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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Net loss before income taxes for the years ended December 31, 2024 and 2023 was derived solely from U.S. sources. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements due to the full valuation allowance recorded against net deferred tax assets. The components of the income tax expense (benefit) were as follows (in thousands):
Year Ended December 31,
20242023
Current
Federal$— $(164)
State1 (15)
Total current1 (179)
Deferred
Federal— — 
State— — 
Total deferred— — 
Total income tax expense (benefit)$1 $(179)
A reconciliation of the Company’s income tax expense (benefit) to the amount computed by applying the federal statutory income tax rate is summarized as follows (in thousands):
Year Ended December 31,
20242023
Expected tax benefit computed at federal statutory rate$(10,452)$(14,731)
State income taxes, net of federal tax benefit(2,117)(1,153)
Research and development credit carryforwards(2,119)(5,472)
Reserve for uncertain tax positions2,328 1,517 
Prior year permanent differences586 (699)
Current year permanent differences377 120 
Other515 236 
Change in valuation allowance10,883 20,003 
Income tax expense (benefit)$1 $(179)
Significant components of the Company’s net deferred tax assets (liabilities) are summarized as follows (in thousands):
Year Ended December 31,
20242023
Deferred tax assets
Net operating loss carryforwards$15,543 $3,975 
Research and development credit carryforwards8,162 6,269 
Capitalized research and development28,294 15,282 
Other1,795 1,284 
Total deferred tax assets53,794 26,810 
Valuation allowance(53,174)(26,736)
Net deferred tax assets620 74 
Deferred tax liabilities
Other(620)(74)
Total deferred tax liabilities620 74 
Net deferred tax assets$— $— 
The Tax Cuts and Jobs Act (TCJA) requires taxpayers to capitalize and amortize research and development (R&D) expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during the year ended December 31, 2022, resulting in the capitalization of R&D costs, net of amortization, of approximately $128.3 million and $66.0 million as of December 31, 2024 and December 31, 2023, respectively. The Company will continue to amortize these costs for tax purposes over 5 years for R&D performed in the U.S. and over 15 years for R&D performed outside the U.S.
Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will not be realized. Due to uncertainties surrounding the realizability of the deferred tax assets, the Company maintains a full valuation allowance against its deferred tax assets at December 31, 2024 and 2023.
The Company had a valuation allowance of $53.2 million at December 31, 2024 to offset the net deferred tax assets as realization of such assets is uncertain. The valuation allowance increased by $26.5 million during the year ended December 31, 2024.
At December 31, 2024, the Company's federal and state net operating loss (NOL) and tax credit carryforwards were as follows:
AmountExpiration Years
Net operating losses, federal (starting from January 1, 2018)$72,899 Do not expire
Net operating losses, state3,908 
2040 - 2044
Tax credits, federal7,646 
2040 - 2044
Tax credits, state653 2042
Utilization of NOL carryforwards and other tax attributes, including those obtained through the Merger, may be subject to substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, due to ownership change limitations that have occurred previously or that could occur in the future. An ownership change occurs, generally,
if the percentage of stock of the loss corporation owned by one or more 5% shareholders has increased by more than 50 percentage points relative to the lowest percentage of stock of the loss corporation owned by the same 5% shareholders at any time during the testing period (generally, the three-year period preceding a testing date). These ownership changes may limit the amount of NOL carryforwards and tax credits that can be utilized annually to offset future taxable income. State NOL carryforwards and other state tax attributes may be similarly limited. During the year ended December 31, 2024, the Company completed a Section 382 analysis, and determined that an ownership change more likely than not occurred on March 21, 2024 as a result of the Merger. The ownership change resulted in a limitation that will reduce the total amount of NOL carryforwards and tax credits disclosed that can be utilized to offset future taxable income. The Company adjusted the carryforward attributes accordingly, with an offsetting adjustment to the valuation allowance. Subsequent ownership changes may affect the limitation in future years.
The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more likely than not recognition at the effective date to be recognized. As of December 31, 2024 and 2023, the Company had no unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate due to the valuation allowance against deferred tax assets.
The following table summarizes the changes to the Company’s gross unrecognized tax benefits (in thousands):
Year Ended December 31,
20242023
Balance at beginning of year$1,953 $131 
Increases (decreases) related to prior year tax positions(5)6 
Increases related to current year tax positions2,334 1,816 
Balance at end of year$4,282 $1,953 
The Company's policy is to recognize interest and penalties related to income tax matters as income tax expense. The Company had no accrual for interest or penalties on the Company's balance sheets at December 31, 2024 or 2023, and has not recognized interest and/or penalties in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024 and 2023. As of December 31, 2024 and 2023, the Company had unrecognized tax benefits of $3.5 million and $1.7 million, respectively, which if recognized currently, should not impact the effective tax rate due to the Company maintaining a full valuation allowance. The Company does not expect that there will be a significant change in the unrecognized tax benefit over the next twelve months.
The Company is subject to taxation in the U.S. federal and various state jurisdictions. All of the Company’s tax years are subject to examination by federal and state tax authorities due to the carryforward of unutilized net operating losses and R&D credits. Further the Company is not currently under examination by any federal, state or local tax authority.