior year tax positions	422
Increases related to current year tax positions	2,444
Decreases related to prior year tax positions	(1,160)
Lapse of statute of limitations	(1,804)
Gross unrecognized tax benefits at December 31, 2022	14,698
Increases related to prior year tax positions	409
Increases related to current year tax positions	746
Decreases related to prior year tax positions	(1,080)
Lapse of statute of limitations	(576)
Gross unrecognized tax benefits at December 31, 2023	14,197
Increases related to prior year tax positions	70
Increases related to current year tax positions	1,642
Lapse of statute of limitations	(2,479)
Gross unrecognized tax benefits at December 31, 2024	$13,430

As of December 31, 2024, we had gross unrecognized tax benefits of approximately $13.4 million, $11.8 million of

which, if recognized, would impact our effective tax rate. We estimate the change in unrecognized tax benefits, due to the

expiration of statute of limitations, will not be material in 2025.

As of December 31, 2024 and 2023, accrued interest and penalties related to uncertain tax positions were not material.