10.  INCOME TAXES

 

		2017			2016
Tax provision (benefit)
Current
Federal		$	—		$	—
State			—			—
Total current			—			—
Deferred
Federal			13,626,404			(4,053,114)
State			1,969,262			99,883
Total deferred			15,595,666			(3,953,231)
Change in valuation allowance			(15,595,666)			3,953,231
Total		$	—		$	—

Deferred tax assets consisted of the following at December 31:

 

		2017			2016
Deferred tax assets
Federal net operating loss		$	24,353,504		$	36,472,996
Federal research and development tax credit carryforwards			4,947,879			3,808,862
State net operating losses and tax credit carryforwards			1,589,927			2,628,006
Capitalized research and development expenses			5,772,165			8,834,640
Stock-based compensation expense			1,445,078			2,162,703
Depreciable assets			166,793			—
Other			121,680			235,681
Total deferred tax assets			38,397,026			54,142,888
Deferred tax liabilities
Depreciable assets			—			(150,196)
Total deferred tax liabilities			—			(150,196)
Net deferred tax assets			38,397,026			53,992,692
Less– valuation allowance			(38,397,026)			(53,992,692)
Total deferred tax assets		$	—		$	—

  

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:

 

		Year ended December 31,
		2017			2016
Income tax benefit using U.S. federal statutory rate			34.00	%		34.00	%
State income taxes			(9.58)	%		(1.07)	%
Permanent items			(2.55)	%		17.88	%
Federal tax credits			8.43	%		9.55	%
Change in valuation allowance			115	%		(63.97)	%
Federal rate change			(143.50)	%		—
Other			(1.80)	%		3.61	%
Total			0.00	%		0.00	%

 

 

Because of the Company’s continuing losses and uncertainty associated with the utilization of the deferred tax assets in the future, management has provided a full allowance against the net deferred tax asset.

 

The Company did not have unrecognized tax benefits or accrued interest and penalties at any time during the years ended December 31, 2017 or 2016, and does not anticipate having unrecognized tax benefits over the next twelve months.  The Company is subject to audit by the IRS and state taxing authorities for tax periods commencing January 1, 2014. Additionally, the Company may be subject to examination by the IRS for years beginning prior to January 1, 2014 as a result of its NOLs. However, any adjustment related to these periods would be limited to the amount of the NOL generated in the year(s) under examination.

 

On December 22, 2017 The Tax Cuts and Jobs Act (the “Act”) was enacted. The Act significantly revised the U.S. corporate income tax law by lowering the corporate Federal income tax rate from 35% to 21%. As of December 31, 2017, the Company has assessed the effects of the corporate rate reduction on its existing deferred tax balances which resulted in the valuation allowance equal to the effect of the rate reduction on the ending deferred tax asset was also reflected. In addition to the rate reduction, the Act also requires companies with foreign subsidiaries to pay a one-time transition tax on earnings that were previously tax deferred. As of December 31, 2017, the Company does not maintain any foreign subsidiaries and does not have previously deferred foreign earnings subject to the transition tax.