Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

13. Income taxes

The Company's losses before income taxes consist solely of losses from domestic operations, which totaled $157.4 million, $120.3 million and $45.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Income tax expense (benefit) is summarized as follows:

	Year ended December 31,
(in thousands)	2022		2021		2020
Current:
Federal	$	-	$	-	$	-
State		53		-		-
Foreign		-		-		-
Total current provision	$	53	$	-	$	-
Deferred:
Federal		-		-		-
State		-		-		-
Foreign		-		-		-
Total deferred provision	$	-	$	-	$	-

A reconciliation of the income tax expense computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

	Year ended December 31,
(in thousands)	2022			2021			2020
Federal statutory rate		21.0	%		21.0	%		21.0	%
Change in valuation allowance		(34.7	)%		(31.3	)%		(29.6	)%
Stock-based compensation		(0.3	)%		0.9	%		(0.3	)%
Executive compensation		(0.8	)%		(1.1	)%		0.0	%
Permanent items		(0.2	)%		(0.1	)%		1.1	%
State income taxes, net of federal benefit		8.4	%		6.1	%		6.8	%
Research and development tax credits		5.6	%		4.5	%		1.0	%
Other		1.0	%		0.0	%		0.0	%
Effective income tax rate		—	%		—	%		—	%

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 are comprised of the following:

	December 31,
(in thousands)	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	43,779		$	33,409
Capitalized costs—net of amortization		11,095			12,395
Research and development tax credits		20,835			6,098
Capitalized research costs		28,650			—
Stock-based compensation		3,669			1,117
Other		174			76
Lease liability		22,285			533
Accrued expenses		5,024			2,852
Total deferred tax assets		135,511			56,480
Deferred tax liabilities:
Property and equipment		(881	)		(899	)
Right of use asset		(24,994	)		(501	)
Total deferred tax liabilities		(25,875	)		(1,400	)
Total deferred tax assets, net		109,636			55,080
Less: valuation allowance		(109,636	)		(55,080	)
Deferred tax assets, net of valuation allowance	$	—		$	—

The Company has incurred net operating losses in each year since inception. Management has evaluated the positive and negative evidence bearing upon the realizability of the Company’s net deferred tax assets, which are comprised primarily of net operating loss carryforwards, tax credits, and costs capitalized for tax purposes. Management has considered the Company’s history of cumulative net losses in the United States and estimated future tax losses and has determined that it is more likely than not that the Company will not recognize the benefits of the net deferred tax assets. As a result, the Company has recorded a full valuation allowance at December 31, 2022 and 2021. The valuation allowance increased by $54.6 million in 2022, due to the increase in deferred tax assets, primarily due to net operating loss carryforwards, tax credit carryforwards, and increase in deferred tax assets associated with current year temporary items.

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. The Company’s ability to utilize these federal and state net operating loss and research and development credit carryforwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code 382. An ownership change occurs when the ownership percentages of 5% or greater shareholders change by more than 50% over a three-year period. As of December 31, 2022, the Company has not completed a study to assess whether a change of control has occurred and whether the net operating losses and credits are limited due to a change in ownership. To the extent that an assessment is completed in the future, the Company’s ability to utilize tax attributes could be restricted on a year-by-year basis and certain attributes could expire before they are utilized.

As of December 31, 2022, the Company had approximately $163.9 million of federal and $148.0 million of state net operating loss carryforwards The federal net operating losses have an indefinite life and can be utilized to offset 80% of future taxable income, while the state net operating losses will start to expire at various dates through 2042. Additionally, as of December 31, 2022, the Company had approximately $14.4 million of federal and $8.2 million of Massachusetts tax research and development credits that expire starting in 2042 and 2037, respectively.

As of December 31, 2022 and 2021, the Company had no uncertain tax positions. The Company recognizes both interest and penalties associated with unrecognized tax benefits as a component of income tax expense. The Company has not recorded any interest or penalties for unrecognized tax benefits since its inception.

The Company files income tax returns in the United States, California, Connecticut, the Commonwealth of Massachusetts, Pennsylvania, and Wisconsin. The Company is not currently under examination by the Internal Revenue Service or any other jurisdiction. All tax years remain open to tax examination. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.