v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
12. Income Taxes
Loss before provision for (benefit from) income taxes consisted of the following (in thousands):

 
 
 
Years Ended December 31,
 
 
 
2021
 
 
2020
 
 
2019
 
United States
    $ (514,200 )    $ (1,203,682 )    $ (580,362 ) 
Foreign
      25,706       24,655       13,091  
    
 
 
    
 
 
    
 
 
  
Loss before provision for (benefit from) income taxes
    $ (488,494 )    $ (1,179,027 )    $ (567,271 ) 
    
 
 
    
 
 
    
 
 
  
Provision for (benefit from) income taxes consisted of the following (in thousands):

 
 
 
Years Ended December 31,
 
 
 
2021
 
 
2020
 
 
2019
 
Current:
                         
Federal
    $ —     $ —     $ —  
State
      (88 )      500       139  
Foreign
      (11,343 )      7,249       19,435  
    
 
 
    
 
 
    
 
 
  
Total current provision
      (11,431 )      7,749       19,574  
Deferred:
                         
Federal
      (111 )      —       —  
State
      —       —       —  
Foreign
      43,427       (20,385 )      (7,199 ) 
    
 
 
    
 
 
    
 
 
  
Total deferred provision
      43,316       (20,385 )      (7,199 ) 
    
 
 
    
 
 
    
 
 
  
Total provision for (benefit from) income taxes
    $ 31,885     $ (12,636 )    $ 12,375  
    
 
 
    
 
 
    
 
 
  
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,
 
 
 
2021
 
 
2020
 
 
2019
 
Expected tax (benefit) at U.S. federal statutory rate
    $ (102,584 )    $ (247,596 )    $ (119,127 ) 
State income taxes - net of federal benefit
      (88 )      500       139  
Foreign tax rate differential
      870       (4,131 )      25,430  
Research and development tax credits
      (94,591 )      (26,294 )      (2,106 ) 
Stock-based compensation
      (817,839 )     (194,730 )      (6,069 ) 
Non-deductible
officers’ compensation
      428,682       76,093       —  
Change in valuation allowance
      616,572       373,632       112,149  
Other
      863       9,890       1,959  
    
 
 
    
 
 
    
 
 
  
Total provision for (benefit from) income taxes
    $ 31,885     $ (12,636 )    $ 12,375  
    
 
 
    
 
 
    
 
 
  
For the year ended December 31, 2021, the Company recorded a provision for income taxes compared to a benefit from income taxes for the year ended December 31, 2020, primarily due to the establishment of a full valuation allowance against its U.K. deferred tax assets during the fourth quarter of 2021, partially offset by a
one-time
benefit related to the refund of the Company’s U.K. 2019 taxes paid based on the tax election to carry back the 2020 U.K. net tax operating losses.
For the year ended December 31, 2020, the Company recorded a benefit from 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.
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,
  
    
2021
     
2020
  
Net operating loss carryforwards
    $ 1,497,774      $ 853,861  
Reserves and accruals
      43,348        55,685  
Tax credit carryforwards
      177,402        68,626  
Stock-based compensation
      212,163        246,380  
Lease liabilities
      59,787        57,543  
Depreciation and amortization
      35,176        28,970  
    
 
 
     
 
 
  
Gross deferred tax assets
      2,025,650        1,311,065  
Right-of-use
assets
      (49,665 )       (48,120 ) 
    
 
 
     
 
 
  
Total net deferred tax assets before valuation allowance
      1,975,985        1,262,945  
Valuation allowance
      (1,977,565 )       (1,220,093 ) 
    
 
 
     
 
 
  
Net deferred tax assets
    $ (1,580 )     $ 42,852  
    
 
 
     
 
 
  
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.
For the year ended December 31, 2021, the provision for income taxes increased compared to the year ended December 31, 2020, due to the Company’s valuation allowance against its U.K. deferred tax assets. The Company maintains a full valuation allowance against its U.S. federal and state deferred tax assets. Additionally, due to the Company’s current and projected U.K. tax losses, the Company has determined its U.K. deferred tax assets are currently not more likely than not to be realized, and accordingly, the Company established a full valuation allowance against its total net U.K. deferred tax assets.
As of December 31, 2021, the Company had U.S. federal and state net operating losses of approximately $5.9 billion and $2.9 billion, respectively. 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. 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 $4.3 billion which can be carried forward indefinitely. The state net operating loss carryforwards will expire at various dates beginning in 2022 through 2041 if not utilized. As of December 31, 2021, the Company has net operating losses in the U.K. of approximately $333.0 million. The U.K. net operating
losses can be carried forward indefinitely.

Additionally, as of December 31, 2021, the Company had federal and California research and development credits of approximately $184.1 million and $68.7 million, respectively. 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. The federal research and development credits will begin to expire in the years 2027 through 2041 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, 2021, 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,
 
 
 
2021
 
 
2020
 
 
2019
 
Unrecognized tax benefit beginning of year
    $ 75,557     $ 31,702      $ 27,812  
Increases in current year tax positions
      19,638       43,855        6,301  
Increases in prior year tax positions
      967       —          114  
Decreases in prior year tax positions
      (30,895 )      —          (1,829 ) 
Decreases in prior year tax positions due to settlements
      (197 )      —          (696 ) 
Decreases in prior year tax positions due to lapse of statute of limitations
      —         —          —    
    
 
 
    
 
 
     
 
 
  
Unrecognized tax benefit end of year
    $     65,070     $     75,557      $     31,702  
    
 
 
    
 
 
     
 
 
  
For the years ended December 31, 2021, 2020, and 2019, the Company recorded gross unrecognized tax benefits of $65.1 million, $75.6 million, and $31.7 million, respectively, that, if recognized, would not benefit the Company’s effective tax rate due to the valuation allowance that currently offsets deferred tax assets.
As of December 31, 2021, 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 accrued immaterial interest and penalties related to uncertain tax positions as of December 31, 2021 and has not accrued interest
and
penalties related to uncertain tax positions as of December 31, 2020.
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 2021 and the UK for tax years 2017 through 2021.