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Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

6. Income Taxes

Our effective tax rate differs from the statutory federal income tax rate, primarily as a result of the changes in valuation allowance. There was no provision for taxes for the years ended December 31, 2021 and December 31, 2020. The provision for income taxes for the year ended December 31, 2019 was $0.3 million, which represents the current state alternative minimum tax for the year.

A reconciliation of the federal statutory income tax to our effective income tax is as follows (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended
​	​	December 31,
​	​	2021		​	2020		​	2019
Federal statutory income tax		$	17,352		$	(14,559)		$	5,709	​
State and local income taxes	​	​	783	​	​	(4,659)	​		2,549	​
Research and development credit	​		(10,492)	​		(9,669)	​		(6,747)	​
Stock-based compensation	​	​	2,424	​	​	529	​	​	1,927	​
State credit	​	​	—	​	​	—	​	​	1,725	​
Other	​	​	95	​	​	56	​		(301)	​
Change in state rate	​	​	2,599	​	​	—	​	​	—	​
Net change in valuation allowance	​	​	(12,761)	​	​	28,302	​		(4,550)	​
Income tax provision	​	$	—	​	$	—	​	$	312	​

The tax effect of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2021 and 2020 is presented below (in thousands):

​	​	​	​	​	​	​	​
​		December 31,
​	​	2021			2020		​
Deferred income tax assets	​	​	​	​	​	​	​
Net operating loss carryforwards	​	$	46,629	​	$	56,182	​
Research credits	​	​	48,128	​		38,047	​
Unrealized loss on securities	​	​	327	​		195	​
Capitalized lease assets	​	​	489	​	​	288	​
Accrued compensation	​	​	9,207	​		8,464	​
Deferred revenue	​	​	—	​		11,925	​
Gross deferred income tax assets	​	​	104,780	​		115,101	​
Valuation allowance	​		(93,580)	​		(105,995)	​
Net deferred income tax assets	​	​	11,200	​		9,106	​
Deferred income tax liabilities	​	​	​	​	​	​	​
Patent costs	​		(3,416)	​		(4,219)	​
Equity investment	​	​	(3,508)	​	​	(4,497)	​
Licensing costs	​		(151)	​		(194)	​
Capitalized legal costs	​		(13)	​		(21)	​
Depreciation	​	​	(288)	​	​	(151)	​
Unrealized gain on securities	​	​	(3,824)	​	​	(24)	​
Gross deferred income tax liabilities	​		(11,200)	​		(9,106)	​
Net deferred income tax asset	​	$	—	​	$	—	​

The Tax Cuts and Jobs Act of 2017 (TCJA) was enacted in December 2017 and made substantial changes in the U.S. tax system. One of the changes was elimination of the AMT tax system for corporations and allowance of an income tax refund for AMT tax credit carryforwards as of December 31, 2017. We have received an income tax refund of $0.8 million and $0.8 million for each year ended December 31, 2020 and 2019 for U.S. AMT credit carryforwards. We have net deferred tax assets relating primarily to net operating loss carryforwards and research and development tax credit carryforwards. Due to the uncertainty surrounding the realization of the benefits of our deferred tax assets in future tax periods, we have placed a valuation allowance against our deferred tax assets at December 31, 2021 and 2020. The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s net deferred income tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative losses that have resulted over the years. During the year ended December 31, 2021, the valuation allowance decreased by $12.4 million. The Company’s tax years starting in 2017 through 2020 remain open to potential examination by the U.S. and state taxing authorities due to carryforwards of net operating losses.

As of December 31, 2021, we had cumulative net operating loss carryforwards for federal and state income tax purposes of $168.2 million and $161.6 million, respectively, and available tax credit carryforwards of approximately $34.0 million for federal income tax purposes and $17.8 million for state income tax purposes, which can be carried forward to offset future taxable income, if any. The federal net operating loss carryforwards consist of $63.9 million of losses incurred prior to January 1, 2018, which are subject to carryforward limitations and $104.3 million of losses incurred after January 1, 2018, which may be carried forward indefinitely.

Our federal net operating loss carryforwards expire starting in 2026, state net operating loss carryforwards expire starting in 2035, and federal tax credit carryforwards began to expire in 2019. A total of $0.5 million in federal tax credits will expire over the next four years if not utilized. Utilization of our net operating loss and tax credit carryforwards are subject to a substantial annual limitation under Section 382 of the Code due to the fact that we have experienced ownership changes. As a result of these changes, certain of our net operating loss and tax credit carryforwards may expire before we can use them.

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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.

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