Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 11 — Income Taxes

Loss before provision for income taxes includes the following components (in thousands):

	Year Ended December 31,
	2023			2022			2021
Domestic	$	(274,998	)	$	(371,900	)	$	(524,440	)
Foreign		(1,258	)		6,917			1,160
Loss before provision for income taxes	$	(276,256	)	$	(364,983	)	$	(523,280	)

Provision for Income Taxes

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2023			2022			2021
Current:
Federal	$	—		$	—		$	—
State		(43	)		(608	)		50
Foreign		(17	)		1,115			609
Total current income tax expense		(60	)		507			659
Deferred:
Federal		—			—			—
State		—			—			—
Foreign		(140	)		2,708			(102	)
Total deferred income tax expense		(140	)		2,708			(102	)
Provision (benefit) for income taxes	$	(200	)	$	3,215		$	557

Our income tax provision related to continuing operations differs from the amount computed by applying the statutory income tax rate of 21% to our pretax loss as follows (in thousands):

	Year Ended December 31,
	2023			2022			2021
Income tax benefit at federal statutory rate	$	(58,013	)	$	(76,647	)	$	(109,889	)
Research credits		(1,192	)		(987	)		(4,727	)
Change in valuation allowance		35,033			51,108			97,914
Expiration of net operating loss carryforwards		312			12,348			286
Stock-based compensation		8,919			15,778			6,627
Non-cash interest expense on liability related to sales of future royalties		5,320			6,071			9,936
Non-cash royalty revenue related to sales of future royalties		(7,838	)		(7,112	)		(7,891	)
Loss on revaluation of liability related to the sale of future royalties		—			—			4,940
Impairment of goodwill		16,065			—			—
Other		1,194			2,656			3,361
Provision (benefit) for income taxes	$	(200	)	$	3,215		$	557

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We measure deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. Significant components of our deferred tax assets for federal and state income taxes are as follows (in thousands):

	December 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	574,737		$	545,508
Research and other credits		144,128			142,198
Net capital loss carryforwards		39,655			38,445
Operating lease liabilities		25,384			28,254
Stock-based compensation		19,447			22,110
Capitalized research and development costs		34,675			24,134
Liability related to the sale of future royalties		6,729			13,424
Other		13,863			13,935
Deferred tax assets before valuation allowance		858,618			828,008
Valuation allowance for deferred tax assets		(854,528	)		(816,235	)
Total deferred tax assets		4,090			11,773
Deferred tax liabilities:
Operating lease right-of-use assets		(3,824	)		(11,335	)
Investment in foreign subsidiary		(521	)		(2,451	)
Other		(265	)		(392	)
Total deferred tax liabilities		(4,610	)		(14,178	)
Net deferred tax assets (liabilities)	$	(520	)	$	(2,405	)

Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Because of our lack of U.S. earnings history and projected future losses, we have fully reserved our net U.S. deferred tax assets with a valuation allowance. The valuation allowance increased by $38.3 million for the year ended December 31, 2023 and increased by $30.5 million for the year ended December 31, 2022.

Our net deferred tax liability position reflects the provision for the withholding taxes associated with the repatriation of accumulated earnings and profits from India.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2023, we had a net operating loss carryforward for federal income tax purposes of approximately $2.7 billion, of which $1.3 billion is subject to expiration beginning in 2024 and a total state net operating loss carryforward of approximately $0.7 billion, portions of which will begin to expire in 2027. We have federal tax credits of approximately $126.0 million, which will begin to expire in 2024 and state research credits of approximately $59.9 million which have no expiration date. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions.

Unrecognized tax benefits

We have the following activity relating to unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2023			2022			2021
Beginning balance	$	85,845		$	80,604		$	78,665
Tax positions related to current year:
Additions		848			378			2,371
Reductions		—			—			—
Tax positions related to prior years:
Additions		40,079			5,272			58
Reductions		—			—			(490	)
Settlements		—			—			—
Lapses in statute of limitations		(274	)		(409	)		—
Ending balance	$	126,498		$	85,845		$	80,604

If we are eventually able to recognize our uncertain tax positions, our effective tax rate may be reduced. We currently have a full valuation allowance against our U.S. net deferred tax asset which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. Adjustments to the substantial majority of our uncertain tax positions would result in an adjustment of our net operating loss or tax credit carryforwards rather than resulting in a cash outlay.

We file income tax returns in the U.S., California, Alabama, certain other states and India. As a result of our net operating loss and research credit carryforwards, substantially all of our domestic tax years remain open and subject to examination. We may be subject to examination in India from time to time, but we do not believe that any liability resulting from such an examination would have a material effect on our financial position or results of operations.

Our policy is to include interest and penalties related to unrecognized tax benefits, if any, within the provision for income taxes in the consolidated statements of operations. During the years ended December 31, 2023, 2022 and 2021, no significant interest or penalties were recognized relating to unrecognized tax benefits. Although it is reasonably possible that certain unrecognized tax benefits could change in the future, we do not anticipate any significant changes over the next twelve months.