Entity information:
12. INCOME TAXES
There was no current or deferred tax expense for the years ended December 31, 2017, 2016 or 2015 due to our loss before income taxes and our valuation allowance. We have recorded a full valuation allowance against our deferred tax assets based upon the weight of available evidence, as it is more likely than not that the deferred tax assets will not be realized.
The following is a reconciliation between the U.S. federal statutory rate and the effective tax rate for the years ended December 31, 2017, 2016 and 2015:
​ ​ ​
2017
 ​ ​
2016
 ​ ​
2015
 ​
Income tax (benefit) expense at statutory rate
 ​ ​ ​ $ (9,929) ​ ​ ​ ​ $ (7,724) ​ ​ ​ ​ $ (4,683) ​ ​
State tax (benefit) expense, net of Federal tax (benefit) expense
 ​ ​ ​ ​ (1,452) ​ ​ ​ ​ ​ (1,146) ​ ​ ​ ​ ​ (677) ​ ​
Permanent items
 ​ ​ ​ ​ 508 ​ ​ ​ ​ ​ 263 ​ ​ ​ ​ ​ 239 ​ ​
Effect of change in valuation allowance and State NOL expiration
 ​ ​ ​ ​ (39,972) ​ ​ ​ ​ ​ 8,837 ​ ​ ​ ​ ​ 4,945 ​ ​
Tax credits
 ​ ​ ​ ​ (544) ​ ​ ​ ​ ​ (228) ​ ​ ​ ​ ​ (74) ​ ​
Change in tax rate on beginning assets
 ​ ​ ​ ​ 51,445 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Other
 ​ ​ ​ ​ (56) ​ ​ ​ ​ ​ (2) ​ ​ ​ ​ ​ 250 ​ ​
Tax expense (benefit)
 ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
​
The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities on the accompanying balance sheets is a result of the following at December 31, 2017 and 2016:
     
2017
    
2016
  
Deferred tax assets:      
Net operating loss carryforwards
       $ 100,421         $ 135,642    
Tax credit carryforwards
         26,771           25,264    
Equity based compensation
         3,381           9,610    
Book depreciation in excess of tax
         49           56    
Reserves and accruals
         171           181    
Other
         16           28    
          130,809           170,781    
Valuation allowance
         (130,809)           (170,781)    
Deferred tax liabilities
         —           —    
Net deferred tax assets
       $ —         $ —    
 
Total valuation allowance decreased by $39,972 for the year ended December 31, 2017, and increased by $8,837 and $4,945 for the years ended December 31, 2016 and 2015, respectively. We have evaluated positive and negative evidence bearing upon the realizability of our deferred tax assets, which are comprised principally of federal and state net operating loss (“NOL”), net capital loss, and research and development credit carryforwards. We have determined that it is more likely than not that we will not recognize the benefits of our federal and state deferred tax assets and, as a result, we have established a full valuation allowance against our net deferred tax assets as of December 31, 2017.
The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, requires companies to re-measure the deferred tax assets and deferred tax liabilities as of the date of enactment. We re-measured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The amount recorded related to the re-measurement of our deferred tax balance before Valuation Allowance was $51,445 which is offset by the full valuation allowance.
As of December 31, 2017, we had federal NOL, state NOL, and research and development credit carryforwards of approximately $409,409, $228,565 and $28,253 respectively, which expire at various dates through 2037. Approximately $15,080 of our federal NOL and $929 of our state NOL are attributable to stock-based compensation windfall deductions as of 12/31/2016. We recorded a deferred tax asset for previously unrecognized excess tax benefit, offset by valuation allowance upon the adoption in 2017 of ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”
As of December 31, 2017, and 2016 we had no unrecognized tax benefits. We do not expect that the total amount of unrecognized tax benefits will significantly increase in the next twelve months. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017 and 2016, we had no accrued interest or penalties related to uncertain tax positions. Our U.S. federal tax returns for the tax years 2013 through 2017 and our state tax returns for the tax years 2013 through 2017 remain open to examination. Prior tax years remain open to the extent of net operating loss and tax credit carryforwards.
Utilization of NOL and research and development credit carryforwards may be subject to a substantial annual limitation in the event of an ownership change that has occurred previously or could occur in the future pursuant to Section 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. An ownership change may limit the amount of NOL and research and development credit carryforwards that can be utilized annually to offset future taxable income, and may, in turn, result in the expiration of a portion of those carryforwards before utilization. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. We undertook a detailed study of our NOL and research and development credit carryforwards through January 31, 2018, to determine whether such amounts are likely to be limited by Sections 382 or 383. As a result of this analysis, we currently do not believe any Sections 382 or 383 limitations will significantly impact our ability to offset income with available NOL and research and development credit carryforwards. However, future ownership changes under Section 382 may limit our ability to fully utilize these tax benefits.