v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before provision for income taxes consisted of the following (in thousands):
Years Ended December 31,
202320222021
United States$174,637 $(402,834)$(514,200)
Foreign62,454 41,807 25,706 
Income (loss) before provision for income taxes$237,091 $(361,027)$(488,494)
Provision for income taxes consisted of the following (in thousands):
Years Ended December 31,
202320222021
Current:
Federal$— $— $— 
State2,333 765 (88)
Foreign22,189 9,476 (11,343)
Total current provision24,522 10,241 (11,431)
Deferred:
Federal— — (111)
State— — — 
Foreign(4,806)(174)43,427 
Total deferred provision(4,806)(174)43,316 
Total provision for income taxes$19,716 $10,067 $31,885 
A reconciliation of the expected tax provision at the statutory federal income tax rate to the Company’s recorded tax provision consisted of the following (in thousands):
Years Ended December 31,
202320222021
Expected tax (benefit) at U.S. federal statutory rate$49,789 $(75,592)$(102,584)
State income taxes - net of federal benefit2,309 766 (88)
Foreign tax rate differential859 832 870 
Research and development tax credits(45,667)(34,546)(94,591)
Stock-based compensation(79,128)1,374 (817,839)
Non-deductible officers’ compensation
34,479 40,629 428,682 
Change in valuation allowance35,070 49,833 616,572 
Base Erosion Anti-Abuse Tax and related elections14,700 25,200 — 
Taxes withheld at source4,378 — — 
Non-deductible expenses3,610 — — 
Other(683)1,571 863 
Total provision for income taxes$19,716 $10,067 $31,885 
For the year ended December 31, 2023, the Company recorded a provision for income taxes of $19.7 million compared to $10.1 million for the year ended December 31, 2022, primarily due to the increase in foreign income taxes as the result of higher foreign taxable income and higher foreign withholding taxes in the current year. The Company maintains a full valuation allowance against its U.S. federal and state, and certain foreign deferred tax assets.
For the year ended December 31, 2022, the Company recorded a provision for income taxes of $10.1 million compared to $31.9 million for the year ended December 31, 2021, primarily due to the prior year establishment of a full valuation allowance
against its U.K. deferred tax assets during the fourth quarter of 2021 partially offset by permanent differences associated with U.S. Base Erosion and Anti Abuse Tax elections. The Company maintains a full valuation allowance against its U.S. federal and state and certain foreign deferred tax assets.
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,
20232022
Net operating loss carryforwards$1,317,684 $1,436,957 
Capitalized research and experimental expenses214,848 70,839 
Reserves and accruals99,105 76,905 
Tax credit carryforwards277,060 226,565 
Stock-based compensation139,419 203,735 
Lease liabilities53,902 58,056 
Depreciation and amortization14,413 29,665 
Capitalized facilitative expenses28,906 — 
Gross deferred tax assets2,145,337 2,102,722 
Outside basis difference— (6,512)
Acquisition related intangibles(8,428)(10,225)
Right-of-use assets(42,721)(46,295)
Total net deferred tax assets before valuation allowance2,094,188 2,039,690 
Valuation allowance(2,102,251)(2,051,655)
Net deferred tax assets (liabilities)$(8,063)$(11,965)
Because of the Company’s history of U.S. and certain foreign net operating tax losses, primarily in the U.K., the Company has maintained a full valuation allowance against potential future benefits for U.S, federal, state, and certain foreign deferred tax assets as of December 31, 2023.
The valuation allowance totaled $2.1 billion for the years ended December 31, 2023 and 2022. The valuation allowance on our net deferred tax assets increased by $50.6 million and $74.1 million during the years ended December 31, 2023 and 2022, respectively.
Provisions enacted by the 2017 Tax Cuts and Jobs Act related to the capitalization for tax purposes of research and experimental (“R&E”) expenditures became effective on January 1, 2022. All U.S. and foreign based R&E expenditures must be capitalized and amortized over five years and 15 years, respectively. As a result of this enactment, the Company began capitalizing and amortizing R&E expenditures over five years for domestic research and 15 for foreign research rather than expensing these costs as incurred during fiscal year ended December 31, 2022. The Company has recorded a deferred tax asset of $214.8 million as of December 31, 2023 related to the capitalization requirement.
As of December 31, 2023, the Company had U.S. federal and state net operating losses of approximately $5.0 billion and $2.5 billion, respectively. As of December 31, 2022, the Company had U.S. federal and state net operating losses of approximately $5.6 billion and $2.8 billion, respectively. The U.S. federal net operating loss carryforwards will expire at various dates beginning in 2035 through 2037 if not utilized, with the exception of $4.2 billion which can be carried forward indefinitely. The state net operating loss carryforwards will expire at various dates beginning in 2025 through 2043 if not utilized.
Additionally, as of December 31, 2023, the Company had federal and California research and development credits of approximately $290.1 million and $99.5 million, respectively. As of December 31, 2022, the Company had federal and California research and development credits of approximately $230.2 million and $91.4 million, respectively. The federal research and development credits will begin to expire in the years 2027 through 2043 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 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, 2023, the Company had U.S. federal capital loss carryforwards of $324.0 million. As of December 31, 2022, the Company had U.S. federal capital loss carryforwards of $113.1 million. The capital loss carryforwards will expire beginning in 2027 if not utilized.
As of December 31, 2023, the Company had foreign net operating losses, primarily in the U.K., of approximately $464.7 million. These net operating losses can be carried forward indefinitely.
As of December 31, 2023, the Company had an immaterial amount of earnings from its wholly-owned foreign subsidiaries 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.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Based on the Company’s current analysis of the provisions, the Company does not believe this legislation will have a material impact on its consolidated financial statements.
Uncertain Tax Positions
A reconciliation of the gross unrecognized tax benefits consists of the following (in thousands):
Years Ended December 31,
202320222021
Unrecognized tax benefit beginning of year$81,904 $65,070 $75,557 
Increases in current year tax positions14,346 5,733 19,638 
Increases in prior year tax positions15,766 11,497 967 
Decreases in prior year tax positions— (36)(30,895)
Decreases in prior year tax positions due to settlements— (360)(197)
Decreases in prior year tax positions due to lapse of statute of limitations— — — 
Unrecognized tax benefit end of year$112,016 $81,904 $65,070 
As of December 31, 2023, 2022, and 2021, the Company recorded gross unrecognized tax benefits of $112.0 million, $81.9 million, and $65.1 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, 2023, 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 provision for income taxes on the consolidated statements of operations. The Company has recorded immaterial interest and penalties related to uncertain tax positions as of December 31, 2023, 2022, and 2021.
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 2023 and the U.K. for tax years 2017 through 2023.