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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Taxes |
Income Taxes | 12. Income Taxes During the year ended December 31, 2016, 2015 and 2014, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items. As of December 31, 2016, the Company had federal NOL carryforwards of approximately $20.0 million and state NOL carryforwards of approximately $45.0 million which are available to reduce future taxable income. The NOLs will begin to expire in 2034, if not utilized. As of December 31, 2016, the Company also had $1.3 million of federal and $1.7 million of state research and development tax credit carryforwards available to reduce future income taxes. The federal research and development tax credits will begin to expire 2035, if not utilized. The state research and development tax credits have no expiration date. Utilization of NOL carryforwards and credits may be subject to an annual limitation due to the ownership change provisions provided by the Internal Revenue Code of 1986, as amended ("Code"), and similar state provisions. An annual limitation may result in the expiration of NOLs and credits before utilization. In March and April 2016, the Company issued a total of 5.2 million shares of common stock associated with its IPO. In addition, during the third quarter of 2015, the Company issued a new series of convertible preferred stock. The common and preferred stock issuances may have created an ownership change under these provisions of the Code and similar state provisions. As of December 31, 2016, NOLs and credits are not expected to expire unused in the carryforward period as a result of these recent issuances of convertible preferred shares. The components of loss before income tax is as follows (in thousands):
|  | 2016 |  | 2015 |  | 2014 |
Domestic |  | $ | (11,375 | ) | $ | (31,335 | ) | $ | (161 | )
Foreign |  |  | (25,000 | ) |  | — |  |  | — |
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|  | $ | (36,375 | ) | $ | (31,335 | ) | $ | (161 | )
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A reconciliation of the Company's effective tax rate to the U.S. Federal statutory rate is as follows:
|  | December 31, 2016 |  | December 31, 2015 |  | December 31, 2014 |
Federal tax benefit at statutory rate |  |  | 34 | % |  | 34 | % |  | 34 | %
State tax, net of Federal benefit |  |  | 8 |  |  | 3 |  |  | 6 |
Loss due to change in fair value of convertible preferred stock liability |  |  | — |  |  | (19 | ) |  | — |
Foreign rate differential |  |  | (23 | ) |  | — |  |  | — |
Change in valuation allowance |  |  | (19 | ) |  | (18 | ) |  | (40 | )
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Effective income tax rate |  |  | 0 | % |  | 0 | % |  | 0 | %
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The effective tax rate is different from the federal statutory tax rate primarily due to a foreign rate differential and a valuation allowance against deferred tax assets as a result of the Company's history of losses. The principal components of the Company's net deferred tax assets are as follows (in thousands)
|  | December 31, 2016 |  | December 31, 2015 |
Net operating loss carryforwards |  | $ | 9,339 |  | $ | 4,671 |
Tax credit carryforwards |  |  | 1,960 |  |  | 445 |
Capitalized tax assets |  |  | 241 |  |  | 528 |
Accruals |  |  | 230 |  |  | 108 |
Stock compensation |  |  | 954 |  |  | 43 |
Other |  |  | 67 |  |  | 71 |
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Total deferred tax assets |  |  | 12,791 |  |  | 5,866 |
Valuation allowance |  |  | (12,791 | ) |  | (5,866 | )
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Net deferred tax assets |  | $ | — |  | $ | — |
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The Company recorded a valuation allowance against its deferred tax assets at December 31, 2016 and 2015 because Company management believed that it was more likely than not that these assets would not be fully realized. The valuation allowance increased by approximately $ 7.0 million and $5.8 million for the years ended December 31, 2016 and 2015, respectively. Changes in the valuation allowance for deferred tax assets relate primarily to the increase in the Company's net operating loss carryforward. As of December 31, 2016, the Company had unrecognized tax benefits ("UTBs") of approximately $0.6 million. All of the deferred tax assets associated with these UTBs are fully offset by a valuation allowance. The following table summarizes the activity related to UTBs:
|  | December 31, 2016 |  | December 31, 2015 |  | December 31, 2014 |
Unrecognized tax benefits beginning of the period |  | $ | 135 |  | $ | — |  | $ | — |
Increase related to the prior year |  |  | 6 |  |  | — |  |  | — |
Increased related to the current year |  |  | 463 |  |  | 135 |  |  | — |
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Unrecognized tax benefits, end of the period |  | $ | 604 |  | $ | 135 |  | $ | — |
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The Company follows the provisions of ASC 740, Accounting for Income Taxes, and the accounting guidance related to accounting for uncertainty in income taxes. The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company will recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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