Income Taxes

12 Months Ended

Dec. 31, 2020

13. Income Taxes

Loss before provision (benefit) for income taxes consisted of the following (in thousands):


	Years Ended December 31,
	2020		2019		2018

United States	$	(1,203,682)	$	(580,362)	$	(558,974)
Foreign		24,655		13,091		(11,951)

Loss before provision (benefit) for income taxes	$	(1,179,027)	$	(567,271)	$	(570,925)

Provision (benefit) for income taxes consisted of the following (in thousands):


	Years Ended December 31,
	2020		2019		2018
Current:
Federal	$	—	$	—	$	—
State		500		139		142
Foreign		7,249		19,435		15,945

Total current provision		7,749		19,574		16,087
Deferred:
Federal		—		—		—
State		—		—		—
Foreign		(20,385)		(7,199)		(6,985)

Total deferred benefit		(20,385)		(7,199)		(6,985)

Total provision (benefit) for income taxes	$	(12,636)	$	12,375	$	9,102

A reconciliation of the expected tax provision (benefit) at the statutory federal income tax rate to the Company’s recorded tax provision (benefit) consisted of the following (in thousands):


	Years Ended December 31,

	2020		2019		2018
Expected (benefit) at U.S. federal statutory rate	$	(247,596)	$	(119,127)	$	(119,894)
State income taxes – net of federal benefit		500		139		142
Foreign tax rate differential		(4,131)		25,430		8,028
Research and development tax credits		(26,294)		(2,106)		(4,565)
Stock-based compensation		(194,730)		(6,069)		2,629
Warrants revaluation		—		—		(10,099)
Non-deductible officers’ compensation		76,093		—		—
Change in valuation allowance		373,632		112,149		126,395
Other		9,890		1,959		6,466

Total provision (benefit) for income taxes	$	(12,636)	$	12,375	$	9,102

For the year ended December 31, 2020, the Company recorded a benefit for income taxes compared to a provision for income taxes for the year ended December 31, 2019, primarily due to decreases in profits from our international operations and foreign benefits from stock-based compensation.

For the year ended December 31, 2019, the provision for income taxes increased compared to the year ended December 31, 2018, primarily due to an increase of foreign income as a result of increased foreign business.

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant deferred tax assets and liabilities consisted of the following (in thousands):


	As of December 31,

	2020		2019

Net operating loss carryforwards	$	853,861	$	570,583
Reserves and accruals		55,685		36,269
Tax credit carryforwards		68,626		28,459
Stock-based compensation		246,380		181,901
Lease liabilities		57,543		—
Depreciation and amortization		28,970		23,709

Gross deferred tax assets		1,311,065		840,921
Right-of-use assets		(48,120)		—

Total net deferred tax assets before valuation allowance		1,262,945		840,921
Valuation allowance		(1,220,093)		(819,738)

Net deferred tax assets	$	42,852	$	21,183

The Company performs an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. The Company reviews the recognition of deferred tax assets on a regular basis to determine if realization of such assets is more likely than not. A valuation allowance is provided when it is more likely than not that such assets will not be realized.

As of December 31, 2020, the Company had U.S. federal and state net operating losses of approximately $3.6 billion and $1.5 billion, respectively. As of December 31, 2019, the Company had U.S. federal and state net operating losses of approximately $2.4 billion and $1.1 billion, respectively. The U.S. federal net operating loss carryforwards will expire at various dates beginning in 2024 through 2037 if not utilized with the exception of $2.0 billion, which can be carried forward indefinitely. The state net operating loss carryforwards will expire at various dates beginning in 2022 through 2040 if not utilized. Additionally, as of December 31, 2020, the Company had federal and California research and development credits of approximately $85.1 million and $66.0 million, respectively. As of December 31, 2019, the Company had federal and California research and development credits of approximately $32.5 million and $30.9 million, respectively. The federal research and development credits will begin to expire in the years 2027 through 2040 if not utilized and the California research and development credits have no expiration date.

Utilization of the net operating losses and research and development credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code (“IRC”) of 1986 and similar state provisions. The annual limitation may result in the expiration of the net operating loss and research and development credit carryforwards before utilization.

As of December 31, 2020, the Company had an immaterial amount of earnings indefinitely reinvested outside the U.S. The Company does not intend to repatriate these earnings and, accordingly, the Company does not provide for U.S. income taxes and foreign withholding tax on these earnings.

Uncertain Tax Positions

A reconciliation of the gross unrecognized tax benefits consists of the following (in thousands):


	Years Ended December 31,

	2020		2019			2018

Unrecognized tax benefit beginning of year	$	31,702	$	27,812		$	18,793
Increases in current year tax positions		43,855		6,301			8,437
Increases in prior year tax positions		—		114			582
Decreases in prior year tax positions		—		(1,829	)		—
Decreases in prior year tax positions due to settlements		—		(696	)		—
Decreases in prior year tax positions due to lapse of statute of limitations		—		—			—

Unrecognized tax benefit end of year	$	75,557	$	31,702		$	27,812

For the years ended December 31, 2020, 2019, and 2018, the Company recorded gross unrecognized tax benefits of $75.6 million, $31.7 million, and $27.8 million, respectively, that

if recognized, would not benefit the Company’s effective tax rate.

As of December 31, 2020, no significant increases or decreases are expected to the Company’s uncertain tax positions within the next twelve months.

It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense. The Company has not accrued interest and penalties related to uncertain tax positions due to offsetting tax attributes as of December 31, 2020 or 2019.

The Company files U.S. federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitation. The material jurisdictions where the Company is subject to potential examination by tax authorities are the U.S. (federal and state) for tax years 2004 through 2020 and the UK for tax years 2013 through 2020.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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