Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
14. Income Taxes
The Company's consolidated effective income tax rate from continuing operations for the years ended December 31, 2022 and 2021 was 0.0%. The Company's provision for income taxes from continuing operations for the years ended December 31, 2022 and 2021 is as follows:
Years Ended December 31,
2022 2021
(in thousands)
Current:
Federal $ —  $ — 
State —  — 
Total current $ —  $ — 
Deferred:
Federal —  — 
State —  — 
Total deferred $ —  $ — 
Total provision for income taxes $ —  $ — 
The Company’s operations are domestically located and therefore, the Company is not subject to tax in foreign jurisdictions. Income tax (benefit) expense differed from the amount computed by applying the federal statutory income tax rate of 21% to loss before income taxes due to the following items for the years ended December 31, 2022 and 2021:
Years Ended December 31,
2022 2021
(in thousands)
Tax benefit at federal statutory rate $ (15,725) $ (51,673)
Non-deductible compensation (1,092) 4,431 
State tax, net of federal benefit (3,227) (3,296)
Valuation allowance 18,834  25,631 
Shortfall of stock compensation deduction 3,190  — 
Non-deductible interest —  21,715 
Non-taxable warrants (2,481) (5,016)
Uncertain tax position —  8,449 
Other 501  (241)
Income tax (expense) benefit $ —  $ — 
The income tax (expense) benefit as of December 31, 2022 and 2021 was $0. The tax benefits associated with losses generated by the consolidated group have been reduced by a full valuation allowance as the Company does not believe it is more-likely-than-not that the losses will be utilized.
Deferred tax assets and liabilities as of December 31, 2022 and 2021, consisted of the following:
December 31,
2022 2021
(in thousands)
Deferred tax assets:
Net operating loss carryforwards $ 54,892  $ 45,181 
Sec. 163(j) carryforward 7,741  6,414 
Accruals and reserves 1,613  2,359 
Deferred revenue 271  778 
Capital loss carryforward 3,919  3,689 
Section 174 - research expenditures 6,238  — 
Other deferred tax assets 6,385  3,631 
Total deferred tax assets 81,059  62,052 
Valuation allowance (80,137) (61,460)
Total net deferred tax assets 922  592 
Deferred tax liabilities
Basis difference in intangibles (468) (588)
Other deferred tax liabilities (454) (4)
Total deferred tax liabilities (922) (592)
Net deferred tax liabilities $ —  $ — 
The Company continues to provide for a full valuation allowance on its net deferred tax assets as the Company does not believe it is more-likely-than-not that the losses will be utilized after evaluation of all significant positive and negative evidence including, but not limited to, historical cumulative losses over the prior three-year period, as adjusted for permanent items, insufficient sources of taxable income in prior carryback periods and unavailability of prudent and feasible tax-planning strategies.
Below is a summary of the Company's estimated loss and tax credit carryforwards. In the year ended December 31, 2022, the Company performed a historic ownership change analysis and concluded that $1.5 million of federal net operating loss carryforward pre-tax attributes were subject to limitations, as defined by the Internal Revenue Code Sections 382 and 383.
Tax Effected Expiration
(in thousands)
Federal net operating loss (“NOL”) carryforward $ 7,966  2033-2036
Federal NOL carryforward 45,122  Indefinite
Federal capital loss carryforward 3,919  2025
State NOL carryforwards 1,804  2037-2042
At December 31, 2022 and 2021 the Company had $252.8 million and $213.9 million of net operating loss (“NOL”) carryforwards for U.S. federal tax purposes, respectively. U.S. federal tax NOL carryforwards generated prior to 2018 of $37.9 million will expire, if unused, between 2033-2036. Under the Tax Cuts and Jobs Act of 2017, as modified by the Coronavirus Aid, Relief, and Economic Security Act, federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely. As of December 31, 2022, the Company had $214.9 million of NOL carryforwards generated after 2017 for U.S. federal tax purposes, which may be used to offset 80% of its taxable income annually.
The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. Tax years 2014-2021 remain open for examination.
Below is a tabular reconciliation of the total amounts of unrecognized tax benefits:
2022 2021
(in thousands)
Unrecognized tax benefits - January 1 $ 8,443  $ — 
Gross increase - tax positions in current period —  8,443 
Gross increase - tax positions in prior period 563  — 
Unrecognized tax benefits - December 31 $ 9,006  $ 8,443 
The majority of the unrecognized tax benefits as of the year ended December 31, 2022 is from the valuation of guaranteed incentives shares issued for SVB guarantors. The balance of unrecognized tax benefits as of December 31, 2022 and 2021, if recognized, would not affect our effective tax rate and would result in adjustments to other tax accounts, primarily deferred tax assets and the net operating loss carry forward.