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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 8. Income Taxes Domestic and foreign pre-tax income (loss) is as follows (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Domestic |  |  | (45,249 | ) |  | $ | (18,419 | ) |  | $ | 25,854 |
Foreign |  |  | (243,035 | ) |  |  | (251,633 | ) |  |  | (189,967 | )
|  |  | (288,284 | ) |  | $ | (270,052 | ) |  | $ | (164,113 | )
At December 31, 2017, the Company had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $407.1 million, $340.0 million, and $647.4 million, respectively. The Company recognized state income tax provisions of $1.1 million, $1.3 million and $0.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. These tax liabilities were associated with California state alternative minimum tax obligations and the apportionment of income to certain state jurisdictions in which the Company did not have corresponding NOLs. Utilization of the domestic NOL and research and development (“R&D”) credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred or that could occur in the future, as required by Section 382 of the Code, as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. The Company previously completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from the Company’s formation through December 31, 2013. Based upon this study, the Company determined that several ownership changes had occurred. Accordingly, the Company reduced its deferred tax assets related to the federal NOL carryforwards and the federal R&D credit carryforwards that are anticipated to expire unused as a result of these ownership changes. These tax attributes were excluded from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on income tax expense or the effective tax rate. The Company completed a study through December 31, 2017 and concluded no additional ownership changes occurred. Future ownership changes may further limit the Company’s ability to utilize its remaining tax attributes. Federal and state NOL carryforwards of $2.3 million and less than $0.1 million will expire in 2018, respectively, unless utilized. The remaining federal and state NOL carryforwards will begin to expire in 2023. At December 31, 2017, the Company had $19.8 million of federal R&D credit carryforwards of which $0.1 million will expire in 2018 unless utilized, and the remaining federal R&D credit carryforwards will begin to expire in 2019. At December 31, 2017, the Company had state R&D credit carryforwards of approximately $0.2 million that will begin to expire in 2023 and $10.0 million that have no expiration date. At December 31, 2017, the Company had foreign NOL carryforwards of approximately $643.9 million that will expire in 2022 and $3.6 million that have no expiration date. The Company continues to record the deferred tax assets related to these attributes, subject to valuation allowance, until expiration occurs. Prior to the issuance of ASU No. 2016-09, entities were required to recognize excess tax benefit or deficiency as additional paid-in capital. To simplify the presentation of stock compensation, the amendments in this ASU require that the excess tax benefit or deficiency is recognized as expense. For public business entities, the amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company adopted the update as of January 1, 2017. Given the Company's full valuation position there is no quantitative impact to the financial statements. The components of the deferred tax assets are as follows (in thousands):
|  | December 31, |
|  | 2017 |  |  | 2016 |
NOL carryforwards |  | $ | 163,059 |  |  | $ | 168,753 |
R&D credit carryforwards |  |  | 27,862 |  |  |  | 21,016 |
Capitalized R&D |  |  | 5,606 |  |  |  | 3,977 |
Stock-based compensation |  |  | 30,986 |  |  |  | 27,576 |
Other |  |  | 10,110 |  |  |  | 6,102 |
|  |  | 237,623 |  |  |  | 227,424 |
Valuation allowance |  |  | (237,623 | ) |  |  | (227,424 | )
|  | $ | — |  |  | $ | — |
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $10.2 million in 2017 primarily due to an increase in deferred tax assets generated from net operating losses, R&D credits and stock-based compensation expense, partially offset by the expiration of NOL carryforwards in 2017 and the remeasurement of our deferred tax balance for changes in future tax rates. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into legislation. At December 31, 2017, the Company has not yet completed its accounting assessment for the tax effects of the enactment of the Act; however, as described below, the Company has made a reasonable estimate of the effects on the existing deferred tax balances. As a result of the lower enacted corporate tax rate, the Company has remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recorded related to the remeasurement of the Company’s deferred tax balance was $68.9 million, that is fully offset by a corresponding decrease to the valuation allowance. 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 Company has 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. The Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. 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. A reconciliation of income taxes to the amount computed by applying the statutory federal income tax rate to the pretax loss is summarized as follows (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Amounts computed at statutory federal rate |  | $ | (98,016 | ) |  | $ | (91,818 | ) |  | $ | (55,799 | )
Stock-based compensation and other permanent differences |  |  | 1,341 |  |  |  | 3,065 |  |  |  | 1,752 |
R&D credits |  |  | (5,573 | ) |  |  | (3,390 | ) |  |  | (3,782 | )
Change in valuation allowance |  |  | (28,230 | ) |  |  | 27,583 |  |  |  | 4,580 |
State taxes |  |  | (26 | ) |  |  | 272 |  |  |  | 742 |
Contingencies |  |  | 360 |  |  |  | 361 |  |  |  | 2,247 |
Foreign rate differential |  |  | 61,480 |  |  |  | 64,065 |  |  |  | 48,456 |
Tax Cuts and Jobs Act |  |  | 68,889 |  |  |  | — |  |  |  | — |
Other |  |  | 894 |  |  |  | 1,203 |  |  |  | 2,134 |
Income tax expense |  | $ | 1,119 |  |  | $ | 1,341 |  |  | $ | 330 |
The tax years 1998-2016 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination. The Company recorded an uncertain tax position reserve of $0.4 million, $0.4 million and $2.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. In addition, due to the Tax Cuts and Jobs Act a provisional adjustment of $1.1 million was made to remeasure the uncertain tax position reserve at December 31, 2017. Due to the valuation allowance recorded against the Company’s deferred tax assets, an immaterial amount of the total unrecognized tax benefits as of December 31, 2017 would reduce the annual effective tax rate if recognized. The Company does not anticipate that the amount of unrecognized tax benefits as of December 31, 2017 will significantly change within the next twelve months. The Company’s practice is to recognize interest and/or penalties related to uncertain income tax positions in income tax expense. The Company had no interest and/or penalties accrued on the Company’s consolidated balance sheets at December 31, 2017 or 2016, respectively. Further, the Company did not recognize any interest and/or penalties in the statement of operations for the years ended December 31, 2017, 2016 and 2015, respectively, related to uncertain tax positions. The following table provides a reconciliation of changes in unrecognized tax benefits (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at beginning of period |  | $ | 2,664 |  |  | $ | 2,301 |  |  | $ | — |
Additions related to current period tax positions |  |  | 361 |  |  |  | 363 |  |  |  | 2,301 |
Provisional impact of Tax Cuts and Jobs Act |  |  | (1,092 | ) |  |  | — |  |  |  | — |
Balance at end of period |  | $ | 1,933 |  |  | $ | 2,664 |  |  | $ | 2,301 |

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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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