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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 9. INCOME TAXES The components of the income tax expense for continuing operations are as follows:
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (100 | ) |  | $ | — |  |  | $ | — |
State |  |  | 830 |  |  |  | — |  |  |  | — |
Total income tax expense |  | $ | 730 |  |  | $ | — |  |  | $ | — |
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate at December 31, 2018, 2017 and 2016, due to the following:
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Federal income taxes at 21% for 2018 and 35% for 2017 and 2016 |  | $ | 4,587 |  |  | $ | (49,889 | ) |  | $ | (49,383 | )
State income tax, net of federal benefit |  |  | 361 |  |  |  | (4,013 | ) |  |  | 2 |
Tax effect on non-deductible expenses |  |  | 446 |  |  |  | 433 |  |  |  | (321 | )
Share-based compensation expense |  |  | (9,778 | ) |  |  | (19,589 | ) |  |  | (5,077 | )
Officer compensation |  |  | 915 |  |  |  | 2,163 |  |  |  | — |
Change in tax rate |  |  | (198 | ) |  |  | 154,415 |  |  |  | — |
Expired tax attributes |  |  | 13,874 |  |  |  | 2,998 |  |  |  | 6,708 |
Research credits |  |  | (13,526 | ) |  |  | (5,596 | ) |  |  | (5,554 | )
Change in valuation allowance |  |  | 4,306 |  |  |  | (79,966 | ) |  |  | 53,414 |
Other |  |  | (257 | ) |  |  | (956 | ) |  |  | 211 |
|  | $ | 730 |  |  | $ | — |  |  | $ | — |
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017 are listed below. A valuation allowance of $335.2 million and $330.9 million at December 31, 2018 and 2017, 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) |  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses |  | $ | 223,800 |  |  | $ | 238,500 |
R&D credits |  |  | 62,200 |  |  |  | 47,500 |
Capitalized R&D |  |  | 34,800 |  |  |  | 47,500 |
Share-based compensation |  |  | 17,300 |  |  |  | 14,600 |
Other |  |  | 28,600 |  |  |  | 14,600 |
Total deferred tax assets |  |  | 366,700 |  |  |  | 362,700 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Convertible senior notes |  |  | (26,400 | ) |  |  | (31,300 | )
Fixed assets |  |  | (5,100 | ) |  |  | (500 | )
Total deferred tax liabilities |  |  | (31,500 | ) |  |  | (31,800 | )
Net of deferred tax assets and liabilities |  |  | 335,200 |  |  |  | 330,900 |
Valuation allowance |  |  | (335,200 | ) |  |  | (330,900 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
At December 31, 2018, the Company had federal and state income tax net operating loss carry forwards of approximately $1.0 billion and $398.0 million, respectively. The federal net operating losses will begin to expire in 2021, unless previously utilized. A portion of the California net operating loss carry forwards expired in 2018. The remaining California net operating losses will begin to expire in 2028 and the net operating losses related to other states will begin to expire in 2026. In addition, the Company has federal and California R&D tax credit carry forwards of $63.6 million and $41.6 million, respectively. A portion of the federal R&D tax credit carry forwards expired in 2018. The remaining federal R&D tax credits will continue to expire beginning in 2019, unless previously utilized. The California R&D tax credits carry forward indefinitely. Additionally, the future utilization of the Company’s net operating loss and R&D tax credit carry forwards to offset future taxable income may be subject to annual limitations, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that could result in the future. The Company has determined that no ownership changes have occurred through December 31, 2018. On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted, reducing the corporate income tax rate from 35% to 21% 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, with a corresponding decrease to the valuation allowance. Therefore, the TCJA had no impact on the Company's 2017 earnings. As of December 31, 2018, the Company has completed its accounting of the tax effects from the enactment of the TCJA. 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 FASB provides accounting guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company’s policy is to recognize interest or penalties related to income tax matters in income tax expense. Interest and penalties related to income tax matters were not material for the years ended December 31, 2018 or 2017. The Company is subject to taxation in the U.S. and various state jurisdictions. The Company’s tax years for 2001 (federal) and 2008 (California) and forward are subject to examination by the U.S. and state tax authorities due to the carry forward of unutilized net operating losses and R&D tax credits. The following table summarizes the activity related to unrecognized tax benefits:
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Balance as of the beginning of the year |  | $ | 37,403 |  |  | $ | 34,112 |  |  | $ | 33,074 |
Increases related to prior year tax positions |  |  | 6,103 |  |  |  | — |  |  |  | 260 |
Increases related to current year tax positions |  |  | 11,726 |  |  |  | 3,291 |  |  |  | 2,211 |
Expiration of the statute of limitations for the assessment of taxes |  |  | (457 | ) |  |  | — |  |  |  | (1,433 | )
Balance as of the end of the year |  | $ | 54,775 |  |  | $ | 37,403 |  |  | $ | 34,112 |
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 $11.7 million for current year tax positions, as reflected in the table above. As of December 31, 2018, the Company had $50.1 million of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate. In the next 12 months, the Company does not expect a significant change in its 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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