Entity information:

• Entity registrant name: Ultragenyx Pharmaceutical Inc.
• CIK: 0001515673
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1515673/000156459018002535/0001564590-18-002535-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1515673/000156459018002535/rare-20171231.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1515673/000156459018002535/rare-20171231.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001515673
• Generator: Donnelley Financial Solutions
• Total assets: 490,753,000
• Income tax expense (benefit): -16,199,000
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

---

11.      Income Taxes

The components of the Company’s loss before income taxes were as follows (in thousands):

 

 

The components of the Company’s income tax provision were as follows (in thousands):

The Company has incurred net operating losses since inception. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

The effective tax rate of our provision for income taxes differs from the federal statutory rate as follows:

 

 

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets is presented below (in thousands):

 

 

  

As of December 31, 2017 and 2016, the Company had $422.3 million and $315.5 million of federal net operating loss carryforwards available to reduce future taxable income that will begin to expire in 2030. As of December 31, 2017 and 2016, the Company had $457.7 million and $259.8 million of state net operating loss carryforwards available to reduce future taxable income that will begin to expire in 2030.

As of December 31, 2017 and 2016, the Company had federal research tax credit carryforwards of $4.5 million and $2.5 million available to reduce future tax liabilities that will begin to expire in 2030. As of December 31, 2017 and 2016, the Company had state research credit carryforwards of $12.4 million and $6.7 million available to reduce future tax liabilities that will be carried forward indefinitely.

As of December 31, 2017 and 2016, the Company had federal Orphan Drug Credits of $124.6 million and $84.3 million available to reduce future tax liabilities that will begin to expire in 2031.

The Company’s ability to use net operating loss and tax credit carryforwards to reduce future taxable income and liabilities may be subject to annual limitations pursuant to Internal Revenue Code Sections 382 and 383 as a result of ownership changes in the past and future. As a result of ownership changes in 2012 and 2011, $3.6 million of federal net operating loss carryforwards, $3.6 million of state net operating loss carryforwards, and $0.2 million of federal tax credits are permanently limited. Deferred tax assets for net operating losses and tax credits have been reduced and a corresponding adjustment to the valuation allowance has been recorded.

On November 7, 2017, the Company acquired Dimension (see Note 3 “Acquisition”). The Company recorded a $47.4 million deferred tax liability relating to the tax impact of future GAAP amortization or potential impairments associated with the identified intangible assets acquired, which are indefinitely lived assets and are not currently deductible for tax purposes. Due to the reduction of the US corporate tax rate to 21% in the period subsequent to the acquisition, the Company recorded a net decrease to the deferred tax liability of $16.2 million with a corresponding benefit from income taxes of $16.2 million for the year ended December 31, 2017.  

The valuation allowance increased by $91.9 million and $102.9 million during the year ended December 31, 2017 and 2016, respectively.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Act). The Company has calculated its best estimate of the impact of the Tax Act in its year end income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of this filing. The provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was a net decrease related to deferred tax assets and deferred tax liabilities of $70.5 million, with a corresponding net adjustment to benefit from income taxes of $16.1 million and offsetting change in valuation allowance of $86.6 million for the year ended December 31, 2017. The Company does not expect a material impact related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings.

On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the adjustment to deferred taxes was a provisional amount and a reasonable estimate at December 31, 2017. The determination of the benefit from (provision for) income taxes requires complex estimations, significant judgments and significant knowledge and experience concerning the applicable tax laws. Given that the Company is still in the transition period for the accounting for income tax effects of the Tax Act, the current assessment on deferred tax assets (liabilities) is based on the currently available information and guidance. If in the future any element of the tax reform changes the related accounting guidance for income tax, it could affect the Company’s income tax position and the Company may need to adjust the benefit from (provision for) income taxes accordingly.

The Company recorded unrecognized tax benefits for uncertainties in income taxes. A reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2017, 2016, and 2015 is as follows (in thousands):

 

  

The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company has elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2017 and 2016, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next year.

It is our intention to reinvest the earnings of our non-U.S. subsidiaries in their operations. As of December 31, 2017, the Company had not made a provision for U.S. income taxes or foreign withholding taxes on a nominal amount of the excess of the amount of net income for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon repatriation as dividends and under certain other circumstances. If these earnings were repatriated to the U.S., the deferred tax liability associated with these temporary differences would result in a nominal amount.

The Company files income tax returns in the U.S. federal, California, and other state tax jurisdictions. The federal and state income tax returns from inception to December 31, 2017 remain subject to examination.