Entity information:
Income Taxes
There is no provision for income taxes because we have historically incurred operating losses and we maintain a full valuation allowance against our net deferred tax assets.
Differences between the provision (benefit) for income taxes and income taxes at the statutory federal income tax rate are as follows:
(In thousands, except percentages)
For the years ended December 31,
 
2017
 
2016
 
2015
Income tax expense (benefit) at statutory federal rate
$
(10,499
)
 
34.0
 %
 
$
(7,651
)
 
34.0
 %
 
$
(9,226
)
 
34.0
 %
State income tax, net of federal benefit
(1,880
)
 
6.1

 
(1,389
)
 
6.2

 
(1,678
)
 
6.2

Permanent items
63

 
(0.2
)
 
38

 
(0.2
)
 
58

 
(0.2
)
Research credits
(1,172
)
 
3.8

 
(970
)
 
4.3

 
(1,379
)
 
5.1

Stock-based compensation
(122
)
 
0.4

 
(29
)
 
0.1

 
—

 
—

ASC 740-10
469

 
(1.5
)
 
388

 
(1.7
)
 
552

 
(2
)
Change in valuation allowance
(128
)
 
0.4

 
9,602

 
(42.6
)
 
11,924

 
(43.9
)
Tax Cuts and Jobs Act
13,092

 
(42.4
)
 
—

 
—

 
—

 
—

Other
177

 
(0.6
)
 
11

 
(0.1
)
 
(251
)
 
0.8

Provision (benefit) for income taxes
$
—

 
—
 %
 
$
—

 
—
 %
 
$
—

 
—
 %



Deferred tax assets are recognized for temporary differences that will result in deductible amounts in future periods. The components of the deferred tax assets are as follows at December 31, 2017 and 2016:
 
December 31,
(In thousands)
2017
 
2016
Deferred tax assets:


 
 
Net operating loss carryforwards
$
26,369

 
$
27,093

Research & development credits
3,044

 
2,173

Accrued expenses
753

 
720

Amortization and depreciation
(132
)
 
2,738

Stock-based compensation
4,860

 
2,296

Other
12

 
14

 
34,906

 
35,034

Valuation Allowance
(34,906
)
 
(35,034
)
Net current deferred tax assets
$
—

 
$
—



At December 31, 2017, we had net deferred tax assets of $34,906,000. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset the net deferred tax asset.
Additionally, the future utilization of our net operating loss and research and development tax credits carryforwards is subject to annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes limit the amount of the net operating loss and research and development tax credit carryforward and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Sections 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. We believe we incurred ownership changes since April 2014, however, we have not completed an analysis yet to determine the impact of our ability to use net operating losses and research and development credits as of December 31, 2017.
At December 31, 2017, we had federal and California net operating loss carryovers of $93,253,000 and $93,172,000, respectively. The federal and California net loss carryforwards will begin to expire in 2032.
At December 31, 2017, we had federal and state research tax credit carryovers of approximately $2,972,000 and $2,660,000, respectively. The federal research and development tax credit carryforwards will begin to expire in 2033. The California research and development credit carryforwards are available indefinitely.
The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. There were no unrecognized tax benefits recorded by us as of the date of adoption. As a result of the implementation, we did not recognize an increase in the liability for unrecognized tax benefits.
A rollforward of changes in our unrecognized tax benefits is shown below.
(In thousands)
December 31,
 
2017
 
2016
Balance at beginning of year
$
1,698

 
$
1,234

Additions based on tax positions related to the current year
554

 
464

Additions for tax positions of prior years
—

 
—

Balance at end of year
$
2,252

 
$
1,698



The amount of unrecognized tax benefits that would impact the effective tax rate if recognized and realized is $2,029,000.
Our practice is to recognize interest and/or penalties related to income tax matters as income tax expense. We had no accrual for interest or penalties on our accompanying consolidated balance sheets at December 31, 2017 and 2016, and have not recognized interest and/or penalties in our consolidated statements of operations and comprehensive loss for the years ended December 31, 2017, 2016 and 2015.
We do not anticipate a significant change to our unrecognized tax benefits during the next twelve months.
We file tax returns as prescribed by tax laws of the jurisdictions in which we operate. In the normal course of business, we are subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. Our federal and state tax returns are still open under statute from 2012 to present.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Act"). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018.
As a result of the rate reduction, the Company has reduced the deferred tax asset balance as of December 31, 2017 by $13.1 million.
Due to the Company's full valuation allowance position, the Company has also reduced the valuation allowance by the same amount.

Due to uncertainties which currently exist in the interpretation of the provisions of the Tax Cuts and Jobs Act of 2017 regarding Internal Revenue Code Section 162(m), the Company has not evaluated the potential impacts of IRC Section 162(m) as amended by the Tax Cuts and Jobs Act of 2017 on its consolidated financial statements.