Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the provision for (benefit from) income taxes were as follows (in thousands):
Year Ended December 31,
2021 2020 2019
Current
Federal $ —  $ —  $ — 
State 22  —  — 
Foreign 43  —  — 
Deferred
Federal —  —  — 
State —  —  — 
Foreign (5) —  — 
Total $ 60  $ —  $ — 
Loss before income taxes was as follows (in thousands):
Year Ended December 31,
2021 2020 2019
United States $ (51,777) $ (40,278) $ (32,060)
Foreign 147  (143) — 
Total $ (51,630) $ (40,421) $ (32,060)
The following reconciles the differences between the federal statutory income tax rate in effect in each year to the Company’s effective tax rate:
Year Ended December 31,
2021 2020 2019
Statutory federal tax rate 21.00  % 21.00  % 21.00  %
State tax, net of federal tax effect 2.64  (0.74) (0.14)
Stock compensation 3.51  (3.49) (0.11)
Change in valuation allowance (27.21) (16.34) (20.12)
Other (0.06) (0.43) (0.63)
Effective tax rate (0.12) % —  % —  %
The components of deferred tax assets and (liabilities) were as follows (in thousands):
December 31, 2021 December 31, 2020
Deferred tax assets:
Net operating losses $ 41,167  $ 28,540 
Sales and use tax reserves 195  195 
Stock compensation 1,808  711 
Compensation related accruals 846  564 
Interest expense limitations 527  226 
Leases 1,123  — 
Other 55  54 
Fixed Assets 475  223 
Valuation allowance (40,101) (26,052)
Total deferred tax assets - net 6,095  4,461 
Deferred tax liabilities:
State taxes (1,193) (827)
Intangible assets (528) (154)
Deferred contract acquisition costs (4,369) (3,480)
Total deferred tax liabilities (6,090) (4,461)
Net deferred taxes assets (liabilities) $ 5  $ — 
Activity of the deferred tax asset valuation allowance was as follows (in thousands):
Year Ended December 31,
2021 2020 2019
Balance at beginning of the year $ 26,052  $ 20,537  $ 13,093 
Charged to costs and expense 14,049  5,515  7,444 
Balance at end of the year $ 40,101  $ 26,052  $ 20,537 
The Company evaluates its ability to realize net deferred tax assets by considering all available positive and negative evidence including past results of operations, forecasted earnings, tax planning strategies, and all sources of future taxable income. A full valuation allowance was maintained on domestic deferred tax assets as of December 31, 2021, primarily due to cumulative losses in recent years. Net deferred tax assets are included in the other non-current assets on the consolidated balance sheets.
As of December 31, 2021, U.S. Federal and State net operating loss (“NOL”) carry forwards are both approximately $169.1 million and $113.1 million. These NOLs have expiration dates starting in 2037 for U.S. Federal and 2032 for State jurisdictions. The U.S. federal NOL generated in 2018 and years forward, are not subject to a carryforward limitation and can be utilized at any time in the future. The total federal NOLs not subject to carryover limitation are $137.4 million. Full realization of the NOLs is dependent on generating sufficient taxable income prior to their expiration. The ability to realize the NOLs could also be limited by previous or future changes in ownership in accordance with rules in Internal Revenue Code Sections 382 and 383.
ASC 740-10, Accounting for Uncertainty in Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized in the financial statements only when it is more likely than not that the position will be sustained upon examination. Once the recognition threshold is met, the portion of the tax benefit that is recorded represents the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement with a taxing authority. The Company determined it did not have any unrecognized tax benefits at December 31, 2021 or 2020. The Company accounts for interest expense and penalties for unrecognized tax benefits as a part of its income tax provision. The Company does not anticipate any significant changes in unrecognized tax benefits during the next 12 months.
The Company files income tax returns in the U.S. Federal jurisdiction and in various states. Additionally, the Company files income tax returns in the foreign jurisdictions in which it operates. The statute of limitations for the federal US income tax returns is still open for tax years 2018 forward. The statute of limitations for state income tax returns varies between three and four years in the state taxing jurisdictions where the Company files, and would still be open for tax years 2017 forward or 2018 depending on the jurisdiction. The statute of limitations in the foreign jurisdictions varies by foreign jurisdiction, however, the Company has open returns in the foreign jurisdictions beginning for tax year 2020.
On March 27, 2020, The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits deferral of payment of the employer’s portion of payroll taxes for up to two years. The Company has evaluated the impact of this payroll deferral and has included the impact of the deferral in the financial statements for the years ended December 31, 2021 and 2020.