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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 9. Income Taxes Components of income tax expense for continuing operations were as follows:
| Year Ended December 31, |
(in thousands) | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | — |  |  | $ | (100 | ) |  | $ | — |
State |  | 9,530 |  |  |  | 830 |  |  |  | — |
Total income tax expense | $ | 9,530 |  |  | $ | 730 |  |  | $ | — |
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate due to the following:
|  | December 31, |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Federal income taxes at 21% for 2019 and 2018 and 35% for 2017 |  | $ | 9,775 |  |  | $ | 4,587 |  |  | $ | (49,889 | )
State income tax, net of federal benefit |  |  | 4,044 |  |  |  | 361 |  |  |  | (4,013 | )
Tax effect on non-deductible expenses |  |  | 855 |  |  |  | 446 |  |  |  | 433 |
Branded prescription drug fee |  |  | 3,707 |  |  |  | — |  |  |  | — |
Share-based compensation expense |  |  | (12,785 | ) |  |  | (9,778 | ) |  |  | (19,589 | )
Officer compensation |  |  | 3,068 |  |  |  | 915 |  |  |  | 2,163 |
Change in tax rate |  |  | (4,143 | ) |  |  | (198 | ) |  |  | 154,415 |
Expired tax attributes |  |  | 1,228 |  |  |  | 13,874 |  |  |  | 2,998 |
Research credits |  |  | (10,359 | ) |  |  | (13,526 | ) |  |  | (5,596 | )
Change in valuation allowance |  |  | 13,883 |  |  |  | 4,306 |  |  |  | (79,966 | )
Other |  |  | 257 |  |  |  | (257 | ) |  |  | (956 | )
|  | $ | 9,530 |  |  | $ | 730 |  |  | $ | — |
Significant components of our deferred tax assets as of December 31, 2019 and 2018 are listed below. We assess all available positive and negative evidence to estimate whether sufﬁcient future taxable income will be generated to permit use of the existing deferred tax assets. A signiﬁcant piece of objective negative evidence evaluated was the cumulative book loss incurred over the three-year period ended December 31, 2019. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. On the basis of this analysis, we recorded a valuation allowance of $346.0 million and $335.2 million at December 31, 2019 and 2018, respectively, to offset the net deferred tax asset below as realization of such asset is uncertain. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future growth.
|  | December 31, |
(in thousands) |  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses |  | $ | 181,300 |  |  | $ | 223,800 |
Research and development credits |  |  | 71,900 |  |  |  | 62,200 |
Capitalized research and development |  |  | 28,000 |  |  |  | 34,800 |
Share-based compensation expense |  |  | 22,900 |  |  |  | 17,300 |
Operating lease assets |  |  | 23,300 |  |  |  | 100 |
Intangible assets |  |  | 49,300 |  |  |  | 9,400 |
Other |  |  | 18,500 |  |  |  | 19,100 |
Total deferred tax assets |  |  | 395,200 |  |  |  | 366,700 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Convertible senior notes |  |  | (24,100 | ) |  |  | (26,400 | )
Operating lease liabilities |  |  | (18,200 | ) |  |  | — |
Other |  |  | (6,900 | ) |  |  | (5,100 | )
Total deferred tax liabilities |  |  | (49,200 | ) |  |  | (31,500 | )
Net of deferred tax assets and liabilities |  |  | 346,000 |  |  |  | 335,200 |
Valuation allowance |  |  | (346,000 | ) |  |  | (335,200 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
At December 31, 2019, we had federal and state income tax net operating loss carry forwards of approximately $816.2 million and $359.8 million, respectively. The federal net operating losses will begin to expire in 2024, 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, we have federal and California R&D tax credit carry forwards of $73.2 million and $47.5 million, respectively. A portion of the federal R&D tax credit carry forwards expired in 2019. The remaining federal R&D tax credits will continue to expire in 2020, unless previously utilized. The California R&D tax credits carry forward indefinitely. Additionally, the future utilization of our net operating loss and R&D tax credit carry forwards to offset future taxable income may be subject to annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that could result in the future. No such ownership changes have occurred through December 31, 2019. 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. Our 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 2019, 2018 or 2017. We are subject to taxation in the U.S. and various state jurisdictions. Our tax years for 2001 (federal) and 2008 (California) and forward are subject to examination by federal and state tax authorities due to the carry forward of unutilized net operating losses and R&D tax credits. A summary of activity related to unrecognized tax benefits follows:
|  | Year Ended December 31, |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at January 1 |  | $ | 54,775 |  |  | $ | 37,403 |  |  | $ | 34,112 |
Increases related to prior year tax positions |  |  | 281 |  |  |  | 6,103 |  |  |  | — |
Increases related to current year tax positions |  |  | 9,519 |  |  |  | 11,726 |  |  |  | 3,291 |
Expiration of the statute of limitations for the assessment of taxes |  |  | (657 | ) |  |  | (457 | ) |  |  | — |
Balance at December 31 |  | $ | 63,918 |  |  | $ | 54,775 |  |  | $ | 37,403 |
We excluded deferred tax assets that are not more-likely-than-not to be sustained under the technical merits of the tax position. Such unrecognized tax benefits totaled $9.5 million for current year tax positions, as reflected in the table above. At December 31, 2019, we had $57.9 million of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate, subject to the valuation allowance. We do not expect a significant change in our unrecognized tax benefits in the next twelve months.

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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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