12. Income Taxes

 

For the year ended December 31, 2017, 2016, and 2015, the Company recognized $0, $25,296, and $0, respectively. The $25,296 of income tax benefit in 2016 was a result of the application of intraperiod tax allocation provisions of ASC 740, under which the Company is required to consider all items (including items recorded in other comprehensive income) in determining the amount of tax benefit that should be allocated to net loss. The non-cash income tax benefit was offset in full by income tax expense recorded in other comprehensive income. For years shown, components of the Company’s income tax expense (benefit) were as follows:

 

 

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:

 

 

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:

 

 

In assessing its ability to realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.

 

Due to the Company’s history of losses, the deferred tax assets are fully offset by a valuation allowance at December 31, 2017, 2016 and 2015.

 

The following table summarizes carryforwards of net operating losses and tax credits as of December 31, 2017:

 

 

The Internal Revenue Code of 1986, as amended (the “Code”) provides for a limitation of the annual use of net operating losses and other tax attributes (such as research and development tax credit carryforwards) following certain ownership changes (as defined by the Code) that could limit the Company’s ability to utilize these carryforwards. At this time, the Company has not completed a study to assess whether an ownership change under section 382 of the Code has occurred, or whether there have been multiple ownership changes since the Company’s formation, due to the costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income tax purposes.

 

The Company did not have unrecognized tax benefits as of December 31, 2017 and does not expect this to change significantly over the next twelve months. As of December 31, 2017, the Company has not accrued interest or penalties related to uncertain tax positions. The Company’s tax returns for the years ended December 31, 2009 through December 31, 2017 are still subject to examination by major tax jurisdictions.

 

The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017, 2016 and 2015, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations and comprehensive loss.

 

For all years through December 31, 2017, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position for any years. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.