Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12.Income Taxes

For the years ended December 31, 2023 and 2022, we did not record a provision for income taxes due to a full valuation allowance against our deferred tax assets.

The difference between the provision for income taxes and income taxes computed using the effective U.S. federal statutory rate is as follows (in thousands):

	December 31,
	2023			2022
Tax at statutory federal rate	$	(23,210	)	$	(38,225	)
State tax, net of federal benefit		(1,460	)		(13,898	)
Research and development credits		—			(3,531	)
Stock-based compensation expense		19,022			5,857
Non-deductible compensation		(4,682	)		2,104
Employee retention credit adjustment		—			(1,265	)
Change in valuation allowance		7,556			46,452
Provision to return adjustment		3,008			—
Other		(234	)		2,506
Provision for income taxes	$	—		$	—

Deferred income tax assets and liabilities arising from differences between accounting for financial statement purposes and tax purposes, less valuation allowance at year-end are as follows (in thousands):

	December 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforward	$	320,998		$	313,834
Research and development credits		59,417			60,245
Section 174 capitalized research and development		28,822			20,903
Stock-based compensation		15,413			23,991
Lease liabilities		1,471			2,052
Other		5,005			3,693
Total gross deferred tax assets		431,126			424,718
Deferred tax liabilities:
Right-of-use lease assets		(1,362	)		(1,914	)
Total gross deferred tax liabilities		(1,362	)		(1,914	)
Valuation allowance		(429,764	)		(422,804	)
Net deferred tax assets	$	—		$	—

We have established a valuation allowance to offset net deferred tax assets as of December 31, 2023 and 2022 due to the uncertainty of realizing future tax benefits from such assets.

As of December 31, 2023, we had federal and state net operating loss (“NOL”) carryforwards of $1.3 billion and $879.1 million, respectively. The federal NOL carryforwards consist of $542.3 million generated before January 1, 2018, which will begin to expire in 2024, and $755.7 million that can be carried forward indefinitely, but are subject to the 80% taxable income limitation. The state NOL carryforwards will begin to expire in 2028.

As of December 31, 2023, we had federal and state research and development credit carryforwards of $44.6 million and $21.7 million, respectively. The federal research and development credit carryforwards will begin to expire in 2024. The state research and development credit carryforwards will be carried forward indefinitely.

Internal Revenue Code (“IRC”) Sections 382 and 383 place a limitation on the amount of taxable income that can be offset by NOL and credit carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL and credit carryforwards in excess of the IRC Sections 382 and 383 limitation. State jurisdictions have similar rules. We have performed an analysis of IRC Sections 382 and 383 through July 31, 2023 and determined there were ownership changes in 2007, 2011 and 2013. The limitation in the federal and state NOL and research and development credit carryforwards that expire unused would reduce the deferred tax assets, which are fully offset by a valuation allowance.

We file U.S. and state income tax returns with varying statutes of limitations. The tax years from 2003 to 2023 remain open to examination due to the carryover of unused NOL carryforwards and tax credits.

A reconciliation of our unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,
	2023			2022
Balance at beginning of year	$	11,235		$	9,631
Decrease for tax positions of prior years		(332	)		(200	)
Increase based on tax positions related to current year		—			1,804
Balance at end of year	$	10,903		$	11,235

Due to our valuation allowance, the $10.9 million of unrecognized tax benefits would not affect the effective tax rate, if recognized. It is the Company’s practice to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2023, we had no accrued interest and penalties related to uncertain tax positions. We do not expect any material changes to the estimated amount of liability associated with our uncertain tax positions within the next 12 months.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted and signed into law in response to the COVID-19 pandemic. The CARES Act includes changes to the tax provisions that benefits business such as the Employee Retention Credit (“ERC”). The ERC provides an eligible employer with a tax credit that is allowed against certain employment taxes. We qualified for federal government assistance through the ERC provisions for the period between January 1, 2021 and September 30, 2021. We recognize government grants when there is reasonable assurance of compliance with grant conditions and receipt of the credits. For the year ended December 31, 2022, we recorded a one-time refund totaling $6.0 million, which was included in the consolidated balance sheets as prepaid expenses and other current assets, as well as in the consolidated statements of operations and comprehensive loss as an offset to the related employee expenses within research and development, general and administrative, and sales and marketing expenses. The one-time $6.0 million refund was received in the second quarter of 2023.

Beginning January 1, 2022, the Tax Cuts and Jobs Act (the “Tax Act”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to IRC Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and over a 15-year period for foreign expenses. As a result of this provision of the Tax Act, deferred tax assets related to capitalized research expenses increased by $21 million during the year ended December 31, 2022.