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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
INCOME TAXES |
INCOME TAXES | 10. INCOME TAXES The impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense are as follows:
|  | Year Ended December 31, |
(In thousands) |  | 2017 |  | 2016 |  | 2015 |
Expected tax at federal statutory rate |  | $ | 46,997 |  | $ | 20,871 |  | $ | (6,372 | )
State income tax, net of federal benefit |  |  | 4 |  |  | — |  |  | — |
Non-deductible executive compensation |  |  | 987 |  |  | 925 |  |  | 306 |
Other |  |  | (1,506 | ) |  | (122 | ) |  | 170 |
Impact of tax reform rate change |  |  | 124,017 |  |  | — |  |  | — |
Change in valuation allowance |  |  | (170,495 | ) |  | (21,579 | ) |  | 5,896 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax expense |  | $ | 4 |  | $ | 95 |  | $ | — |
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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and deferred tax liabilities are as follows:
|  | As of December 31, |
(In thousands) |  | 2017 |  | 2016 |
Deferred tax assets |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 257,000 |  | $ | 417,000 |
Deferred revenues |  |  | — |  |  | 1,000 |
Research and development tax credit carryforwards |  |  | 57,000 |  |  | 53,000 |
Other |  |  | 3,000 |  |  | 13,000 |
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Total deferred tax assets before valuation allowance |  |  | 317,000 |  |  | 484,000 |
Valuation allowance |  |  | (303,000 | ) |  | (484,000 | )
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Total deferred tax assets |  |  | 14,000 |  |  | — |
Deferred tax liabilities |  |  |  |  |  |  |
Debt issuance discount and other |  |  | (14,000 | ) |  | — |
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Net deferred tax assets |  | $ | — |  | $ | — |
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Realization of deferred tax assets is dependent on future taxable income. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by $181.2 million in the year ended December 31, 2017, increased by $20.6 million in the year ended December 31, 2016, and increased by $4.7 million in the year ended December 31, 2015. The decrease in the valuation allowance in the year ended December 31, 2017 was primarily related to net operating losses utilization during 2017, and remeasurement of the deferred tax assets and liabilities due to enactment of Tax Cuts and Jobs Act. The increase in the valuation allowance in the year ended December 31, 2016 was primarily due to early adoption of the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, ("ASU 2016-09"), for which we recognized additional excess stock option tax benefits of $46.9 million in net operating loss carryforwards. As of December 31, 2017, we had federal net operating loss carryforwards of approximately $1.0 billion, which will expire from 2026 through 2035, and federal research and development tax credit carryforwards of approximately $45.2 million, which will expire from 2018 through 2034. We also had state net operating loss carryforwards of approximately $654.2 million expiring in the years 2028 through 2035 and state research tax credits of approximately $32.3 million, which do not expire. Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2017 and 2016, we had no accrued interest or penalties. The Company conducted a 382 analysis through December 31, 2016 to determine whether an ownership change had occurred since inception. The Section 382 study concluded that it is more likely than not that the Company did not experience an ownership change during the testing period. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards are expected to expire before becoming available to reduce federal and state income tax liabilities as a result of those identified ownership changes. If we undergo another ownership change, the utilization of the pre-ownership change net operating loss carryforwards or pre-ownership change tax attributes, such as research tax credits, to offset the post-ownership change income may be subject to an annual limitation, pursuant to Section 382 and 383 of the Internal Revenue Code of 1986, as amended. Similar rules may apply under state tax laws. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%, and creating a new limitation on deductible interest expense. The Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. The staff of the SEC has recognized the complexity of reflecting the impacts of the TCJA, and, on December 22, 2017, issued guidance in Staff Accounting Bulletin 118 ("SAB 118"). SAB 118 clarifies accounting for income taxes under ASC Topic 740, Income Taxes ("ASC 740"), if information is not yet available or complete and provides for up to a one-year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or "buckets") associated with a company's status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the TCJA being enacted. The Company has recognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities. The Company has recorded a net decrease related to federal deferred tax assets and deferred tax liabilities of $124.0 million, with an offsetting change in valuation allowance of $124.0 million for the year ended December 31, 2017. The ultimate impact may differ from provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. Uncertain Tax Positions A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows (in thousands):
Unrecognized tax benefits as of December 31, 2014 |  | $ | 15,459 |
Gross increase in tax portions for 2015 |  |  | 29 |
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Unrecognized tax benefits as of December 31, 2017, 2016 and 2015 |  | $ | 15,488 |
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In the event that we are able to recognize these uncertain positions, most of the $15.5 million of the unrecognized benefit would reduce our effective tax rate. We currently have a full valuation allowance against our deferred tax assets, which would impact the timing of the effective tax rate benefit, should any of these uncertain positions be favorably settled in the future. We do not believe it is reasonably possible that our unrecognized tax benefits will significantly change within the next twelve months. We are subject to taxation in the U.S. and various state jurisdictions. The tax years 1999 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.

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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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