Note 9: Income Taxes
There was no income tax benefit recognized for the years ended December 31, 2017, 2016 and 2015 due to the Company’s history of net losses combined with an inability to confirm recovery of the tax benefits from the Company’s losses and other net deferred tax assets. The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.
The reasons for the difference between actual income tax benefit for the years ended December 31, 2017, 2016 and 2015, and the amount computed by applying the statutory federal income tax rate to losses before income tax benefit are as follows:
|
|
|
Year Ended December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Income tax benefit at federal statutory rate |
|
$ |
(12,623 |
) |
|
$ |
(20,298 |
) |
|
$ |
(9,540 |
) |
|
State income taxes, net of federal benefit |
|
|
(762 |
) |
|
|
(1,204 |
) |
|
|
(741 |
) |
|
Non-deductible expenses |
|
|
235 |
|
|
|
229 |
|
|
|
608 |
|
|
Federal rate impact |
|
|
18,960 |
|
|
|
— |
|
|
|
— |
|
|
Distribution of intellectual property rights |
|
|
— |
|
|
|
— |
|
|
657 |
|
|
|
Research and development tax credits |
|
|
(1,732 |
) |
|
|
(1,692 |
) |
|
|
(767 |
) |
|
Other |
|
|
431 |
|
|
|
(124 |
) |
|
|
283 |
|
|
Change in valuation allowance |
|
|
(4,509 |
) |
|
|
23,089 |
|
|
|
9,500 |
|
|
Total income tax provision |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Deferred income taxes reflect the net tax effects 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 the Company’s deferred tax assets and deferred tax liabilities are as follows:
|
|
|
As of December 31, |
|
|||||
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Accrued compensation |
|
$ |
329 |
|
|
$ |
618 |
|
|
Accrued liabilities |
|
|
121 |
|
|
|
700 |
|
|
Tax loss carryforwards |
|
|
32,395 |
|
|
|
37,857 |
|
|
Intangible assets |
|
|
307 |
|
|
|
401 |
|
|
Share-based compensation |
|
|
728 |
|
|
|
412 |
|
|
Tax credits |
|
|
5,662 |
|
|
|
3,930 |
|
|
Facility financing lease obligation |
|
|
1,861 |
|
|
|
2,881 |
|
|
Other |
|
|
13 |
|
|
|
33 |
|
|
Total deferred tax assets |
|
|
41,416 |
|
|
|
46,832 |
|
|
Less valuation allowance |
|
|
(39,291 |
) |
|
|
(43,800 |
) |
|
Net deferred tax asset |
|
|
2,125 |
|
|
|
3,032 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Fixed assets |
|
|
(2,067 |
) |
|
|
(3,032 |
) |
|
Other |
|
|
(58 |
) |
|
|
— |
|
|
Net noncurrent deferred tax asset (liability) |
|
$ |
— |
|
|
$ |
— |
|
In December 2017, the Tax Cuts and Jobs Act, or TCJA, was signed into law. Among other things, the TCJA permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018. Based on provisions of the TCJA, the Company remeasured its deferred tax assets and liabilities to reflect the lower statutory tax rate, which resulted in a provision of $18,960 to income tax expense. However, there is no impact to our effective tax rate because a corresponding and offsetting reduction was made in the valuation allowance. The other provisions of the TCJA did not have a material impact on the consolidated financial statements. The Company’s deferred tax remeasurement is complete and all tax effects of the TJCA have been reflected in the Company’s income tax provision for the year ended December 31, 2017.
As of December 31, 2017, the Company had federal and state net operating loss carryforwards of $140,508 and $142,388, respectively. The net operating loss carryforwards begin to expire in 2028 and 2023 for federal and state tax purposes, respectively. As of December 31, 2017, the Company had charitable contribution carryforwards of approximately $63 available to offset future federal taxable income which will begin to expire in 2018. As of December 31, 2017, the Company had government research and development tax credits of approximately $5,662 to offset future federal taxes which begin to expire in 2028.
The Company had no unrecognized tax benefits as of December 31, 2017 and 2016. The Company does not anticipate a significant change in total unrecognized tax benefits within the next 12 months.
The Tax Reform Act of 1986 contains provisions which limit the ability to utilize the net operating loss carryforwards in the case of certain events including significant changes in ownership interests. If the Company’s net operating loss carryforwards are limited, and the Company has taxable income which exceeds the permissible yearly net operating loss carryforwards, the Company would incur a federal income tax liability even though net operating loss carryforwards would be available in future years.