The components of the deferred tax assets and liabilities are presented below (in thousands):
| | | | |
| | | | | | | |
| Net operating loss carryforwards | | $ | 50,230 | | | $ | 48,261 | |
| Tax credit carry forwards | | | 981 | | | | 981 | |
| Accruals and allowances | | | 1,074 | | | | 507 | |
| Depreciation and amortization | | | 8,759 | | | | 6,593 | |
| Other | | | 13 | | | | 20 | |
| Total deferred tax asset | | | 61,057 | | | | 56,362 | |
| | | | | | | | | |
| Less valuation allowance | | | (61,057 | ) | | | (56,362 | ) |
| Net deferred tax asset | | $ | — | | | $ | — | |
Due to uncertainty surrounding the realization of the favorable tax attributes in future tax returns, we recorded a valuation allowance against our
deferred tax asset. The valuation allowance recorded for the year ended
December
31,
2016
increased by
$4,695,000
and for the year ended
December
31,
2015
increased by
$7,938,000.
For tax return purposes, we had NOLs at Decemb
er
31,
2016
of approximately
$155.8
million and
$21.1
million for federal income tax and state income tax purposes, respectively.
Included in these amounts are unrealized federal and state net operating loss deductions resulting from stock option exercises of approximately
$10.3
million and
$8.4
million respectively. The benefit of these unrealized stock option-related deductions has not been included in deferred tax assets and will be recognized as a credit to additional paid-in capital when realized. Federal NOLs begin to expire in
2019.
State NOLs
begin
. We also had federal research and development credits of approximately
$0.7
million which will begin expiring in
2018,
and a federal alternative minimum tax credit of approximately
$0.5
million, which does not expire.
We recognized an income tax benefi
t of
$101,000
for the year ended
December
31,
2016.
We did
not
recognize any income tax expense or benefit for the year ended
December
31,
2015.
The
effective tax rate for income taxes is different than the amount computed using the applicable statutory federal income tax rate with the difference for each year summarized below:
| | | | |
| | | | | | | |
| Federal tax at statutory rate | | | 34.0 | % | | | 34.0 | % |
| State taxes | | | 5.8 | % | | | 5.8 | % |
| Expiration of CA NOLs | | | (2.1 | )% | | | (2.7 | )% |
| Changes in state tax rates | | | (1.9 | )% | | | — | % |
| Other | | | 0.6 | % | | | (0.2 | )% |
| Adjustment due to change in valuation allowance | | | (35.6 | )% | | | (36.9 | )% |
| | | | 0.8 | | | | (0.0 | )% |
In
2016
and
2015,
the federal statutory rate is
as this is the rate at which the Company expects to realize its deferred tax assets in the future
.
Under the asset and liability method prescribed under ASC
740,
"
Income Taxes
," we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled.
At
December
31,
2016,
we had unrecognized tax benefits of approximately
$0.2
million, (
none
of which, if recognized, would affect our effective tax rate). We do not believe there will be any material changes in its unrecognized tax positions over the next
twelve
months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| | | | | | | |
| | | $ | 300 | | | $ | 300 | |
| Increase (decrease) related to prior year tax positions | | | — | | | | — | |
| Increase (decrease) related to current year tax positions | | | — | | | | — | |
| Settlements | | | — | | | | — | |
| Reductions due to lapse of applicable statute of limitations | | | 101 | | | | — | |
| Balance at December 31 | | $ | 199 | | | $ | 300 | |
Interest and penalty costs related to unrecognized tax benefits, if any, are classified as a component of income tax expense. We did
recognize any interest and penalty expense related to unrecognized tax benefits for the years ended
December
31,
2016
and
2015,
due to immateriality.