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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 8. Income Taxes Domestic and foreign pre-tax loss is as follows (in thousands):
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Domestic |  |  | (78,112 | ) |  | $ | (45,249 | ) |  | $ | (18,419 | )
Foreign |  |  | (165,824 | ) |  |  | (243,035 | ) |  |  | (251,633 | )
|  |  | (243,936 | ) |  | $ | (288,284 | ) |  | $ | (270,052 | )
At December 31, 2018, the Company had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $393.0 million, $339.0 million, and $771.9 million, respectively. The Company recognized state income tax provisions of $1.3 million, $1.1 million and $1.3 million for the years ended December 31, 2018, 2017 and 2016, 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, 2018 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 $17.0 million and less than $0.1 million will expire in 2025 and 2024, respectively, unless utilized. The remaining federal and state NOL carryforwards will begin to expire in 2026 and 2025, respectively. At December 31, 2018, the Company had $26.3 million of federal R&D credit carryforwards of which $0.1 million will expire in 2019 unless utilized, and the remaining federal R&D credit carryforwards will begin to expire in 2020. At December 31, 2018, the Company had state R&D credit carryforwards of approximately $0.5 million that will begin to expire in 2024 and $11.3 million that have no expiration date. At December 31, 2018, the Company had foreign NOL carryforwards of approximately $768.5 million that will begin to expire in 2022 and $3.4 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 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, |
|  | 2018 |  |  | 2017 |
NOL carryforwards |  | $ | 170,476 |  |  | $ | 163,059 |
R&D credit carryforwards |  |  | 32,984 |  |  |  | 27,862 |
Capitalized R&D |  |  | 7,421 |  |  |  | 5,606 |
Stock-based compensation |  |  | 45,492 |  |  |  | 30,986 |
Other |  |  | 14,750 |  |  |  | 10,110 |
|  |  | 271,123 |  |  |  | 237,623 |
Valuation allowance |  |  | (271,123 | ) |  |  | (237,623 | )
|  | $ | — |  |  | $ | — |
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 $33.5 million in 2018 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 2018. In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act included a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. The 2017 Tax Act also provided for a one-time transition tax on certain foreign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, global intangible low taxed income, foreign derived intangible income deduction, additional limitations on executive compensation and limitations on the deductibility of interest. The Company recognized the income tax effects of the 2017 Tax Act in its 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the 2017 Tax Act was signed into law. As such, the Company’s financial results reflected the income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 was complete and provisional amounts for those specific income tax effects of the 2017 Tax Act which were not complete. As of December 31, 2018, the accounting for the income tax effects of the 2017 Tax Act is complete. The effects of the 2017 Tax Act did not have a significant impact in 2018 and are included as part of the overall 2018 provision calculation. 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, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Amounts computed at statutory federal rate |  | $ | (51,226 | ) |  | $ | (98,016 | ) |  | $ | (91,818 | )
Stock-based compensation and other permanent differences |  |  | 3,432 |  |  |  | 1,341 |  |  |  | 3,065 |
R&D credits |  |  | (7,941 | ) |  |  | (5,573 | ) |  |  | (3,390 | )
Change in valuation allowance |  |  | 34,333 |  |  |  | (28,230 | ) |  |  | 27,583 |
State taxes |  |  | (1,017 | ) |  |  | (26 | ) |  |  | 272 |
Contingencies |  |  | 2,938 |  |  |  | 360 |  |  |  | 361 |
Foreign rate differential |  |  | 20,896 |  |  |  | 61,480 |  |  |  | 64,065 |
Tax Cuts and Jobs Act |  |  | — |  |  |  | 68,889 |  |  |  | — |
Other |  |  | (159 | ) |  |  | 894 |  |  |  | 1,203 |
Income tax expense |  | $ | 1,256 |  |  | $ | 1,119 |  |  | $ | 1,341 |
The tax years 1998-2017 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 $3.1 million, $0.4 million and $0.4 million for the years ended December 31, 2018, 2017 and 2016, respectively. In addition, due to the 2017 Tax Act, an 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, 2018 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, 2018 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, 2018 or 2017, respectively. Further, the Company did not recognize any interest and/or penalties in the statement of operations for the years ended December 31, 2018, 2017 and 2016, respectively, related to uncertain tax positions. The following table provides a reconciliation of changes in unrecognized tax benefits (in thousands):
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Balance at beginning of period |  | $ | 1,933 |  |  | $ | 2,664 |  |  | $ | 2,301 |
Additions related to current period tax positions |  |  | 3,104 |  |  |  | 361 |  |  |  | 363 |
Provisional impact of Tax Cuts and Jobs Act |  |  | — |  |  |  | (1,092 | ) |  |  | — |
Balance at end of period |  | $ | 5,037 |  |  | $ | 1,933 |  |  | $ | 2,664 |

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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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