Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the provision for income taxes consisted of the following (in thousands):
Year ended
December 31,
2023 2022
Provision for federal income taxes $ —  $ — 
Provision for state income taxes —  — 
Provision for income taxes $ —  $ — 
The reconciliation of taxes at the statutory rate to our provision for income taxes was as follows (in thousands):
Year ended
December 31,
2023 2022
Tax at the statutory rate $ (63,374) $ (102,416)
State tax – net of federal benefit (15,009) (25,118)
Officer compensation —  6,750 
Earnout Liability (624) (5,469)
Stock Compensation 6,849  5,024 
Warrants & Convertible Debt 8,228  — 
Provision to Return (5,052) (2,958)
U.S. Tax Credits (7,975) (8,929)
Other Rate Impacting Items (1,885) 2,328 
Change in valuation allowance 78,842  130,788 
Provision for income taxes $ —  $ — 
Deferred tax assets and liabilities consisted of the following (in thousands):
December 31,
Deferred Tax Assets: 2023 2022
Net operating loss carry-forwards $ 284,514  $ 257,062 
Capitalized research and development costs 72,364  35,295 
Research and development credits 37,336  25,237 
Stock-based compensation 10,809  10,167 
Other 3,210  1,674 
Total gross deferred income tax assets 408,233  329,435 
Less: Valuation allowance (394,997) (316,155)
Deferred tax assets, net of valuation allowance $ 13,236  $ 13,280 
Deferred Tax Liabilities:
Warrants $ (13,236) $ (13,280)
Total deferred tax liabilities $ (13,236) $ (13,280)
Total net deferred tax assets (liabilities): $ —  $ — 
The Company recorded a full valuation allowance against its deferred income tax assets at December 31, 2023 and 2022. Based upon management’s assessment of all available evidence, the Company has concluded that it is more likely than not that the net deferred income tax assets will not be realized. The increase in the valuation allowance for the years ended December 31, 2023 and 2022 was $78.8 million and $130.8 million, respectively. The following table summarizes the activity recorded in the valuation allowance on the deferred income tax assets (in thousands):
Valuation allowance at December 31, 2021
 $ (185,367)
Additions charged to income tax provision (130,788)
Valuation allowance at December 31, 2022
 (316,155)
Additions charged to income tax provision (78,842)
Valuation allowance at December 31, 2023
 $ (394,997)
At December 31, 2023, we had federal net operating loss carryforwards of approximately $958.2 million and state net operating loss carryforwards of $1.2 billion that may be carried forward indefinitely for federal income tax purposes and can offset 80.0% of taxable income in any given year except as amended by the CARES Act. NOL's can be carried forward to offset future taxable income for a period of twenty years for California state income tax purposes.
The Company has research and development tax credits at December 31, 2023 and 2022 of approximately $37.3 million and $25.2 million, respectively, for both federal and state income tax purposes. If not utilized, the federal research and development tax credits will expire in various amounts beginning in 2039. State research and development credits can be carried forward indefinitely.
Future utilization of the net operating loss carryforwards and tax-credit carryforwards may be subject to an annual limitation based on changes in ownership, as defined by Section 382 of the Internal Revenue Code.
The aggregate changes in the balance of gross unrecognized tax benefits during the years ended December 31, 2023 and 2022 were as follows (in thousands):
Balance at December 31, 2021
 $ (40,258)
Increases in balances related to tax provisions taken during current period (9,179)
Increases related to changes in estimates (3,444)
Other decreases 56 
Balance at December 31, 2022
 (52,825)
Increases in balances related to tax positions taken during current period (10,701)
Increases related to changes in estimates (1,647)
Other decreases 250 
Balance at December 31, 2023
 $ (64,923)

As of December 31, 2023, the Company has total uncertain tax positions of $64.9 million primarily related to research and development costs and tax basis in certain intangible assets which are recorded as a reduction of the deferred tax assets related to the research and development carryforwards and intangible assets. The Company's policy is to recognize interest and penalties, if any, related to uncertain tax positions as a component of income tax expense. For the years ended December 31, 2023 and 2022, the Company did not recognize any interest or penalties for uncertain tax positions. The Company is currently not under examination by the United States Internal Revenue Service or any other state, city, or local jurisdiction. The Company is subject to the standard statutes of limitations by the relevant tax authorities for federal and state purposes and all tax years since inception are open for examination.
The Company does not anticipate any significant increases or decreases in its unrecognized tax benefits within the next twelve months.