15.	Income Taxes

Consolidated income (loss) before provision for income taxes consisted of the following (in thousands):

	Year Ended December 31,
	2015			2014			2013
U.S.	$	(107,450	)	$	(91,121	)	$	(67,004	)
Non U.S.		656			399			284
Total	$	(106,794	)	$	(90,722	)	$	(66,720	)

No income tax expense was recorded for the years ended December 31, 2015, 2014 and 2013 due to net operating loss carryforwards to offset the net income at Dynavax GmbH and a valuation allowance which offsets the deferred tax assets. The difference between the consolidated income tax benefit and the amount computed by applying the federal statutory income tax rate to the consolidated loss before income taxes was as follows (in thousands):

	Year Ended December 31,
	2015			2014			2013
Income tax benefit at federal statutory rate	$	(36,301	)	$	(30,818	)	$	(22,678	)
State tax		(394	)		1,204			(178	)
Business credits		(2,622	)		(1,484	)		(2,515	)
Deferred compensation charges		1,481			2,710			3,072
Change in valuation allowance		36,766			28,093			22,354
Other		1,070			295			(55	)
Total income tax expense	$	-		$	-		$	-

Deferred tax assets and liabilities consisted of the following (in thousands):

	December 31,
	2015			2014
Deferred tax assets:
Net operating loss carry forwards	$	212,074		$	178,008
Research tax credit carry forwards		26,285			22,914
Accruals and reserves		9,771			9,053
Capitalized research costs		6,553			8,601
Deferred revenue		908			654
Other		1,375			1,531
Total deferred tax assets		256,966			220,761
Less valuation allowance		(256,712	)		(220,544	)
Net deferred tax assets		254			217
Deferred tax liabilities:
Fixed Assets		(254	)		(217	)
Total deferred tax liabilities		(254	)		(217	)
Net deferred tax assets	$	-		$	-

The tax benefit of net operating losses, temporary differences and credit carryforwards is required to be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Because of our recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance. The valuation allowance increased by $36.2 million, $27.8 million and $22.5 million during the years ended December 31, 2015, 2014 and 2013, respectively. The amount of the valuation allowance for deferred tax assets associated with excess tax deductions from stock based compensation arrangements that will be allocated to contributed capital if the future tax benefits are subsequently recognized is $0.3 million.

We intend to postpone remittance of all or part of net investment in Dynavax GmbH (including earnings) indefinitely (i.e., essentially permanently reinvest). As of December 31, 2015, we have cumulative total undistributed losses for non-U.S. subsidiaries.

We have not recorded deferred income taxes applicable to undistributed earnings of a foreign subsidiary that are indefinitely reinvested in foreign operations. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of the deferred tax liability on such undistributed earnings.

As of December 31, 2015, we had federal net operating loss carryforwards of approximately $582.8 million, which will expire in the years 2018 through 2035 and federal research and development tax credits of approximately $19.1 million, which expire in the years 2018 through 2035.

As of December 31, 2015, we had net operating loss carryforwards for California state income tax purposes of approximately $192.9 million, which expire in the years 2015 through 2035, and California state research and development tax credits of approximately $14.0 million, which do not expire.

As of December 31, 2015, we had net operating loss carryforwards for foreign income tax purposes of approximately $18.8 million, which do not expire.

Uncertain Income Tax positions

The total amount of unrecognized tax benefits as of December 31, 2015 and 2014 is $2.4 million. If recognized, none of the unrecognized tax benefits would affect the effective tax rate. We had no unrecognized tax benefits as of December 31, 2013.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

Balance at December 31, 2014	$	(2,426	)
Tax positions related to the current year
Additions		-
Reductions		-
Tax positions related to the prior year
Additions		-
Reductions		-
Balance at December 31, 2015	$	(2,426	)

Our policy is to account for interest and penalties, if any, as a component of general and administrative expense. As of December 31, 2015, the Company had no interest related to unrecognized tax benefits. No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes.

The Tax Reform Act of 1986 limits the annual use of net operating loss and tax credit carryforwards in certain situations where changes occur in stock ownership of a company. In the event the Company has a change in ownership, as defined, the annual utilization of such carryforwards could be limited. Due to past equity issuances and changes in ownership of Dynavax common stock, we believe that our ability to use some of our net operating losses and tax credits in the future may be limited.

We are subject to income tax examinations for U.S. federal and state income taxes from 1996 forward. We are subject to tax examination in Germany from 2010 forward.