Note 5---Income Taxes

 

        Losses before income taxes as follows (in thousands):

 





The components of benefit/(expense) for income taxes are as follows (in thousands):

  





The differences between the benefit/(expense) for income taxes computed at the federal statutory rate of 35% and our actual income tax expense for the periods presented are as follows (in thousands):







The individual components of our deferred tax assets are as follows (in thousands):





We have provided a valuation allowance for all of our deferred tax assets as of December 31, 2016 and 2015, due to the uncertainty regarding their future realization. The total valuation allowance increased $1,440,000 from December 31, 2015 to December 31, 2016.  



As of December 31, 2016, we had federal and state net operating loss ("NOL") carryforwards of approximately $578,378,000 and $30,946,000 available to offset future regular and alternative minimum taxable income. The NOLs include deductions for stock-based compensation for which a benefit would be recorded in additional paid-in capital when realized of $2,652,000 and $1,908,000 respectively.   Our federal net operating loss carryforwards expire in various years from 2018 through 2036, if not used. The state net operating loss carryforwards expire in various years from 2031 to 2036, if not used.



Due to the projected loss for the year with a full valuation allowance against its deferred tax assets, there is no tax impact for 2015 and 2016. As of December 31, 2016, we had federal and state research and development credit carryforwards of approximately $6,789,000 and $6,003,000, respectively, available to offset future tax liabilities.  The federal tax credit carryforwards expire in the tax years from 2018 through 2036, if not utilized. The state research and development credits can be carried forward indefinitely.



Federal and state tax laws impose substantial restrictions on the utilization of net operating loss (“NOL”) and credit carryforwards in the event of an "ownership change" for tax purposes, as defined in IRC Section 382. Based on a high-level ownership change analysis performed each year, management concluded that there were no ownership changes through December 31, 2016.  



 We follow the provision of ASC 740-10-25, Income Taxes: Recognition ("ASC 740-10-25"). Our total amount of unrecognized tax benefits as of December 31, 2016  and 2015 were $2,880,000 and $2,800,000, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate were $160,000 and $160,000 as of December 31, 2016 and 2015, respectively.



We recognize interest and penalties accrued related to unrecognized tax benefits in our provision for income taxes. During the years ended December 31, 2016 and 2015, respectively, we did not recognize any interest and penalties.

 

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits for the year ended December 31, 2016 is as follows (in thousands):

 

We are subject to taxation in the United States and various foreign jurisdictions. Our tax years 1998 and forward remain open in several jurisdictions due to the NOL carryforward from those tax years.  



It is possible that the amount of our liability for unrecognized tax benefits may change within the next 12 months.  However, an estimate of the range of possible changes cannot be made at this time.