v3.3.1.900

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2015
Income Taxes |
Income Taxes | 12. Income Taxes The Company's effective tax rates for the years ended December 31, 2015 and 2014 differ from the U.S. federal statutory rate as follows:
|  | December 31, |
|  | 2015 |  |  | 2014 |
|  | (in thousands, except percentages) |
U.S. federal taxes (benefit) at statutory rate |  | $ | (24,375) |  | (34.00) | % |  | $ | (1,747) |  | (34.00) | %
State tax expense |  |  | (2,428) |  | (3.39) | % |  |  | (294) |  | (5.72) | %
Research and development credits |  |  | (751) |  | (1.05) | % |  |  | (530) |  | (10.32) | %
Stock-based compensation |  |  | 1,683 |  | 2.35 | % |  |  | 755 |  | 14.70 | %
Mark to market fair value adjustments |  |  | 504 |  | 0.70 | % |  |  | 566 |  | 11.01 | %
Other nondeductible items |  |  | 841 |  | 1.17 | % |  |  | 414 |  | 8.05 | %
Change in valuation allowance |  |  | 24,526 |  | 34.21 | % |  |  | 851 |  | 16.57 | %
Provision for income taxes |  | $ | — |  | — | % |  | $ | 15 |  | 0.29 | %
Due to its history of operating losses, the Company has not recorded any income tax expense for the years ended December 31, 2015 and December 31, 2014, except for $15 thousand of state income tax expense in 2014. As the provision for income taxes is not significant for 2015 and 2014, any income taxes have been reclassed in other income and expenses. Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liab ilities for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss and tax credit carryforwards. Th e components of the net deferred income tax assets are as follows:
|  | December 31, |
|  | 2015 |  | 2014 |
|  | (in thousands) |
Deferred tax assets |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 41,451 |  | $ | 21,587 |
Research and development tax credit carryforwards |  |  | 4,794 |  |  | 2,696 |
Reserves and accruals |  |  | 3,108 |  |  | 1,717 |
Stock-based compensation |  |  | 2,206 |  |  | 1,505 |
Total deferred tax assets before valuation allowance |  |  | 51,559 |  |  | 27,505 |
Less: valuation allowance |  |  | (51,153) |  |  | (26,627) |
|  |  | 406 |  |  | 878 |
Deferred tax liabilities |  |  |  |  |  |  |
Property and equipment |  |  | (406) |  |  | (878) |
Net deferred tax assets |  | $ | — |  | $ | — |
The Company established a full valuation allowance against its net deferred tax assets in 2015 and 2014 due to the uncertainty surrounding realization of these assets. The valuation allowance increased by $24.5 million, $0.9 million and $10.8 million during the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, the Company had federal and state net operating loss (NOLs) carryforwards of approximately $114.5 million and $73.2 million, respectively, which begin to expire in 2027 and 2017, respectively, if not utilized. The deferred tax assets related to NOLs do not include excess tax benefits from employee stock option exercises. Equity will be increased by $1.4 million, if and when such deferred tax assets are ultimately realized. The Company uses ASC 740 ordering when determining when excess tax benefits have been realized. The Company also had federal research and development credit carryforwards of approximately $4.6 million, which begin to expire in 2027, and state research and development credit carryforwards of approximately $3.4 million, which can be carried forward indefinitely. Realization of these deferred tax assets would require $138.8 million in taxable income to fully utilize. Realization is dependent on generating sufficient taxable income prior to expiration of the loss and credit carryforwards. Federal and California tax laws impose substantial restrictions on the utilization of NOLs and credit carryforwards in the event of an "ownership change" for tax purpose, as defined in Section 382 of the Internal Revenue Code. Accordingly, the Company's ability to utilize these carryforwards may be limited as the result of such ownership change. Such a limitation could result in limitation in the use of the NOLs in future years and possibly a reduction of the NOLs available. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|  | December 31, |
|  | 2015 |  | 2014 |
|  | (in thousands) |
Balance at beginning of year |  | $ | 1,360 |  | $ | 898 |
Additions based on tax positions related to the current year |  |  | 1,045 |  |  | 462 |
Additions for tax positions of prior years |  |  | — |  |  | — |
Balance at end of year |  | $ | 2,405 |  | $ | 1,360 |
The Company adopted the provisions of ASC 740-10-50, Accounting for Uncertainty in Income Taxes, on January 1, 2009. During the years ended December 31, 2015 and 2014, the amount of unrecognized tax benefits increased $1.0 million and $0.5 million, respectively, due to additional research and development credits generated during the year. As of December 31, 2015 and 2014, the total amount of unrecognized tax benefits was $2.4 million and $1.4 million, respectively. The reversal of the uncertain tax benefits would not affect the Company's effective tax rate to the extent that it continues to maintain a full valuation allowance against its deferred tax assets. The Company is subject to U.S. federal income taxes and to income taxes in various states in the United States. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations, and require significant judgment to apply. The Company is subject to U.S. federal, state and local tax examinations by tax authorities for all prior tax years since incorporation. The Company does not anticipate significant changes to its current uncertain tax positions through December 31, 2016. The Company recognizes any interest and/or penalties related to income tax matters as a component of income tax expense. As of December 31, 2015, there were no accrued interest and penalties related to uncertain tax positions.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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