Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 8. Income Taxes

No provision for or benefit from income taxes was recorded during the years ended December 31, 2023 and 2022. The Company has established a full valuation allowance against its net deferred tax assets due to the uncertainty regarding the realization of such assets. All losses to date have been incurred in the United States. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating losses and tax credit carryforwards.

Effective Tax Rate Reconciliation

The effective tax rate of the Company’s provision for income taxes differs from the federal statutory rate and the effective tax rate reconciliation is as follows:

	December 31,
	2023			2022
U.S. federal taxes at statutory rate		21.0	%		21.0	%
State taxes (net of federal benefit)		1.2			1.2
Credits		3.7			2.8
Stock-based compensation		(0.3	)		(0.3	)
Change in valuation allowance		(24.4	)		(24.1	)
Other		(1.2	)		(0.6	)
Total	—%			—%

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

	December 31,
	2023			2022
	(In thousands)
Balance at beginning of year	$	3,141		$	1,470
Additions based on tax positions related to current year		1,423			1,588
Additions based on tax positions related to prior years		—			83
Reductions for tax positions related to prior years		(43	)		—
Balance at end of year	$	4,521		$	3,141

The Company does not expect that its uncertain tax positions will materially change in the next twelve months. The reversal of the uncertain tax benefits would not impact the Company’s effective tax rate as the Company continues to maintain a full valuation allowance against its deferred tax assets.

The Company files tax returns in U.S. federal and state jurisdictions with varying statutes of limitations. Due to net operating loss and credit carryforwards, all of the tax years since inception through the 2023 tax year remain subject to examination by the U.S. federal and state authorities. The Company is currently not subject to any income tax audits by federal or state taxing authorities.

Deferred Income Taxes

The tax effects of significant items comprising the Company’s deferred income taxes are as follows:

	December 31,
	2023			2022
	(In thousands)
Deferred tax assets:
Net operating losses	$	52,757		$	41,256
Capitalized research and development expenditure		29,318			17,045
Tax credits		15,047			9,347
Lease liability		2,613			3,176
Stock-based compensation		2,880			1,631
Accrued expenses and other		1,713			1,368
Total deferred tax assets		104,328			73,823
Valuation allowance		(101,290	)		(71,129	)
Deferred tax assets, net of valuation allowance		3,038			2,694
Deferred tax liabilities:
Right-of-use asset		(2,098	)		(2,453	)
Property and equipment		(940	)		(241	)
Net deferred tax assets	$	—		$	—

Beginning January 1, 2022, the Tax Cuts and Jobs Act eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code (IRC) Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.

The tax benefit of net operating losses, capitalized research expenses, temporary differences and credit carryforwards are recorded as an asset to the extent that the Company assesses that realization is more likely than not. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. As a result of the Company’s recent history of operating losses, the Company believes that recognition of deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance. The valuation allowance increased by $30.2 million and $29.8 million during the years ended December 31, 2023 and 2022. The increase in valuation allowance during the year ended December 31, 2023, was primarily due to the increase in deferred tax assets from 2023 federal net operating losses and the IRC Section 174 capitalized expenses.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2023, the Company’s net operating loss and tax carryforwards are summarized as follows:

(In thousands)	Amount		Expiration in years
Net operating losses, federal (post-December 31, 2017)	$	224,796	Do Not Expire
Net operating losses, federal (pre-January 1, 2018)	$	3,093	Begins to Expire 2036
Net operating losses, state	$	63,212	Begins to Expire 2036
Tax credits, federal	$	14,730	Begins to Expire 2036
Tax credits, state	$	6,856	Do Not Expire

Under Section 382 of the Internal Revenue Code of 1986, as amended, the ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if the Company has experienced an “ownership change”. This annual limitation may result in the expiration of net operating losses and credits before utilization. As of December 31, 2023, the Company concluded that there were no ownership changes during 2023. The Company’s ability to use its remaining net operating loss carryforwards may be further limited if the Company experiences a Section 382 ownership change as a result of future changes in its stock ownership.

The Company recognizes interest and penalties related to taxes and uncertain tax positions as a component of income tax expense. During the years ended December 31, 2023 and 2022, no interest and penalties were accrued by the Company.