Entity information:

• Entity registrant name: EPIZYME, INC.
• CIK: 0001571498
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1571498/000156459018005397/0001564590-18-005397-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1571498/000156459018005397/epzm-20171231.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1571498/000156459018005397/epzm-20171231.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001571498
• Generator: Donnelley Financial Solutions
• Total assets: 289,359,000
• Income tax expense (benefit): -336,000
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

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6. Income Taxes

The Company’s losses before income taxes consist solely of domestic losses.

The provision for (benefit from) income taxes for the years ended December 31, 2017, 2016, and 2015 is as follows:

 

 

A reconciliation of the federal statutory income tax rate and the Company’s effective income tax rate is as follows:

 

 

Deferred Tax Assets (Liabilities)

The Company’s deferred tax assets (liabilities) consist of the following:

 

 

The Company evaluated the expected recoverability of our net deferred tax assets as of December 31, 2017 and determined that, with the exception of the deferred tax asset related to alternative minimum tax, or AMT, credits, there was insufficient positive evidence to support the recoverability of these net deferred tax assets, concluding it is more likely than not that our net deferred tax assets would not be realized in the future; therefore, the Company provided a full valuation allowance against its net deferred tax asset balance as of December 31, 2017, with the exception of the deferred tax asset related to the AMT credit. The AMT credit becomes refundable beginning in 2018 through no later than 2022 under the Tax Cuts and Jobs Act, or TCJA, tax reform legislation, and as such, the related deferred tax asset will be able to be realized and the corresponding valuation allowance of $368,000 has been reversed as of December 31, 2017 and recognized as tax benefit.

The Company evaluated the expected recoverability of its net deferred tax assets as of  December 31, 2016 and 2015 and determined that there was insufficient positive evidence to support the recoverability of these net deferred tax assets, concluding it is more likely than not that the Company’s net deferred tax assets would not be realized in the future; therefore, the Company provided a full valuation allowance against its net deferred tax asset balance as of December 31, 2016 and 2015 and did not recognize any tax benefit for the years ended December 31, 2016 and 2015.

On December 22, 2017, the President of the United States signed into law the 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 repeal of the corporate alternative minimum tax. The TCJA reduced the U.S. corporate tax rate from the current rate of 34 percent down to 21 percent starting on January 1, 2018. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at 21 percent. This revaluation resulted in a provision of $61.6 million to income tax expense in continuing operations related to the reduction in the carrying value of the Company’s deferred tax assets, offset by a corresponding reduction in the valuation allowance.  The Company’s preliminary estimate of the effects of the TCJA, including the remeasurement of deferred tax assets and liabilities and the evaluation of the recoverability of the deferred tax assets related to AMT credits, is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the TCJA, changes to certain estimates and the filing of the Company’s tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the TCJA may require further adjustments and changes in the Company’s estimates. The final determination of the TCJA and the remeasurement of deferred assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the TCJA. In all cases, the Company will continue to make and refine its calculations as additional analysis is completed. In addition, the Company’s estimates may also be affected as it gains a more thorough understanding of the tax law.

As of December 31, 2017, the Company had operating loss carryforwards of approximately $428.5 million and $428.7 million available to offset future taxable income for United States federal and state income tax purposes, respectively. The U.S. federal tax operating loss carryforwards expire commencing in 2029. The state tax operating loss carryforwards expire commencing in 2030.

Additionally, as of December 31, 2017, the Company had research and development tax credit carryforwards of approximately $7.2 million and $2.5 million available to be used as a reduction of federal income taxes and state income taxes, respectively, which expire at various dates from 2028 through 2037, as well as federal orphan drug tax credit carryforwards of $14.7 million, which would expire at various dates from 2033 through 2037, and a $0.4 million federal alternative minimum tax credit carryforward. The Company’s ability to use its operating loss carryforwards and tax credits to offset future taxable income is subject to restrictions under Section 382 of the U.S. Internal Revenue Code, (“the Internal Revenue Code”). These restrictions may limit the future use of the operating loss carryforwards and tax credits if certain ownership changes described in the Internal Revenue Code occur. Future changes in stock ownership may occur that would create further limitations on the Company’s use of the operating loss carryforwards and tax credits. In such a situation, the Company may be required to pay income taxes, even though significant operating loss carryforwards and tax credits exist. 

Uncertain Tax Positions

The following is a rollforward of the Company’s unrecognized tax benefits:

 

 

None of the Company’s unrecognized tax benefits would result in income tax expense or impact the Company’s effective tax rate if recognized. The Company had no accrued tax-related interest or penalties as of December 31, 2017 or 2016.

The Company files income tax returns in the U.S. federal tax jurisdiction and Colorado, Indiana, Massachusetts, and North Carolina state tax jurisdictions. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available.