Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the years ended December 31, 2023 and 2022, the Company incurred net losses and, accordingly, no federal provision for income taxes has been recorded. In addition, no deferred benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. On December 31, 2023, the Company had approximately $382.9 million of U.S. federal and state net operating losses. On December 31, 2022, the Company had approximately $212.6 million of federal and state net operating losses. The federal net operating losses can be carried forward indefinitely while the state carryforwards will begin to expire in 2030. Federal net operating losses carryforwards generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal net operating losses carryforwards is limited to 80% of current year taxable income. Similar rules may apply under state tax laws.
 
The components of the Company's deferred tax assets and liabilities are as follows:

Year Ended December 31,
(in thousands)
2023 2022
Currently reportable expense
Federal
 $ — $ —
State
 — —
— —
Deferred benefit:
Federal
 24,610 14,434
State
 10,032 5,948
34,642 20,382
Less valuation allowance (34,642) (20,382)
Total provision for income tax expense $ — $ —
The following table presents the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate:
Year Ended December 31,
2023 2022
Federal statutory income tax rate 21.0% 21.0%
State tax 6.4% 4.2%
Stock-based compensation (2.6)% (5.3)%
Non-deductible expenses 3.4% (1.6)%
Research and development credit (0.3)% 0.1%
Change in valuation allowance (27.9)% (18.4)%
Effective tax rate —  % —  %
December 31,
(in thousands)
2023 2022
Gross deferred tax assets arising from
Net operating loss carryforwards $ 51,490 $ 27,953
ASC 842 lease liability 3,846 3,317
Acquired intangibles 11,576 1,082
Accruals and reserves 11,780 1,418
Capitalized research expenditures 4,662 2,210
Gross deferred tax assets 83,354 35,980
Less valuation allowance (66,129) (31,487)
Deferred tax assets, net of valuation allowance 17,225  4,493 
Deferred tax liabilities arising from:
ASC 842 right-of-use asset (3,077) (2,749)
Fixed assets and land (14,148) (1,744)
Gross deferred tax liabilities (17,225) (4,493)
Net deferred tax liabilities $ — $ —

For financial reporting purposes, the Company has incurred a loss in each period since its inception. Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2023 and 2022. During the years ended December 31, 2023 and 2022, the change in the valuation allowance of $34.6 million and $20.4 million, respectively, was primarily due to the generation of additional net operating losses.

As of December 31, 2023 and 2022, the Company had $0.5 million and $0.1 million of federal research and development credits, respectively, which will begin to expire in 2042.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively. As a result, the Company recognized a deferred tax asset for the future tax benefit of the amortization deductions of the capitalized research and development expenditures that was fully offset by a change in valuation allowance.

As of December 31, 2023 and 2022, the total amount of unrecognized tax benefits was $0.3 million and $0.1 million, respectively, none of which impact income tax expense. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

The Company's income tax returns and the amount of income or loss reported are subject to examination by the respective taxing authorities. If such examinations result in changes to the profits or losses, the tax liabilities of the Company could be changed accordingly.