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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes |
Income Taxes | 14. Income Taxes For the years ended December 31, 2017, 2016 and 2015, the Company did not record a provision for federal or state income taxes as it has incurred cumulative net operating losses since inception. On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was enacted in the United States. The Act reduces the U.S. federal corporate tax rate from a graduated rate of 35% to a flat rate of 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act, including the effects on its existing deferred tax balances and the one-time transition tax. For the year ended December 31, 2017, the Company recognized no transition tax as it has no foreign subsidiaries. As a result of the Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are anticipated to reverse in the future, which is generally 21%. This resulted in a decrease to the Company's tax effected deferred tax assets of $19.8 million. As the deferred tax asset is offset in full by a valuation allowance, this enacted legislation had no impact on the Company's financial position or results of operations. Any items reported are done so using provisional amounts until the initial accounting required by the Act is complete. Additional time and resources are needed to ensure the correct implementation of the Act. A reconciliation of the U.S. statutory income tax rate to the Company's effective tax rate is as follows for the years ended December 31, 2017, 2016 and 2015:
|  | Year Ended December 31, |
|  | 2017 |  | 2016 |  | 2015 |
Federal income tax (benefit) at statutory rate |  |  | 34.00 | % |  | 34.00 | % |  | 34.00 | %
Permanent differences |  |  | (1.16 | ) |  | (0.85 | ) |  | (0.86 | )
Federal research and development credits and adjustments |  |  | 2.36 |  |  | 2.43 |  |  | 2.64 |
State income tax, net of federal benefit |  |  | 5.80 |  |  | 5.70 |  |  | 5.77 |
Tax reform deferred rate change |  |  | (72.21 | ) |  | — |  |  | — |
Other |  |  | (0.36 | ) |  | (0.40 | ) |  | 0.28 |
Change in valuation allowance |  |  | 31.57 |  |  | (40.88 | ) |  | (41.82 | )
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Effective income tax rate |  |  | — | % |  | — | % |  | — | %
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The Company's deferred tax assets consisted of the following (in thousands):
|  | Year Ended December 31, |
|  | 2017 |  | 2016 |
Deferred tax assets |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 41,436 |  | $ | 48,682 |
Tax credit carryforwards |  |  | 5,896 |  |  | 4,833 |
Capitalized research and development |  |  | 1,879 |  |  | 3,394 |
Capitalized legal expenses |  |  | 1,156 |  |  | 1,597 |
Other differences |  |  | 1,048 |  |  | 1,335 |
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Total deferred tax assets |  |  | 51,415 |  |  | 59,841 |
Valuation allowance |  |  | (51,415 | ) |  | (59,841 | )
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Net deferred tax assets |  | $ | — |  | $ | — |
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The Company recorded a decrease to the valuation allowance of $8.4 million during the year ended December 31, 2017 primarily due to the federal rate reduction from 34% to 21% as a result of the Act. The Company recorded an increase to the valuation allowance of $14.7 million and $13.6 million during the years ended December 31, 2016 and 2015, respectively, due primarily to an increase in the net operating loss carryforwards and tax credits. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible. Due to the Company's history of losses and expectation of future losses, the deferred tax assets were fully offset by a valuation allowance at December 31, 2017 and 2016. As of December 31, 2017, the Company had approximately $152.1 million of federal and $150.4 million of state net operating loss carryforwards to offset future taxable income, if any. Such net operating loss carryforwards expire at varying times through the year 2037, if not utilized. The Company had approximately $4.5 million of federal and $1.8 million of state tax credit carryforwards available to reduce future tax liabilities as of December 31, 2017, which will expire at varying times through the year 2037. The Internal Revenue Code of 1986, as amended (the "Code"), provides for a limitation of the annual use of net operating losses and other tax attributes (such as research and development tax credit carryforwards) following certain ownership changes (as defined by the Code) that could limit the Company's ability to utilize these carryforwards. At this time, the Company has not completed a study to assess whether an ownership change under Section 382 of the Code has occurred, or whether there have been multiple ownership changes since the Company's formation, due to the costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, the Company's ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income tax purposes. The Company's tax returns for the years ended December 31, 2009 through December 31, 2017 are still subject to examination by major tax jurisdictions.

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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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