Note 12. Income Taxes

The components of the pretax loss from operations were all attributed to the United States. There was no income tax expense or benefit for the years ended December 31, 2021 and 2020.

The (benefit from) provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences as of (in thousands):

Significant components of the Company’s deferred tax assets and liabilities consist of the following as of (in thousands):

The realization of deferred tax assets may be dependent on the Company’s ability to generate sufficient income in future years in the associated jurisdiction to which the deferred tax assets relate. The Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. A valuation allowance of $141.8 million has been recorded as of December 31, 2021, as compared to $91.1 million as of December 31, 2020. The valuation allowance is based on management’s assessment that it is more likely than not that the Company will not have taxable income in the foreseeable future.

Deferred tax liabilities associated with indefinite-life intangibles cannot be considered a source of income to support the realization of deferred tax assets because the reversal of these deferred tax liabilities is considered indefinite. However, as the Company has an indefinite-life asset with an unlimited loss carryforward period within the same jurisdiction, and of appropriate character, the deferred tax liability associated with the indefinite-life intangible constitutes a source of taxable income to support the realization of the deferred tax asset, since both have indefinite reversal or expiration periods.

As of December 31, 2021, the Company had federal and state net operating loss carryforwards of $23.3 million and $350.8 million, respectively, which begin to expire in 2032 and the Company had federal net operating loss carryforwards that do not expire but utilization is limited to 80% of taxable income for any given tax year in the amount of $329.9 million.

As of December 31, 2021, the Company had federal orphan drug credits and research and development credits and state research and development tax credits of $33.2 million and $11.8 million, respectively. The federal research and development tax credits will begin to expire in 2032, while the state credits do not expire.

Additionally, the utilization of the net operating loss and research and development tax credit carryforwards is subject to an annual limitation under Section 382 of the Internal Revenue Code. Future ownership changes as determined under Section 382 could further limit the utilization of net operating loss carryforwards. Due to the existence of the valuation allowance, future changes in the deferred tax assets related to these tax attributes will not impact the Company’s effective tax rate.

The Company is subject to taxation in the U.S. and state jurisdictions. As of December 31, 2021, the Company’s tax years beginning 2012 to date are subject to examination by federal and other state taxing authorities due to the carry forward of unutilized net operating losses and research and development tax credits. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. The Company is not currently under examination by the IRS or state and local tax authorities.

As of December 31, 2021, the Company had unrecognized tax benefits of $9.5 million, determined as follows:

These unrecognized tax benefits are not expected to change within the next twelve months. Of the $9.5 million of unrecognized tax benefits, zero would impact the effective tax rate due to the valuation allowance, if reversed. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. As of December 31, 2021, there are no accrued interest or penalties.