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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes |
12. | INCOME TAXES
For the years ended December 31, 2016 and 2015, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company. The components of loss before income taxes were as follows:
|  | As of December 31, |
|  | 2016 |  |  | 2015 |
|  | (in thousands) |
U.S. |  | $ | (15,838 | ) |  | $ | (31,382 | )
Foreign |  |  | (369 | ) |  |  | (691 | )
Total |  | $ | (16,208 | ) |  | $ | (32,073 | )
A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:
|  | As of December 31, |
|  | 2016 |  |  | 2015 |
Federal income tax (benefit) at statutory rate |  |  | 34.0 | % |  |  | 34.0 | %
(Increase) decrease income tax benefit resulting from: |  |  |  |  |  |  |  |
Permanent differences |  |  | 29.0 |  |  |  | (1.2 | )
Net Operating Loss Limitation |  |  | (111.1 | ) |  |  | — |
R&D Credit Limitation |  |  | (1.5 | ) |  |  | — |
Change in valuation allowance |  |  | 48.7 |  |  |  | (31.7 | )
Other |  |  | 0.9 |  |  |  | (1.2 | )
Income tax expense (benefit) |  |  | 0.0 | % |  |  | 0.0 | %
Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are comprised of the following:
|  | As of December 31, |
|  | 2016 |  |  | 2015 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 16,146 |  |  | $ | 28,200 |
Depreciation and amortization |  |  | 6,229 |  |  |  | 6,688 |
Accrued expenses |  |  | 2,082 |  |  |  | 1,183 |
Capitalized start-up costs |  |  | 10,037 |  |  |  | 8,531 |
Other |  |  | 75 |  |  |  | 259 |
Deferred tax assets before valuation allowance |  |  | 34,569 |  |  |  | 44,861 |
Valuation allowance |  |  | (34,569 | ) |  |  | (43,751 | )
|  |  | — |  |  |  | 1,110 |
Deferred tax liabilities |  |  |  |  |  |  |  |
IPR&D |  |  | — |  |  |  | (36 | )
Change in accounting method |  |  | — |  |  |  | (1,074 | )
|  |  | — |  |  |  | (1,110 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. As of December 31, 2016 and 2015, based on the Company’s history of operating losses, the Company has concluded that it is not more likely than not that the benefit of its deferred tax assets will be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2016 and 2015. The valuation allowance decreased $9.2 million during the year ended December 31, 2016, due primarily to a reduction of net operating losses generated. The valuation allowance increased by $11.8 million during the year ended December 31, 2015, due primarily to net operating losses generated and capitalized expenses. In addition, the reduction in net operating losses were related to Section 382 limits as a result in a change in ownership. During November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. We early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in the removal of gross deferred tax assets and liabilities from the Company’s Consolidated Balance Sheet at December 31, 2015. The impact was zero. No prior periods were retrospectively adjusted. As of December 31, 2016 and 2015, the Company had U.S. federal NOL carryforwards of $24.5 million, and $55.5 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2036. As of December 31, 2016 and 2015, the Company also had U.S. state NOL carryforwards of $24.3 million and $55.4 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2036. At December 31, 2016 and 2015, the Company also had $26.1 million and $25.6 million, respectively, of foreign NOL carryforwards which may be available to offset future income tax liabilities, which carryforwards do not expire. Utilization of the NOL and research and development 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 and Section 383 of the Code, as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and research and development 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. The Company has completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since its formation. The results of this study indicated we experienced ownership changes, as defined by Section 382 of the Code, in each of 2006, 2011, 2012, 2013, and 2016. The Company has not recorded NOLs that, as a result of these restrictions, will expire unused. The limitations were approximately $47.1 million in 2015 and $100.1 million in 2016. The changes in the Company’s unrecognized tax benefits are summarized as follows:
|  | As of December 31, |
|  | 2016 |  |  | 2015 |
|  | (in thousands) |
Unrecognized tax benefit, beginning of year |  | $ | 687 |  |  | $ | 811 |
Increase (decrease) related to current year positions |  |  | (125 | ) |  |  | (124 | )
Settlements |  |  | — |  |  |  | — |
Unrecognized tax benefit, end of year |  | $ | 562 |  |  | $ | 687 |
As of December 31, 2016 and 2015, the total amount of unrecognized tax benefits was $0.6 million and $0.7 million, respectively which, if recognized, would favorably affect the effective income tax rate in future periods. Note that liabilities for unrecognized tax benefits have been recorded to the extent that they do not exceed the Company’s available losses that are not limited as a result of ownership changes that have occurred under Section 382 of the Code. Reductions to unrecognized tax benefits for limitations on the utilization of net operating losses due to ownership changes occurring during the year has been reflected in the table as reductions based on tax positions related to the current year. Histogenics accrues interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes. No accrued interest and penalties related to the Company’s unrecognized tax benefits has been accrued as of December 31, 2016 and 2015. The Company believes that it is reasonably possible that none of its unrecognized tax benefits, may be recognized at the end of 2016. The Company or one of its subsidiaries files income tax returns in the United States and various states and Israel. The Company is subject to U.S. federal, state and local income tax examinations by tax authorities for years 2001 through present. Carryforward attributes that were generated in earlier periods remain subject to examination to the extent the year in which they were used or will be used remains open for examination. The tax years which remain subject to examination by tax authorities in Israel, as of December 31, 2016, include years 2013 through the present.

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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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