Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the years ended December 31, 2023, 2022 and 2021, the loss before income taxes consisted of the following (in thousands):

	Year Ended December 31,
	2023		2022		2021
Domestic	$	(890,986)	$	(2,118,095)	$	(1,837,497)
Foreign	(1,954)		(3,304)		(625)
Total	$	(892,940)	$	(2,121,399)	$	(1,838,122)

For the years ended December 31, 2023, 2022 and 2021, the Company recorded the following income tax benefit (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current:
State	$	690	$	271	$	1
Foreign	123		159		—
Total current	813		430		1
Deferred:
Federal	—		(10,500)		(413)
State	—		(3,943)		(912)
Foreign	(884)		(1,014)		(156)
Total deferred	(884)		(15,457)		(1,481)
Income tax benefit	$	(71)	$	(15,027)	$	(1,480)

A reconciliation of income tax benefit computed at the statutory corporate income tax rate to the effective income tax rate for the years ended December 31, 2023, 2022 and 2021 is as follows:

	Year Ended December 31,
	2023		2022		2021
Federal income tax at statutory rate	21.0	%	21.0	%	21.0	%
State income tax	1.3		—		4.5
Change in valuation allowance	13.6		0.8		(23.9)
Stock-based compensation	(14.2)		(16.7)		(0.2)
Executive compensation	8.1		(5.3)		(2.0)
Tax credits	0.8		0.6		0.9
Investments in subsidiaries and other	(29.0)		—		—
Other	(1.6)		0.3		(0.2)
Effective tax rate	—	%	0.7	%	0.1	%

The Company’s deferred tax assets and liabilities consist of the following (in thousands):

	Year Ended December 31,
	2023		2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	277,559	$	434,020	$	174,127
Tax credit carryforwards	64,157		74,336		37,455
Capitalized research and development costs	185,462		162,601		—
Accrued expenses	616		1,330		2,690
Deferred revenue	36,225		46,798		45,928
Stock-based compensation	83,037		124,126		318,049
Amortizable intangibles	5,505		6,010		3,834
Lease liabilities	60,197		113,665		—
Investments in subsidiaries	58,447		—		—
Tenant allowance	—		—		2,927
Other	952		863		—
Deferred tax assets before valuation allowance	772,157		963,749		585,010
Valuation allowance	(711,778)		(833,086)		(583,107)
Deferred tax assets, net of valuation allowance	60,379		130,663		1,903
Deferred tax liabilities:
Amortizable intangibles	(16,873)		(23,583)		(4,722)
Property, plant, and equipment	(410)		(13,405)		(830)
Lease right-of-use assets	(52,409)		(103,357)		—
Basis differences	—		—		(1,522)
Deferred tax liabilities	(69,692)		(140,345)		(7,074)
Net deferred taxes	$	(9,313)	$	(9,682)	$	(5,171)

Activity in the deferred tax assets valuation allowance is summarized as follows (in thousands):

	Beginning of Period		Additions (Subtractions)		End of Period
Deferred tax assets valuation allowance:
Year Ended December 31, 2023	$	833,086	$	(121,308)	$	711,778
Year Ended December 31, 2022	$	583,107	$	249,979	$	833,086

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. The Company considered its history of cumulative net losses incurred since inception and has concluded that it is more likely than not that it will not realize the benefits of the deferred tax assets. Accordingly, a valuation allowance has been established against the deferred tax assets as of December 31, 2023 and 2022 that are not expected to be realized. The Company reevaluates the positive and negative evidence at each reporting period. The valuation allowance decreased on a net basis by approximately $121.3 million during the year ended December 31, 2023 primarily due to the deconsolidation of Zymergen which impacted deferred tax positions related to net operating loss and tax credit carryforwards, lease liabilities and right of use assets, and investments in subsidiaries, partially offset by an increase in the deferred tax asset related to capitalized research and development costs, as required by the Tax Cuts and Jobs Act of 2017.

As of December 31, 2023, the Company had federal net operating loss carryforwards of approximately $1.0 billion, of which $139.2 million will begin to expire in 2029 and $884.1 million can be carried forward indefinitely. As of December 31, 2023, the Company had state net operating loss carryforwards of approximately $998.2 million, of which $869.2 million will begin to expire in 2030 and $129.0 million can be carried forward indefinitely. As of December 31, 2023, the Company had foreign net operating losses of approximately $1.7 million, which can be carried forward indefinitely.

As of December 31, 2023, the Company had federal research and development tax credit carryforwards of approximately $40.4 million, which will begin to expire in 2029. As of December 31, 2023, the Company also had state research and development and investment tax credit carryforwards of approximately $30.1 million, which will begin to expire in 2030.

Under Sections 382 and 383 of the U.S. Internal Revenue Code, if a corporation undergoes an ownership change, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an ownership change generally occurs if there is a cumulative change in its ownership by 5% stockholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under U.S. state tax laws. The Company may have experienced an ownership change in the past and may experience ownership changes in the future as a result of future transactions in its share capital, some of which may be outside of the Company’s control. As a result, if the Company earns net taxable income, the Company's ability to use its pre-change net operating loss carryforwards, or other pre-change tax attributes, to offset U.S. federal and state taxable income and taxes may be subject to significant limitations.

We assess the impact of various tax reform proposals and modifications to existing tax treaties in all jurisdictions where we have operations to determine the potential effect on our business and any assumptions we have made about our future taxable income. We cannot predict whether any specific proposals will be enacted, the terms of any such proposals or what effect, if any, such proposals would have on our business if they were to be enacted. There was no major tax legislation enacted during 2023, in the jurisdictions in which we operate, that will have a material impact on the Company’s consolidated financial statements.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which the Company operates. In the normal course of business, the Company is subject to examination by U.S. federal, state, local, and foreign taxing authorities, where applicable. There are currently no tax examinations in progress. As of December 31, 2023, with few exceptions, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for tax years before 2014. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state taxing authorities to the extent utilized in a future period.

The Company accounts for uncertain tax positions using a more likely than not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company

evaluates uncertain tax positions on an annual basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. As of December 31, 2023 and 2022, the Company had no recorded liabilities for uncertain tax positions and had no accrued interest or penalties related to uncertain tax positions. The Company does not expect a material change in unrecognized tax benefits in the next twelve months.