Entity information:
Income Taxes
The following table summarizes the components of our income tax (benefit) expense (in thousands):
 
 
 
Year ended December 31,
 
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
 
Federal
 
$
(143
)
 
$
—

 
$
—

State
 
1

 
1

 
1

 
 
(142
)
 
1

 
1

Deferred:
 
 
 
 
 
 
Federal
 
(55
)
 
(5
)
 
(17
)
State
 
—

 
—

 
(2
)
 
 
(55
)
 
(5
)
 
(19
)
Income tax (benefit)
 
$
(197
)
 
$
(4
)
 
$
(18
)

 
The following is a reconciliation of the expected statutory federal income tax provision to our actual income tax provision (in thousands):
 
 
Year ended December 31,
 
 
2017
 
2016
 
2015
Expected income tax benefit at federal statutory tax rate
 
$
(24,515
)
 
$
(27,826
)
 
$
(18,960
)
State income taxes, net of federal benefit
 
1

 
(1,152
)
 
(1,580
)
Tax credits
 
(5,151
)
 
(5,447
)
 
(5,039
)
Change in fair value of convertible note payable
 
—

 
—

 
616

Change in valuation allowance
 
(8,705
)
 
31,990

 
23,216

Prior year true-up
 
1

 
(1,320
)
 
110

Stock compensation
 
1,135

 
2,458

 
1,161

Reserve for uncertain tax positions
 
311

 
1,314

 
254

Tax Cuts and Jobs Act rate change
 
36,249

 
—

 
—

Other
 
477

 
(21
)
 
204

Income tax (benefit)
 
$
(197
)
 
$
(4
)
 
$
(18
)


The following table summarizes the significant components of our deferred tax assets and liabilities (in thousands):
 
 
December 31,
 
 
2017
 
2016
Deferred tax assets:
 
 
 
 
Net operating loss carryovers
 
$
66,549

 
$
70,739

Research and development and other tax credits
 
29,702

 
22,613

Deferred revenue
 
419

 
735

Stock compensation expense
 
4,238

 
5,664

Other
 
2,196

 
4,679

Total deferred tax assets
 
103,104

 
104,430

Total deferred tax liabilities
 
(408
)
 
(799
)
Net deferred tax asset
 
102,696

 
103,631

Valuation allowance
 
(102,641
)
 
(103,631
)
Net deferred tax asset
 
$
55

 
$
—


For all periods presented, we have determined that it is more likely than not that our deferred tax asset will not be realized. Accordingly, we have recorded a valuation allowance to offset the net deferred tax asset of $102.6 million.
As of December 31, 2017, we had federal and California tax net operating loss carryforwards of $265.8 million and $146.3 million, respectively, which begin to expire in 2030 and 2031. Upon adoption of ASU 2016-09 during 2017, the balance of the unrecognized excess tax benefits of $7.7 million has been reversed with the impact recorded to accumulated deficit, offset by a corresponding change in the valuation allowance. As of December 31, 2017, we also had federal and California research and development tax credit carryforwards of $27.5 million and $8.1 million, respectively. The federal research and development tax credit carryforwards will begin to expire in 2029. The California research and development tax credit carryforwards are available indefinitely. As of December 31, 2017, we also had $0.1 million of Federal Alternative Minimum Tax Credit carryforwards that are available indefinitely.
 
The future utilization of our research and development credit carryforwards and net operating loss carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. The Tax Reform Act of 1986 (the Act) limits a company’s ability to utilize certain tax credit carryforwards and net operating loss carryforwards in the event of a cumulative change in ownerships in excess of 50% as defined in the Act.
The following table summarizes the changes in the amount of our unrecognized tax benefits (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Beginning balance of unrecognized tax benefits
 
$
5,632

 
$
2,298

 
$
1,853

(Decrease) increase for prior year tax positions
 
(2,466
)
 
1,991

 
(250
)
Increase for current year tax positions
 
1,255

 
1,343

 
695

Total
 
$
4,421

 
$
5,632

 
$
2,298


Included in unrecognized tax benefits of $4.4 million at December 31, 2017 was $3.7 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to valuation allowance.
We are subject to taxation in the United States and California. Our tax years for 2009 and forward are subject to examination by the U.S. tax authorities and our tax years for 2009 and forward are subject to examination by the California tax authorities due to carryforward of unutilized net operating losses and research and development credits.
It is our practice to recognize interest and/or penalties related to income tax matters in income tax expense. For the years ended December 31, 2017, 2016 and 2015, we have not recognized any interest or penalties related to income taxes.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Act"). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. At December 31, 2017, we had not yet completed our accounting assessment for the tax effects of the enactment of the Act; however, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances. As a result of the lower enacted corporate tax rate, we have provisionally reduced the deferred tax asset balance as of December 31, 2017 by $36.2 million. Due to our full valuation allowance position, we have also reduced the valuation allowance by the same amount.
Due to uncertainties which currently exist in the interpretation of the provisions of the Act regarding Internal Revenue Code Section 162(m), we have not completed our evaluation of the potential impacts of IRC Section 162(m) as amended by the Act on its financial statements.
On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US 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 we have provisionally determined that there is no deferred tax benefit or expense with respect to the remeasurement of certain deferred tax assets and liabilities due to the full valuation allowance against net deferred tax assets. Additional analysis of the law and the impact to the company will be performed and any impact will be recorded in the respective quarter in 2018.