Note 10—Income Taxes:
We did not have any provision for income taxes for the years ended December 31, 2017, 2016 and 2015.
Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes give rise to the Company’s deferred income taxes. The components of the Company’s net deferred tax assets as of December 31, 2017 and 2016 are as follows (in thousands):
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets—2017: |
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards |
|
$ |
257,121 |
|
|
$ |
209,308 |
|
|
Business credit carryforwards |
|
|
29,695 |
|
|
|
21,256 |
|
|
Organization costs |
|
|
180 |
|
|
|
177 |
|
|
Compensation |
|
|
76,423 |
|
|
|
84,341 |
|
|
Deferred rent - leasehold improvement |
|
|
680 |
|
|
|
1,194 |
|
|
Other |
|
|
806 |
|
|
|
997 |
|
|
|
|
|
364,905 |
|
|
|
317,273 |
|
|
Deferred tax liabilities |
|
|
(758 |
) |
|
|
(1,269 |
) |
|
Total deferred tax assets |
|
|
364,147 |
|
|
|
316,004 |
|
|
Valuation allowance |
|
|
(364,147 |
) |
|
|
(316,004 |
) |
|
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
As the ultimate realization of the potential benefits of the Company’s deferred tax assets is considered unlikely by management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation allowances. Accordingly, the Company did not recognize any benefit from income taxes in the accompanying Consolidated Statements of Operations to offset its pre-tax losses. The valuation allowance increased $48.1 million and $106.2 million for the years ended December 31, 2017 and 2016, respectively. At December 31, 2017, the Company had federal and state net operating loss carryforwards respectively of approximately $923.0 million and $870.0 million, which will begin to expire in 2027 and 2030. At December 31, 2017, the Company also has federal research and development credit carryforwards of approximately $19.1 million. If not utilized, the carryforwards will begin expiring in 2032. The Company has state research and development credit carryforwards or approximately $13.2 million which do not expire. Pursuant to the Internal Revenue Code, Sections 382 and 383, use of the Company’s net operating loss and credit carryforwards could be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not yet performed an assessment on the potential limitation on net operating loss and credit carryforwards.
The provision (credit) for income taxes in the accompanying Consolidated Statements of Operations differs from the amount calculated by applying the statutory income tax rate to income (loss) from continuing operations before income taxes. The primary components of such differences are as follows as of December 31 (in thousands):
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Tax computed at the federal statutory rate |
|
$ |
(99,234 |
) |
|
$ |
(93,839 |
) |
|
$ |
(81,356 |
) |
|
State taxes |
|
|
(15,890 |
) |
|
|
(15,693 |
) |
|
|
(16,620 |
) |
|
Permanent items |
|
|
(1,404 |
) |
|
|
6,152 |
|
|
|
4,225 |
|
|
R&D credits |
|
|
(6,217 |
) |
|
|
(2,728 |
) |
|
|
(5,029 |
) |
|
Deferred tax asset adjustment |
|
|
6,805 |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
(20 |
) |
|
|
(113 |
) |
|
|
(2,571 |
) |
|
Impact of federal statutory rate change related to the 2017 Tax Act |
|
|
141,147 |
|
|
|
— |
|
|
|
— |
|
|
Change in valuation allowance |
|
|
(25,187 |
) |
|
|
106,221 |
|
|
|
101,351 |
|
|
Total provision |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits at December 31:.
|
(in thousands) |
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Unrecognized tax benefits—January 1 |
|
$ |
5,315 |
|
|
$ |
4,475 |
|
|
$ |
2,482 |
|
|
Gross decreases—tax positions in prior period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Gross increases—tax positions in current period |
|
|
1,836 |
|
|
|
840 |
|
|
|
1,993 |
|
|
Unrecognized tax benefits—December 31 |
|
$ |
7,151 |
|
|
$ |
5,315 |
|
|
$ |
4,475 |
|
The unrecognized tax benefits that, if recognized, would affect the effective tax rate is $7.2 million at December 31, 2017. The Company does not have tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefit will significantly increase or decrease within 12 months of the reporting date.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by the federal and state jurisdictions where applicable. There are currently no pending income tax examinations. The Company’s tax years for 2007 and forward are subject to examination by the federal and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.