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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 13. INCOME TAXES At December 31, 2017, the Company had deferred tax assets of $362.7 million and deferred tax liabilities of $31.8 million. Due to uncertainties surrounding the Company’s ability to generate future taxable income, a full valuation has been established to offset the net deferred tax assets and liabilities. Additionally, the future utilization of the Company’s net operating loss and R&D credit carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that could occur in the future. The Company has determined that no ownership changes have occurred through December 31, 2016 and is currently evaluating whether any ownership changes occurred through December 31, 2017. At December 31, 2017, the Company had Federal and state income tax net operating loss carry forwards of approximately $978.7 million and $535.3 million, respectively. The Federal tax loss carry forwards will begin to expire in 2021, unless previously utilized. The California net operating loss carry forwards will begin to expire in 2018 and net operating loss carry forwards related to other states will begin to expire in 2027. In addition, the Company has Federal and California R&D tax credit carry forwards of $48.2 million and $34.6 million, respectively. The Federal R&D tax credit carry forwards begin expiring in 2018 and will continue to expire unless utilized. The California R&D tax credit carryforwards carry forward indefinitely. The Company also has Federal Alternative Minimum Tax credit carryforwards of approximately $100,000. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the 2017 Tax Act) was enacted reducing the corporate tax rate from 35% to 21% which is effective on January 1, 2018. The carrying value of the Company’s deferred tax assets is also determined by the enacted U.S. corporate income tax rate. Consequently, any changes in the U.S. corporate income tax rate have impacted the carrying value of the Company’s deferred tax assets. Under the new corporate income tax rate of 21%, deferred income taxes decreased but there is a corresponding decrease to the valuation allowance. Therefore, the 2017 Tax Act is expected to have no impact on the Company’s 2017 earnings. In accordance with Staff Accounting Bulletin 118, as of December 31, 2017, the Company has not completed its accounting for the tax effects of the enactment of the 2017 Tax Act; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2017 and 2016 are listed below. A valuation allowance of $330.9 million and $463.5 million at December 31, 2017 and 2016, respectively, has been recognized to offset net deferred tax assets as realization of such assets is uncertain. Amounts are shown as of December 31 as of each respective year (in thousands):
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses |  | $ | 238,500 |  |  | $ | 309,100 |
Research and development credits |  |  | 47,500 |  |  |  | 38,800 |
Capitalized research and development |  |  | 47,500 |  |  |  | 80,200 |
Share-based compensation expense |  |  | 14,600 |  |  |  | 17,400 |
Deferred revenue |  |  | 2,800 |  |  |  | 4,300 |
Deferred gain on sales leaseback |  |  | 2,100 |  |  |  | 3,800 |
Intangibles |  |  | 1,700 |  |  |  | 4,800 |
Cease-use expense |  |  | — |  |  |  | 300 |
Fixed assets |  |  | — |  |  |  | 400 |
Other |  |  | 8,000 |  |  |  | 4,400 |
Total deferred tax assets |  |  | 362,700 |  |  |  | 463,500 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Convertible debt |  |  | (31,300 | ) |  |  | — |
Fixed assets |  |  | (500 | ) |  |  | — |
Total deferred tax liabilities |  |  | (31,800 | ) |  |  | — |
Net of deferred tax assets and liabilities |  |  | 330,900 |  |  |  | 463,500 |
Valuation allowance |  |  | (330,900 | ) |  |  | (463,500 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2017, 2016 and 2015, due to the following (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Federal income taxes at 35% |  | $ | (49,889 | ) |  | $ | (49,383 | ) |  | $ | (31,126 | )
State income tax, net of Federal benefit |  |  | (4,013 | ) |  |  | 2 |  |  |  | 2 |
Tax effect on non-deductible expenses |  |  | 433 |  |  |  | (321 | ) |  |  | 172 |
Share-based compensation expense |  |  | (19,589 | ) |  |  | (5,077 | ) |  |  | 201 |
Officer compensation |  |  | 2,163 |  |  |  | — |  |  |  | — |
Change in tax rate |  |  | 154,415 |  |  |  | — |  |  |  | 10,773 |
Expired tax attributes |  |  | 2,998 |  |  |  | 6,708 |  |  |  | 5,594 |
Research credits |  |  | (8,352 | ) |  |  | (6,511 | ) |  |  | (6,638 | )
Change in valuation allowance |  |  | (79,966 | ) |  |  | 53,414 |  |  |  | 15,029 |
Uncertain tax positions |  |  | 2,756 |  |  |  | 957 |  |  |  | 5,940 |
Other |  |  | (956 | ) |  |  | 211 |  |  |  | 53 |
|  | $ | — |  |  | $ | — |  |  | $ | — |
Under the FASB’s accounting guidance related to uncertain tax positions, among other things, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the guidance provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s consolidated balance sheets at December 31, 2017 or December 31, 2016, and has not recognized interest and/or penalties in the statement of comprehensive loss for the years ended December 31, 2017 and December 31, 2016. The Company is subject to taxation in the United States and various state jurisdictions. The Company’s tax years for 1998 (federal) and 2002 (California) and forward are subject to examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses and R&D credits. The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance as of the beginning of the year |  | $ | 34,112 |  |  | $ | 33,074 |  |  | $ | 23,854 |
Increases related to prior year tax positions |  |  | — |  |  |  | 260 |  |  |  | 6,636 |
Increases related to current year tax positions |  |  | 3,291 |  |  |  | 2,211 |  |  |  | 2,584 |
Expiration of the statute of limitations for the assessment of taxes |  |  | — |  |  |  | (1,433 | ) |  |  | — |
Balance as of the end of the year |  | $ | 37,403 |  |  | $ | 34,112 |  |  | $ | 33,074 |
The Company, under authoritative guidance, excluded those deferred tax assets that are not more likely than not to be sustained under the technical merits of the tax position. These unrecognized tax benefits totaled $3.3 million for current year tax positions, as reflected in the tabular rollforward above. As of December 31, 2017, the Company had $30.7 million of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate. In the next twelve months, the Company does not expect a significant change in their unrecognized tax benefits.

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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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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