Entity information:

• Entity registrant name: Atara Biotherapeutics, Inc.
• CIK: 0001604464
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1604464/000156459018003390/0001564590-18-003390-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1604464/000156459018003390/atra-20171231.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1604464/000156459018003390/atra-20171231.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001604464
• Generator: Donnelley Financial Solutions
• Total assets: 217,779,000
• Income tax expense (benefit): -14,000
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

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Losses before provision for income taxes were as follows in each period presented:

 

 

The components of income tax provision (benefit) were as follows in each period presented:

 

 

A reconciliation of statutory tax rates to effective tax rates were as follows in each of the periods presented:

 

 

In the first quarter of 2017, the Company adopted ASU 2016-09, which requires excess tax benefits and tax deficiencies generated by the settlement of share-based awards to be recognized as part of the income tax provision. The adoption of ASU 2016-09 did not have an impact on our balance sheet, results of operations, cash flows or statement of stockholders’ equity because we have a full valuation allowance on our deferred tax assets.   Upon adoption, the Company recognized the previously unrecognized excess tax benefits. The previously unrecognized excess tax effects were recorded as a deferred tax asset, which was fully offset by a valuation allowance.  Upon adoption, the Company recorded additional federal and state net operating losses of $10.5 million. These net operating losses are offset with a valuation allowance. Beginning in 2017, the impact of excess tax benefits and tax deficiencies are included in the Impact of Stock Compensation tax rate line.

 

Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows as of the dates indicated:

 

 

We recognize deferred income taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes, as well as for tax attribute carryforwards. We regularly evaluate the positive and negative evidence in determining the realizability of our deferred tax assets. Based upon the weight of available evidence, which includes our historical operating performance and reported cumulative net losses since inception, we maintained a full valuation allowance on the net deferred tax assets as of December 31, 2017 and 2016. We intend to maintain a full valuation allowance on our deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The valuation allowance decreased by $8.6 million and increased by $18.9 million for the years ended December 31, 2017 and 2016, respectively.

As of December 31, 2017, we had federal and state net operating loss carryforwards for tax return purposes of $76.0 million and $231.4 million, respectively. The federal and state net operating loss carryforwards begin to expire in 2032 in various amounts if not utilized.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we have experienced an “ownership change.” Generally, a Section 382 “ownership change” occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50% over its lowest ownership percentage within a specified testing period. Similar rules may apply under state tax laws.

We have completed a Section 382 study of transactions in our stock through December 31, 2015. The study concluded that we have experienced at least one ownership change since inception and that our utilization of net operating loss carryforwards will be subject to annual limitations. However, it is not expected that these limitations will result in the expiration of tax attribute carryforwards prior to utilization. The Company has also completed an updated analysis since the previous ownership change through December 31, 2017. As a result, no new ownership changes have occurred that would limit the current generated NOLs.

On December 22, 2017, the Tax Act was enacted into law.  The Tax Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%; limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses); limitation of the deduction of net operating losses generated in tax years beginning after December 31, 2017 to 80% of taxable income, indefinite carryforward of net operating losses generated in tax years after 2018 and elimination of net operating loss carrybacks; changes in the treatment of offshore earnings regardless of whether they are repatriated; current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations, mandatory capitalization of research and development expenses beginning in 2022; immediate deductions for certain new investments instead of deductions for depreciation expense over time; further deduction limits on executive compensation; and modifying, repealing and creating many other business deductions and credits, including the reduction in the orphan drug credit from 50% to 25% of qualifying expenditures. As of December 31, 2017, we have made a reasonable estimate of the effects on our existing deferred taxes and related disclosures by reducing the expected deductibility of certain executive compensation by $0.6 million due to the application of new limitations under Internal Revenue Section 162(m) and reducing our net federal and state deferred tax assets by $13.5 million for the reduction in corporate tax rate. These adjustments to our deferred tax assets are offset against the valuation allowance. Due to accumulated foreign deficits the Company does not expect a current inclusion in U.S. federal taxable income for the transition tax on earnings of controlled foreign corporations.

Additionally, the SEC staff has issued SAB 118, which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S. 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. Because the Company is still in the process of analyzing certain provisions of the Act including the application of new executive compensation limitation provisions under Internal Revenue Section 162(m) in accordance with SAB 118, the Company has determined that the adjustment to its deferred taxes was a provisional amount and a reasonable estimate at December 31, 2017.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

 

 

The Company currently has a full valuation allowance against its U.S. net deferred tax assets, which would impact the timing of the effective tax rate benefit should any uncertain tax position be favorably settled in the future. Of the $30.1 million total unrecognized tax benefits as of December 31, 2017, $0.1 million, if recognized, would affect the Company’s effective tax rate.

 

During July 2016, the Company licensed certain intellectual property rights to a wholly-owned subsidiary outside the United States. Although the license of intellectual property rights between consolidated entities did not result in any gain in the consolidated statements of operations and comprehensive loss, the transaction generated a taxable gain in the United States. However, as this gain is offset by current and existing tax losses, there was no cash tax impact from the transaction in the periods presented. As a result of the transaction, there was an increase of $0.4 million and $0.8 million in unrecognized tax benefits during the year ended December 31, 2016 and December 31, 2017, respectively. The remaining increases and decreases in unrecognized tax benefits related to changes to federal and state research and development and orphan drug tax credit carryforwards. The Company expects to record an uncertain tax benefit of $0.8 million during the next 12 months related to the licensed intellectual property rights. The Company’s policy is to account for interest and penalties related to uncertain tax positions as a component of the income tax provision.  The amount of accrued interest and penalties as of December 31, 2017 and for the years ended December 31, 2017, 2016 and 2015 was immaterial.

 

Our significant jurisdictions are the Cayman Islands, the U.S. federal, and the California state jurisdiction. All of our tax years remain open to examination by the U.S. federal and California tax authorities.