12. Income Taxes

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act, or TCJA. The TCJA makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a reduction of the amount of the orphan drug credit. As a result of the TCJA, the Company remeasured its ending deferred tax assets and liabilities at December 31, 2017 to the newly enacted U.S. federal corporate tax rate of 21%. This remeasurement resulted in a provision of $37.2 million to income tax expense and an offsetting income tax benefit for the reduction in the valuation allowance.  As a result, there was no impact to the Company’s consolidated statements of operations and comprehensive loss. The other provisions of the TCJA did not have a material impact on the Company’s consolidated financial statements.

The Company has recognized the provisional tax impacts related to the remeasurement of the deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of TCJA. The final determination of the TCJA and the remeasurement of the Company’s deferred tax assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the TCJA.

A reconciliation of the difference between the federal statutory rate and the effective income tax rate as a percentage of income before taxes for the years ended December 31, 2017,  2016 and 2015, respectively, is as follows (in thousands):

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes at December 31, 2017 and 2016 were as follows (in thousands):

 

As of December 31, 2017, the Company had federal and state net operating loss carryforwards available to reduce future taxable income of approximately $119.8 million and $111.0 million, respectively, which expire beginning in 2032. These net operating loss carryforwards may be subject to limitation under Internal Revenue Code Section 382, or IRC Section 382, should there be a greater than 50% ownership change as determined under the regulations.  During 2016, the Company performed a detailed analysis of historical and current IRC Section 382 ownership changes that may limit the utilization of net operating loss carryovers. The entire federal net operating loss carryforward of $119.8 million is available for immediate use based on the IRC Section 382 analysis performed.

As of December 31, 2017 and 2016, the Company has unused federal research and development carryforwards of approximately $23.4 million and $13.7 million, respectively, which will begin to expire in 2034. A portion of these carryforwards and tax credits may expire before becoming available to reduce future income tax liabilities.

The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. Tax years 2014 and forward remain open for examination for federal tax purposes and tax years 2013 and forward remain open for examination for the Company’s more significant state tax jurisdictions. To the extent utilized in future years' tax returns, net operating loss carryforwards at December 31, 2017 will remain subject to examination until the respective tax year is closed.

The table below details the changes to the Company’s valuation allowance for the years ended December 31, 2017 and 2016 (in thousands):